How big of a mistake was this?

[Anonymous]

Thank you, everyone, for all of your advice on this board.  Lurking has taught me a lot! Based on reading entries for the last couple months, I am making great headway on AZEO, and am seeing positive movement in my scores as a result.  

I have a series of derogatories on a credit card that I simply forgot had a balance. These went from December 2019 - April, 2020.  As you can imagine, the 2020 ones are pretty bad, (90+ day lates).  When I ordered the report in May, I saw this and fixed it.  I have been told in no uncertain terms by the cc company that they will not forgive these.  

Here is my question.  I was hoping to purchase in first quarter, 2021.  My understanding of the FHA guidelines is that I need 12 months with no big cc lates like I have.  Is conventional the same? Assuming my scores improve to where I could get a mortgage, is there any way around waiting until April to apply for pre-approval? Will this even be possible in April given big late payments only a year prior? How much did I screw up my plans??

[newmomnewme]

Welcome to the forums! 

What are your current mortgage scores? Are you able to put 5-10% down? I was pre-approved with a 638 mid score last month....but can't find a house to buy lol. 

[Anonymous]

581 is my middle mortgage score right now - but hoping to get closer to yours by the time I complete AZEO in about 3 months. I will also have 5% ready as a down payment, but hoping for FHA... if possible.  My wife's middle scores are low 700s.  The market is tough right now - good luck!

[Anonymous]

Can your wife apply for the mortgage alone (without you)?  

[Anonymous]

She possibly could, that is definitely the back up plan.  She makes $130k/year and I make $60k.  We are hoping for $500k house (standard amount for a 3 bedroom around here), and not sure if her salary is enough on its own to get us there. Fortunately, these lates were on my personal credit card - all of our joint accounts are solid, especially once we finish paying balances down. 

But we are completely new at this - so suggestions are welcome!

[VALoanMaster]

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@Anonymous wrote:

She possibly could, that is definitely the back up plan.  She makes $130k/year and I make $60k.  We are hoping for $500k house (standard amount for a 3 bedroom around here), and not sure if her salary is enough on its own to get us there. Fortunately, these lates were on my personal credit card - all of our joint accounts are solid, especially once we finish paying balances down. 

But we are completely new at this - so suggestions are welcome!

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Hi @Anonymous,

There are several factors that will help determine what your options are.

1) What state are you in? If you're in a community property state & you want to have you wife apply for an FHA loan by herself, your debt will still have to be counted against her income even though you're not on the loan.

2)Need to check the FHA county loan limit to see if FHA will even go up to 550K in your market.

3) Here is what FHA has to say about late payments on revolving accounts: Major derogatory credit on revolving accounts must include any payments made more than 90 Days after the due date, or three or more payments more than 60 Days after the due date.

I would look at getting your wife qualified on her own first & then go from there.

[Anonymous]

Thanks, VALoanMaster!

1) Washington State - it is community property.  

Here are our debts. Its embarrassing.... but I need to swallow my pride. 

Joint:

Chase card - $9,500/$25,000 (plan to pay down to less than 30% in next 2 months, then keep lowering from there) No lates.

Citi - $100/$2,500 limit. No lates

Alaska Airlines - $100/$1000 limit. No lates

Mine

Syncrany $0/$2000 limit. No lates

Credit Union $100/$2000 limit - lates December 2019 - April 2020 (30, 60, 90, 120, 150)

Car - $178/month. 1 30 day late in February, auto-pay mess up.

Student loans - $300/month amortizing. I had consolidated and accidentally left 2 fed loans out. Those went super late in early 2020, then consolidated in June 2020.  This too may cause us not to be able to do conventional. Huge lessons learned.

Hers

CapOne $2,500/$5,500 limit no lates. Going to pay off in next 3 months

Student loans - $750 not amortizing.  Quote for $1200/month amortizing. No lates. (Shes an attorney - lots of debt). 

Car - $300/month no lates.

Salary

Her $130k

Me $60k

Bank account $21,000

No collections/foreclosures/etc

Goal - Q1 2021. But may need to wait until April when 12 months from all late payments (not including student loans....)

2) Live outside of Seattle, so FHA limit is higher than other parts of the country

3) Can you clarify? Is this within the 12 months? Or is this even outside of the 12 months?

[FlaDude]

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@Anonymous wrote:

Here are our debts. Its embarrassing.... but I need to swallow my pride. 

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No need, many of us have been or still are in far more debt.

[Anonymous]

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@FlaDude wrote:

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@Anonymous wrote:

Here are our debts. Its embarrassing.... but I need to swallow my pride. 

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No need, many of us have been or still are in far more debt.

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Thanks, FlaDude.  Both my wife and I grew up in households where it was shameful to talk about finances - that is one thing we will not pass on to our daughter. The transparency in this group is much appreciated and has been instrumental in our progress in the last few months. 

[VALoanMaster]

The revolving account lates are within the last 12 months so you need to get 12 months out from the last one.

Unfortunately you also have late payments on a couple of installment accounts as well.

Per FHA guidelines: The borrower must not have more than two 30-day late mortgage payments or installment loan payments in the last 24 months.

IMHO, you would better off trying to go conventional with just your wife right now.