First Time Home Buyer with Questions

[jbee]

Hey guys,

I'm new to this site and wanted to get some opinions from the pros on here.  I'm going through a divorce and hasn't ever had to depend on my income much or my credit until now.  I want to purchase a home in the next 6 months but wanted to get your opinions and see where you think I stand right now. 

Ok, here's the details.

My scores are Experian- 661, TU- 634 and I don't know Equifax.

This is the negative on my credit report:

2-Collections, 1 from 2004 and 1 from 2008. (Both are paid)

1- 30-day late Capital One from 2007

2- student loan 90 day late from 2006

Nothing negative in the last 2 years.

My credit card utilization is 60% (I need to get that down), and I have student loans of $21,000 (in deferrment, and will be deferred for another year and half).  I have an auto loan for 8,300 which has never been late.

I make about 31,000/yr and has found several houses that I really like for about 115,000 (I could pay about $5,000 down).

Do you guys think I have a shot of being approved?  Also, if I get my credit cards down to 5%, do you think it will boost my score?

Thanks so much! 

[BrianB_The_Loan_Professor]

It sounds like you would probably qualify for an FHA loan

The only thing that would hold you back is if your monthly payments are too high and mess up your debt ratios

You dont have to count the student loan for FHA because they are deferred for more than 12 months but keep in mind that payment will come in to play with your budget later

Your credit is good enough and in that price range you have enough for the down payment

You would need to get a seller to credit you for closing costs.

Good Luck

B

[jbee]

Thanks...I'm in the process of paying off my credit cards by the end of April, so I wont have any credit card debt.  The only other thing I would have is a car payment that's 350.00.  I will be receiving about 15,000 settlement from my divorce, so what I was planning is pay down the car to only 10 payments, so it wouldn't count toward my DTI.  What do you think?

Thanks again.

[BrianB_The_Loan_Professor]

You would have to pay the car off - if less than 10 payments AND less than $100 it doesnt count

Even with the car debt you would probably be fine based on no other debt and the numbers you have provided.

B

[jbee]

So if the car had only 9 payments left, would it count?  What if the DTI for the mortgage was close to 33% and the other bills was 5%, do you think they would take that into consideration?  I'm just trying to figure out how I can get approved for the mortgage if it's a little more than the 29 or 31% for FHA.

Thanks

[ShanetheMortgageMan]

Having reserves available after closing will certainly help a higher debt ratio qualify.  Would you still have 2 months of the proposed mortgage payment after closing?

[BrianB_The_Loan_Professor]

It is not that hard to get approved above the traditional levelsIf you get an automated approval you can exceed the limits some

Your credit scores will help that as well as any reserves

The car payment will count until it is gone because of the size

It will be close with it but unless your taxes are high in the area you live I think you will be fine if not really close

B

[jbee]

Thanks so much....I will have about 10,000 in my savings after the down payment and after I pay off some bills.  I'm selling my house and should have most of the equity in my account.  I know when I give them my bank statments, they are going to question the deposit, do you think it will be okay when I explain that it was from the sale of my house and the deposit from my divorce settlment or do I have to let it sit there for a few months before it will count?

[BrianB_The_Loan_Professor]

Just be prepared to document where it came from FHA does not have a seasoning requirement

However the funds have to be from an allowable source which this is

B

[jbee]

Thanks so much!!