Question for Shane and other mortgage makers..

[Anonymous]

A few years ago I asked a similar question, however a few road blocks delayed our dream home purchase. We had a new baby and lots of bills to pay with that, we paid all the bills in cash and are now back to looking for a home. Right to it..our purchase time is about one and a half years. I am still self employed and show wages around 50-60k but will be higher this year for the end of year should be around 70k or more. my fico is not so good high 590s and I have two auto payments on it, both have been a little late due to paying off baby expenses. however that being said before we purchase I will have both paid off. never had a mortgage before and am in perfect standing with our lanlord. I think my score is low because of a state tax lien, it is paid off too but slow to come off report...the home price range we are looking is 250-300k and have around 50k to put down including closing cost. how are we looking? what financial planning advice could you give us from this point to move us toward this goal. Thanks Much.

[ShanetheMortgageMan]

Your down payment should be enough, but you'll want to continue working on your scores, to at least a 620 but 660 would give you more options and lower interest rates & mortgage insurance (if you choose to go with conventional financing).  Make sure you have at least 3 trade lines with at least 12 months of history going with on time payments when you apply, 3 credit cards would do the trick, keep credit card balances low, make all of your payments on time, and in 1.5 years I think you'll certainly be there.  As far as your income the amount that qualifies is after your business expenses, I am not sure what other monthly payments you plan on having in 1.5 years (that's a long time from now, perhaps just auto loans and student loans you'd know about) but $70k usually is enough to qualify for the price range you listed & down payment you have.

[Anonymous]

Shane, thanks for the reply. The above income projected is our employee earnings. I havnt figured the business funds into this equatiion at all. Is that something that I need to look at too? Also, I have been told that it isnt wise to deplete your entire savings on down payments because the lender wants to see 3 to 6 months of living expenses tucked away..what is your position on this?

[Anonymous]

Just wondering.. if you have $50k to put down, why are your car payments late? I know it is never a good thing to pull money out of savings, but I think in the long run it would've been better for you to have paid everything on time.

[Anonymous]

were late while paying all the maternity bills..not too late, but late is late. your right..at that time i had only retirment savings, not the 'projected' amount that we will have at closing

[ShanetheMortgageMan]

You are welcome.  Business funds are typically fine to qualify with.  As a general rule of thumb I always think it's a good idea to have 6 months of reserves after closing, just for your own peace of mind, but 2 months of the proposed housing payment is usually what lenders are looking to see, the more you have the better off you are.