Thanks in advance for any advice/feedback.
I plan to move to Buffalo, NY to help take care of my mother. I would like to purchase my first home within the next few months.
Bad news - I have tons of debt...240k (deferred student loans) and 100k (revolving and installment).
Bad news - 1/1/2019 scores 580, 619, and 628
Bad news - 3 paid collections accounts (refuse to delete), 1 30-day late from 8/2018
Bad news - BoA loan officer said my DTI was 42% and couldn't approve; I thought FHA limit was 43%
Good news - 150k max purchase price thanks to Buffalo, NY lower cost of living
Good news - 210k annual salary
Good news - 10k bonus next month
I submitted several mortgage loan apps in the past two days in hopes that I could get a pre-approval from somewhere...no luck.
I have a 6 y/o, so I have to move during summer, if I can't move this year, I will have to pay $1250 monthly rent while waiting until 2020.
Do I have a chance at approval?
Assuming the 42% DTI calculation was correct, I can't imagine you not being approved for an FHA loan.
The standard amount for FHA regarding your student loan debt repayment calculation appears to be roughly 8% of your DTI so that's not too bad---although SLs in "deferred" status do tend to keep your credit score from improving, so that's something to consider---along with trying to pay down some of the revolving debt you've accrued as that will help boost your score too.
The August 2018 collection--as it ages out, it naturally will have less impact on your score, but moving forward you really need to avoid having ANY credit accounts be delivered to Collections as these will always sabotage your credit score for years, but having their greatest impact within the first year of occurrence--as it does now.
You should be fine though with an FHA loan as long as you can find something habitable in that market.
My advice would be to relocate and rent so that you can become accustomed to the area and can gauge the market for a while--Buffalo tends to get a bit more wintry weather than anywhere else on earth and therefore I'd recommend checking out that town and studying the area with your realtor, home inspector and loan officer.....all of which may not want to spend tons of time wanting to help you until you if you are not buying immediately, so you might want to become friends with them and treat them to wings at the Anchor Bar or brews @ a Sabres game in order to get their opinions and then be sure to refer them business too!
Houses can be an investment in time as well as money. If you have a 6 year old, and a mother to take care of, it might be best to rent so that you do not need to worry about the upkeep of the domicile as well.
That being said, it sounds like from your income you have plenty of financial weight to throw around. Your scores should improve as you pay down your revolving and installment accounts. Your DTI will improve for the same reasons, and mortgages use the middle score, so your 580 won't be used.
I think the no approval is due to the very recent late. I'm not 100% sure, but I think if its newer than 6 months you will have issues, so spend a few more months building up your scores and try again in March.
My guess is BOA has an overlay that limits your DTI to 41% if your loan requires a manual underwrite. I have a couple of investors that have the same overlay but I also have some options where I can go as high as 50% on the DTI on a manual underwrite for an FHA mortgage.
The fact that you've applied with multiple lenders & have not been approved & the BOA issue tells me that your file is not getting approved through an Automated Underwriting System (AUS) which means you need to find a lender that can work with you on a manual underwrite.
To answer your question: Yes it's possible.
Thanks all. I just got off the phone with Chase Mortgage and the loan officer advised that I come back with a 620 mid score and 20% down to avoid any issues. He said I could get a conventional loan without insurance etc. So, I am going to take this week's pay and pay off one or two of my smaller credit cards....Amazon, Macys and Victorias Secret were starting to balance chase me a few months ago, so I didn't want to pay them off and lose the utility anyway. UGH
At present, I am still waiting to hear back from NFCU, Wells, and M&T. If either of them approve me, I am taking the loan, buying the house and moving to Buffalo. I should be able to pay down the debt with the lower mortgage payment anyway.
Magnolia Bank called me today, but they wanted me to send tax returns as well. I will let you all know how this shakes out.
@kree, I thought about that. I have one 30-day late in August 2018, one in July 2017, and one in June 2015.
The most recent one is from Navy Federal and I may try to talk to them to get it removed...they snatched $$ to pay my line of credit when the credit card was 25 days late. I was out of the country and forgot all about it.
If creditors are balance chasing you, each month you would be at 100% with each. This is hurting your score. Pay them off. Anytime a creditor is taking adverse action such as this or worse, closing your account with a balance, it spooks other creditors. So many do not realize that if you max out a credit card, and keep it that way, month after month, regardless if your payment on time, can lead to this. It catches them by surprise.
Over 50% balance on 1 card or several not being paid down, only minimum met is pushing it then.
If you can obtain, all credit cards to less than 28.9% of the credit line, paying off the ones that are been balance chased, you will see a decent bump in your scores.
I got a notification today that one of the three paid collections was removed from my report. YAY!!
I spoke with Quicken mortgage "credit" department and they told me that if I get the my only 30-day late (Aug 2018) removed, I will gain 30 pts.
Sent a GW removal request to Navy Federal last night and I will keep reaching out to them until they remove it.
At the same time, I am working on the last two collections removal as well as paying a 4-5 CC in full.
I will let you all know how it goes.
Thanks so much for the motivating advice!