@Anonymous wrote:I'm looking at purchasing a home/investment property in 4-6 months. I'm targeting something in the 200k range, with ~10k down payment
My FICO-04 is currently in the 605 range though I expect to be 640+ across the board within a couple weeks (util is going way down) and ~670 (if you believe the myFico simulator) in about 3-4 months (when I'll actually go in for a pre-approval). Due to credit issues (paid collection account + satisfied judgment - though currently not reporting that status - should be taken care of within a month, lates on several accounts from late 2013 when I had had a huge family issue that burned through all my available cash), and amount I'd have available for a down payment (I'd have 14-15k saved, 10k available from IRA - though I don't plan on having to touch this), I'm pretty sure I'll be going the FHA route.
My question is about pre-approval. I've been doing a lot of reading to understand the process, important steps to take between now and when I'll apply credit and savings-wise, but I seem to find conflicting information on this question:
Do I need to have the full amount I expect to use as a downpayment available at the time that I go in for a pre-approval?
Assuming I go for the pre-approval mid May, I'd have 9k available in savings. I'd be up to about 14.5k a month later but I'd like to be able to start the process a bit sooner so I limit the amount of downtime between the end of my lease (out end of April) and when I move in to a new home. I have a place to stay rent free for about 3-4 months (which I've factored into my expected savings) but beyond that, I'd need to get back to renting month-to-month.
I optionally could have ~11k by my target pre-approval date, but that would mean delaying paying down credit leaving me at the ~640 scores. My reading and research surmise that in my case (since I'm anticipating FHA anyway), I'm better off going for the better score than slightly higher down payment.
Welcome to MyFICO! 
I highlighted the sentence above because you mention home and investment property in the same sentence. FHA will finance a primary residence only with a down payment as low as 3.5%. In addition to down payment requirements, you have closing costs and pre-paid expenses. You may be able to get the seller to pay some or all of your closing costs and pre-paid expenses, but you need to put that in your offer. Expect an additional 4% more or less for closing and pre-paids depending upon the real estate taxes and insurance costs in your area. If the seller won't contribute toward your closing costs, because some markets are seller's markets, then the lender can bump up the interest rate and pay a portion of your costs.
You can not get an FHA loan for an investment property. You can turn a primary residence into an investment property after you have lived there in the property for X months (don't know the minimum length of time, I "assume" it would be somewhere in the 12+ month range).
Now, to your question: 3.5% of $200,000 is $7k and expect another $8k mol in closing and expenses if you don't get any help with your costs. I suggest you work with an agent that is accustomed to getting the buyer's costs paid in the purchase agreement. Seems to me that you will have the $7k by the time you apply. Allow yourself time to find the right property.
...you can tell the lender that you will be using "gift" funds to meet part of your closing costs ...as long as you have the dp currently in a bank account and your other factors "work" you'll get a pre-qual from most lenders w/o having to prove the source of the "gift" ...in fact, in my experience, lender worksheets will treat a seller closing cost contribution as a "gift" in their GFEs.
...the short of it is as long as you can show the dp, you can get a pre-qual ...just be sure you have the actual closing costs seasoned at least a week before the closing.
...and don't forget that the USDA has a very viable rural housing loan program (for low to moderate incomes) with 3% rates as of March 1st, no dp, and you can include closing costs in the loan IF the appraisal is higher than your offer ...you might be surprised by just how much of suburbia is considered "rural" for USDA purposes ...hth
