Put a house under contract

[shalane85]

I put a house under contract today. The builder and their preferred lender are offering a 4.875% fixed rate, pay all closing costs, taxes, insurance, and HOA fees for the rest of the year. Only $500 dollar earnest money which will be refunded at closing. Sounds like a good deal. My only issue is that my fico score is 627 and I'm hoping and praying that I get approved for this FHA loan. I haven't had any lates in over a year and half and I have 3 things in collections which are at least 2 years old. My other issue is that I just bought a car this month and I'm afraid it will affect my DTI. I dont make the first payment until October so its not on my credit report. Should I be concerned?

[Anonymous]

Well, if it is not on your credit report, it is not affecting your DTI at the moment.  3 things to consider though

1.  if it will eventually affect your DTI and put you over the accepted limits for FHA (FHA has higher limits than most), you need to sreiously consider whether your are overspending according to a realistic budget.

2.  Lenders can often re-pull your credit immediately prior to close of the house.  This is even more true if the house is not yet built as it will take  awhile and they have to have an accurate report at close.  If you do not disclose the new loan and they re-pull credit and it has shown up, it can and probably will mess up the deal and possible cause you to loose some money as well.

3.  They usually ask you to list your monthly debts at some point (at least both of the  lenders I worked with did)  technically, even if it is not on your credit score, not disclosing this is mortgage fraud.  I am not sure it is in any way actionable, but it is wrong to a degree to not disclose the new account.

Personally, I would be honest with the LO and underwriter and if they have any issues witht he DTI, then the price is probably over what you should be at comfortably.  To each their own on that, just be smart. 

[ShanetheMortgageMan]

A 4.875% 30-year fixed rate is insanely low, are you sure it's not 5.875%?  Even a 5.875% rate is incredibly low.  To put it in perspective, back in 2004, when rates were the lowest they have been in 50-60 years, and were over 1% lower than they are today, 4.875% was a REALLY good rate.

Either way, you need to disclose the car payment to the loan officer and it will be included in your debt to income ratio, even if the payments don't start until October.  If your debt to income ratio can support it, then you shouldn't have any problems with that.  Since you've had clean credit for 12 months and your collections are 2+ years old, I think your credit should be fine for FHA.

[shalane85]

The rate is 4.875% if I used the builder's preferred lender, Opteum Mortgage. I thought it was a pretty good rate too. So I should disclose the new auto loan. How long can my student loans be deferred before they have to be included in my DTI ratio. Right now they are deferred for 6 months. Is that long enough for me  to not have to include it in my DTI?

[ShanetheMortgageMan]

With FHA, your student loans need to be deferred for 12 months from the closing date in order to be excluded from your DTI.  With conventional, they are always included in the DTI.