Preparing to buy a house

[Anonymous]

Good morning!

I think this is my first ever post here, so here goes! Also, if I need to delete and repost this in another section, please let me know!

My wife and I have been renting for like 5 years and we are finally ready and able to afford a house, at least when it comes to our income. We live in the DFW area and combined, we make just over $100k before taxes.

We've both got student loans (in repayment) and we've got about $3k or so in credit card debt that we are working on paying off. We've got one auto loan that we've never been late or missed a payment on. No bankruptcy and it's been a long time since anything has been in collections. We aren't looking to buy a house until at least September of 2020, so we've got a year or so to get everything in order.

We don't have a ton of money saved up for a down payment, currently about $2,500, although we are working to create a budget and a plan to start saving more, so I'm hoping to have at least $10k as a down payment. I know that with an FHA loan, you just need 3.5% down, so that's kind of what I'm aiming for. We don't really have a price in mind for a house yet, although I'd prefer a mortgage payment that's close to our rent, which is just over $1,000 a month right now, so I'm thinking no more than $1,400 for a mortgage payment.

Our credit scores are both in the mid 600s according to Capital One CreditWise. We are thinking of signing up for MyFICO to get our FICO scores so we have better knowledge there, but here's where I come to the questions I have:

1.) How much of a house should we look at? We don't wanna bite off more than we can chew.

2.) Aside from paying off/down credit cards, is there anything we else we should do?

3.) We're going to comb through our credit reports soon and make sure everything is good to go there, as we've had some credit issues in the past, but is there a way to, within a year, get our credit score up into the 700s?

4.) Do I seem on target with our down payment goal of $10,000? I know that the more of a down payment you have, the better, but $10k is 3.5%~ of $300,000, so I feel like we're okay, but if I'm not, please enlighten me!

5.) Can anyone offer any advice on the best way to start house and mortgage shopping? We'd like to get the best possible mortgage. As far as houses, I'm always browsing Zillow, looking around, but at what point should I engage a realtor?

[CreditInspired]

Since your target date is September 2020, you have plenty of time. 

1. Since your scores are low, it seems there are some baddies on your CRs, so work on getting those cleaned up. Once you take care of those, you'll see a bump in scores. Do you have any liens, judgements, or collections?
2. Do not apply for anything 12 months prior to applying for a mortgage.
3. $3K is not a lot of debt for a combined $100K income. Does this include auto loans, school loans, all CCs, and any other type of loans?
4. You should definitely get your FICO scores. You can get those at www.creditchecktotal.com for $1 trial for a 7 days. Make sure to cancel by 7th day or you will be automitically charged $29.99.
5. I think at the beginning of 2020, you can pull your FICO mortgage scores from MyFICO to see where you stand.
6. Also, if it's a buyer's market when you're ready to purchase, FHA will allow seller's closing cost assistance up to 6% of the sales prices. However, if it's a seller's market, sellers usually will not offer closing cost assistance. In this case, you will need to also have that amount + 3.5% down payment for a FHA loan.
7. When applying for a mortgage, the lowest middle score is used. So, let's say your scores are 680, 695, 700 and DW's scores are 675, 685, 690, the score that will be used for mortgage purposes is your DW's 685.
8. Also, once you visit with a loan officer and they have all CRs, incomes, bank statements, W2s entered into their system, they will let you know the amount of mortgage you qualify for. And if you know you want to stay at $300K and they approve you for $415K, you borrow the amount that you feel comfortable with. 

GL2U

[Anonymous]

There might be a few things in collections but I will know for sure when I pull my credit report, which I’m doing this weekend.

Edit: according to that website, my experian FICO Score 8 is 614.

So $3k is credit cards. Then we owe about $26k on the car. And then student loan debt, yeah. We’ve got it. Let’s just round up and say $70k, but it’s in repayment and we’ve never been late. So debt roughly equals income, which I’m gonna step out on a limb and say that’s not great?

[CreditInspired]

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@Anonymous wrote:
There might be a few things in collections but I will know for sure when I pull my credit report, which I’m doing this weekend.

Edit: according to that website, my experian FICO Score 8 is 614.

So $3k is credit cards. Then we owe about $26k on the car. And then student loan debt, yeah. We’ve got it. Let’s just round up and say $70k, but it’s in repayment and we’ve never been late. So debt roughly equals income, which I’m gonna step out on a limb and say that’s not great?

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Thanks.

Need all three scores for both of you from Experian, Transunion and Equifax.

What is the minimum monthly payment on CCs, carnote, and student loan?

DTI is very important when buying a home.

[Anonymous]

Experian 614, Equifax 622, Transunion 624.

Minimum payments on debt come to $1,126 (that includes the car and all student loan payments). $214 of that is credit card payments that will be paid off before we apply for a mortgage, so for all purposes, that number is really $912.00.

[CreditInspired]

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@Anonymous wrote:

Experian 614, Equifax 622, Transunion 624.

Minimum payments on debt come to $1,126 (that includes the car and all student loan payments). $214 of that is credit card payments that will be paid off before we apply for a mortgage, so for all purposes, that number is really $912.00.

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Thanks again. So since only 1 party's score is provided, is the mortgage going to just be in one name? I thought two since 2 incomes were stated. 

So going with 622 (mortgage score may be lower), I believe if you follow my first post, you should be able to increase your scores.

GL2U