First time buyer: Can I qualify for a mortgage?

[jlg1970]

Hello everyone! Long time lurker but not a frequent poster. I’m a first time buyer and have little knowledge of the process. I’m wondering if it would be possible to qualify for a mortgage for about $120,000-$140,000. I am wondering specifically about qualifying for an FHA or conventional mortgage, but really don’t know where to start. I am hoping you wonderful people would be able to give me some hope and insight!

Also, will lenders take my REPAYE student loan payment to calculate my DTI, or calculate the 1%? This will make a huge difference in my DTI.

Income: pre-tax $2,960/month ($35,529/year)
* Been with the same company for 2.5 years and will be getting 4% increase in may

Debts: $589/month
* Federal student loan: $57.90/month on REPAYE (total $39,319)
* Private student loan: $160/month (total $25,706)
* Student loan: $69/month (total $1,330)
* Personal loan: $91/month (total $1,475)
* Car loan: $169/month (total $6,239)
* Discover card: $35/month (total $2,010)

FICO score 5: 746
FICO score 4: 754
FICO score 2: 773

No negatives on my credit report.

I currently have $5,000 as down payment, but could have $7,000 if needed.

Thank you all in advance!!

[glockrunner]

You will be borderline. Your scores are very good but the mortgage, taxes, PMI insurance and home insurance will possibly put you over the threshold because of your other bills.

You have to also figure on other expenses that come with a home purchase and will you be able to afford it. You don't want to be strapped for cash with a new home
My advice would be take some more time and pay off some of the bills you have then you will look much better for DTI

[jlg1970]

Thanks for your input! I am tackling those couple lower-balance debts to lower my DTI, so I am hoping to be in much better place within the next year.

[glockrunner]

I think you're making a smart choice. I was where you are 9 months ago. I had credit cards that I paid down and for myself I started to learn how to save money instead of buying things I don't need. Now I have almost enough saved to apply for mortgage. My scores aren't as good as yours but there's not much more improvement I can do at this time.
One thing I'm making sure of is I have enough for a down payment, closing costs and extra money to be comfortable.

[Anonymous]

why wouldnt you look into a down payment assistance program? With your income you should be within the income limits? Also you could always find a house that the owner is willing to help with the closing costs. Just negotiate. There are so many down payment programs out there. My income is more than yours, but if I had the credit scores you did and small debt load as you have, I Would be looking at a conventional loan which by the way will only consider what is reported to the Bureaus, so the amount you are in monthly repayment. If your squeezed too tight you could always look at less house, and buy something lower value, which obviously would mean less money down. I don't think you should wait, why so you can keep renting.... Just my opinion.

[jlg1970]

I will absolutely start looking into downpayment assistance programs— I think that would be super helpful. I was hoping that with good scores that I would be able to offset the lower income. I know that I would be able to afford the monthly payments, but was concerned that on paper it would look like I cannot.

[glockrunner]

You didn't mention you paying rent so I'm assuming you live with parents or someone helping pay rent? If you do pay rent then you can establish being able to save money and pay rent too, which will look good.
Sure, you can get down payment
assistance but it's not free money, you'll have to pay it back.
My opinion still stands. I think you should pay off the small student loan, personal loan, Discover card and even your car loan or pay it down to below 8.9%. This will boost your score. Dont have all of your credit cards report a $0 balance or you scores will be dinged. Leave a small balance on 1 card.
Of course you can talk to a loan expert and see what they say.
I know in my state any money saved over $10k must be put toward the downpayment. Good luck!

[VALoanMaster]

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@jlg1970 wrote:
Hello everyone! Long time lurker but not a frequent poster. I’m a first time buyer and have little knowledge of the process. I’m wondering if it would be possible to qualify for a mortgage for about $120,000-$140,000. I am wondering specifically about qualifying for an FHA or conventional mortgage, but really don’t know where to start. I am hoping you wonderful people would be able to give me some hope and insight!

Also, will lenders take my REPAYE student loan payment to calculate my DTI, or calculate the 1%? This will make a huge difference in my DTI.

Income: pre-tax $2,960/month ($35,529/year)
* Been with the same company for 2.5 years and will be getting 4% increase in may

Debts: $589/month
* Federal student loan: $57.90/month on REPAYE (total $39,319)
* Private student loan: $160/month (total $25,706)
* Student loan: $69/month (total $1,330)
* Personal loan: $91/month (total $1,475)
* Car loan: $169/month (total $6,239)
* Discover card: $35/month (total $2,010)

FICO score 5: 746
FICO score 4: 754
FICO score 2: 773

No negatives on my credit report.

I currently have $5,000 as down payment, but could have $7,000 if needed.

Thank you all in advance!!

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Hi jlg1970,

Based on the info you've provided you are a perfect candidate for the 3% down Home Ready program. Based on the info you've provided, 140K will put you right at 50% or more on your back end debt to income ratio depending on the property taxes & insurance so I would back it down to somewhere between 120K & 130K. This program has lower PMI & rate hits while also allowing us to count your student loan payments as reported on your credit.

PS. DPA programs generally have higher rates which is going to decrease your buying power.

[glockrunner]

You'll want to look at the raw #'s too, like when budgeting. Figure your mortgage on a 130k home will be in the $900/mo range, this is total which include taxes, pmi and insurance. Now based on where you live this can be lower or higher. Take your income after taxes and you are sitting at 2.1k a month. Minus your debts this will leave you with $5-600/mo left over for all of your other expenses, food, cell, electricity, cable, water/sewer, etc.
If you have someone else to share your living expenses with then you will be in better shape.

[jlg1970]

I would be living with my significant other, whose income is slightly higher than mine. But due to their student loan debt at this time, our DTI would most likely be too high to qualify together. We were thinking we might be better off with just me. Right now we are renting and we were weighing the pros and cons of renting vs. buying. Within a year or two we should be golden, as a chunk is or debts will be paid off.