First time mortgage and less than perfect credit

Anonymous · ‎01-08-2015

Wife and I are planning to purchase inlaws house soon. Value near 230,000 purchase price 180,000 with gift of equity for down payment and closing. Credit scores on myFICO 645,646 and 651. Only derog on report in past two years will be paid chargeoff that was last reported as 120 days late in April 2014. Any comments on when and if we should be able to be approved. DTI not an issue, income 4600/month with only 281 monthly debt.

Anonymous · ‎01-08-2015

I'd say y'all are good to go.

Might have to write a letter on the gift of equity?

ezdriver · ‎01-09-2015

@Anonymous wrote:
Wife and I are planning to purchase inlaws house soon. Value near 230,000 purchase price 180,000 with gift of equity for down payment and closing. Credit scores on myFICO 645,646 and 651. Only derog on report in past two years will be paid chargeoff that was last reported as 120 days late in April 2014. Any comments on when and if we should be able to be approved. DTI not an issue, income 4600/month with only 281 monthly debt.

What is the source of the $230,000 value? Unless its from a lender-ordered appraisal, it won't be used. Same for the scores ... only lender-pulled credit scores will matter and a 640 middles score [lower of the two middles scores for you and your spouse] will allow you to have an easier time applying and qualifying for an FHA mortgage.

Other than that, it seems a straightforward transaction. Have you applied for the mortgage yet?

Anonymous · ‎01-09-2015

Appraisal is an estimate based on when they refinanced recently, I know this will have to be done again but no reason here that it shouldn't still be close. The numbers can be changed on what we borrow to cover 20 percent. What would be the minimum score we need to be eligible for a conventional mortgage do you think. We can go FHA if no other choice but would love to stay away from PMI if at all possible. Scores are from myFICO site, thought about getting some pulled by a lender but that close don't want the inquiries to dip into my score.

DallasLoanGuy · ‎01-09-2015

i see many deals go thru conventional in the 620s

Retired Lender

StartingOver10 · ‎01-09-2015

Keep in mind that the lender will use the contract price or the appraised value whichever is lower so write your contract carefully.

Anonymous · ‎01-09-2015

Can a contract be written up that will allow me to use gift of equity to cover the 20 percent down as long as an appraisal done with the lender shows the property will stand for it.

And thanks to everyone for all the responses.

StartingOver10 · ‎01-09-2015

Yes, but you have to show the gross sales price, the equity gift and then the financed portion. Don't write the contract as a net amount to finance

Anonymous · ‎01-09-2015

I understand now. After reading the post about FHA insurance rates coming down that may not be a bad way to go after all.

StartingOver10 · ‎01-10-2015

@Anonymous wrote:
I understand now. After reading the post about FHA insurance rates coming down that may not be a bad way to go after all.

FHA is not a bad loan at all. The mortgage insurance is on for the life of the loan - with one exception: if you put down 10% or more, then the mortgage insurance drops off after 11 years.

In your situation, consider putting down slightly more than 10% so the mortgage insurance drops off without you having to refinance in the future.