Wow....that last sentence was right on the money about hunkering down. Looking at your notes, wow. You appear hunkered.
Much of the general info was somewhat true. It is true that there is no difference in rate between 740 and 800. Kind of crazy, isn't it?
There were some items that are not accurate. For example, the interest rate does not vary by FICO on FHA. It is true that either the rate or the points would for Conventional, page 2 here https://www.efanniemae.com/sf/refmaterials/llpa/pdf/llpamatrix.pdf is pretty thorough...if you're the hunkering type 
Another slight tweak, 5% is widely available on conventional. The issue is that both the rate and the rate on the PMI is heavily credit score driven. Generally, with the loan level price adjustments (above) and the higher MI, FHA is often cheaper at 5% down when FICO is over 700. Generally.
It's kind of interesting to see how she explained things. Retail banking tends to go an inch deep in terms of detail and a mile across with the general guidelines. With mortgage financing, sort of like a credit rebuild, the "art" is getting a mile deep into your own scenario and understanding how to rank them.
If credit is history/35%, balances/30%, length of history/15%, new credit/10% and type/10%....loans are something like:
FICO/40%, Income/25%, Loan-to-value/20%, and Reserves/15%....those percentages are arbitrary, but actually probably not too far off. It probably misses important items like property type and it also overlooks the significant differences between mortgage companies and even between originators within the same company, but it's pretty good for off the cuff.
So, if you're going to get hunkering: you need all three scores, especially being close to 680. You need to talk income, especially with those question marks. You need to establish a target down payment. From there you can get very tactical. The reserves, or leftover money, it's probably the most important personal finance decision--but on owner-occupied homes it is not the be-all, end-all criteria for approval.
My $.02 in the form of a winding collection of thoughts,
Chris
@llecs wrote:DW and I have been toying with the idea of buying our first home for a while now. Our scores have increased and our savings are getting there. Yesterday we had a meeting with a LO at our local bank. We told her that we weren't ready to pull the trigger but we'd like information on the loan process so we'd be ready when we did. She was patient and answered our zillions of questions and provided some good info along the way.
The following are some nuggets that we took away from the meeting. I'm still learning the mortgage lingo so feel free to correct me, and if I posted something that seems wrong, challenge it because it was a lot to take in, in such a short meeting.
1) Our bank offers conventional, FHA, and VA loans (maybe USDA too, but we are in an urban area...the only farming we see are the pictures in the produce aisle in the grocery store).
2) For conventional, they offer 5%, 10%, and 20% down options with 5% being near difficult to get.
3) The interest rate on the loans, all of them, vary based on your FICO score and the loan product.
4) Our bank offers FHA for FICOs as low as a 580 (and no, I won't tell you the lender now, but will mention it is a major regional bank based out of Baltimore, I believe). They will value the interest rate based on score tiers with the top being 740. Whether you have a 740 or 800, there's no difference in rates in any of their loan products. Their 580 minimum surprised me since their minimum requirement for any of their other loans is 660 on EQ, even secured.
5) Their DTI is capped at 45% and they don't care if you hit that. It seemed high to me...I wonder what their default rate is. Hmmmm.
6) They will only factor in debts for DTI calculations if and only if it is reported on your CR. I have a loan that is not reported and they said they don't care. That surprised me. Also, Amex charge cards are ignored in the DTI.
7) I run the company I work for now and have the opportunity to take a position elsewhere. I am in the middle of buying the company I work for but put that on hold during the mortgage process due to paperwork issues. They said if I take the other position and keep my current gig and get paid for both, they will not factor in that new income at all, even if I have the paystubs, contract, docs, etc. to prove it. I would have to be at that new position for a year or longer for it to count. So much for added income. Though they did say that I can switch jobs and declare that new income, I just can't claim the old even if I still earn income there. I am worried that our income is too low to qualify. Using 45%, we pushed right at the bare minimum needed to get a home based on what we are looking for. DC area isn't cheap.
8) We have a gift of a $30k downpayment from FIL. She said that the UW would look at the source if it appeared inside of 3 months up to the point they look at the statements. However, she said, if DW opened a savings in her and her father's name, then the $30k would be overlooked and automatically be considered as a give.
9) The bank was looking for 2 months bank statements from any source that shows income and/or the source for any down payment monies.
10) The bank will pull twice, once at app and once 3 days before closing. They estimate closing will occur within 30-60 days of app-time, but they insist on at least 30.
YMMV based on lender. I was just sharing what I learned, some of which I thought was interesting.
I see parallels to credit rebuilding and mortgages. Despite hours and hours of reading and note-taking, you really only learn if you hunker down in the process and actually do it.
Ilecs we are in a similar situation. Just to confirm you are saying that it is better to open a savings account and put the money there ? Does the money have to be there for couple of moths?
Starting Score: 540
@Anonymous wrote:Wow....that last sentence was right on the money about hunkering down. Looking at your notes, wow. You appear hunkered.
Much of the general info was somewhat true. It is true that there is no difference in rate between 740 and 800. Kind of crazy, isn't it?
There were some items that are not accurate. For example, the interest rate does not vary by FICO on FHA. It is true that either the rate or the points would for Conventional, page 2 here https://www.efanniemae.com/sf/refmaterials/llpa/pdf/llpamatrix.pdf is pretty thorough...if you're the hunkering type
Another slight tweak, 5% is widely available on conventional. The issue is that both the rate and the rate on the PMI is heavily credit score driven. Generally, with the loan level price adjustments (above) and the higher MI, FHA is often cheaper at 5% down when FICO is over 700. Generally.
It's kind of interesting to see how she explained things. Retail banking tends to go an inch deep in terms of detail and a mile across with the general guidelines. With mortgage financing, sort of like a credit rebuild, the "art" is getting a mile deep into your own scenario and understanding how to rank them.
If credit is history/35%, balances/30%, length of history/15%, new credit/10% and type/10%....loans are something like:
FICO/40%, Income/25%, Loan-to-value/20%, and Reserves/15%....those percentages are arbitrary, but actually probably not too far off. It probably misses important items like property type and it also overlooks the significant differences between mortgage companies and even between originators within the same company, but it's pretty good for off the cuff.
So, if you're going to get hunkering: you need all three scores, especially being close to 680. You need to talk income, especially with those question marks. You need to establish a target down payment. From there you can get very tactical. The reserves, or leftover money, it's probably the most important personal finance decision--but on owner-occupied homes it is not the be-all, end-all criteria for approval.
My $.02 in the form of a winding collection of thoughts,
Chris
What DOES determine your interest rate on an FHA LOAN??
Thanks!