Should we even try to prequalify??

[ShanetheMortgageMan]

You're welcome. 

When there is self-employment on an FHA loan you are also required to provide a profit & loss statement through the most recent quarter, to confirm the business net profit is being maintained.  It can be self-prepared.

[Jdaisy0805]

Thanks for the heads up! I was assuming so!

funny story, I put in a call to our local CU to ask questions about documents needed for the pre approval process (mortgage loan extension on their customer service line). He had no idea and put in a message for someone to call back. A girl called yesterday, and all she could do was repeatedly offer to schedule an appointment for a sit-down at our local beach. Sigh. I had very specific questions I wanted answered, but sounded like she was just a sales person trying to "get us in the door". Irritating. I want to be prepared with what we need PRIOR to an in office sit down, ya know?? Thankful to you in helping me through this process!

[ShanetheMortgageMan]

Not surprising they wanted you to come in before answering any questions.  CU's are fine for any loan that doesn't involve complications - excellent credit, on salary, good down payment, and some extra money/reserves in the bank are their ideal client.  Anyone who doesn't fit into that box has a higher chance of encountering difficulties - not saying they won't get approved but CU loan officers are paid salary (rather than commission) and their knowledge usually reflects that, anything tricky or out of the box usually throws them for a loop.  

Also, there is zero reason you should need to have a face-to-face meeting to apply for a mortgage.  Gathering up all of your documents and bringing them into a bank while someone on the other side of the desk hems and haws for an hour is very 1980's.  Most banks/CU's that require that know that after you sit through that process it's so off-putting you'll only want to do it once.  I'd ask them if you can apply for the mortgage over the phone with a loan officer - you shouldn't need to have any paperwork on hand to do that.  After you apply for the mortgage you should be able to upload/email those documents directly to the loan officer for them to review, which they should be able to review that same day or at most within 24 hours, and get back to you afterwards to let you know how things are looking.  That's how the vast majority of mortgages are done these days.  Just my $.02.  

[Jdaisy0805]

Thanks for that! I have no idea what's considered "ordinary" since this is our first time looking into a mortgage. Also, latest update gives us a 681 middle mortgage score :-)! Coming from 603 only 3 months ago, super stoked about it lol. All disputes have been resolved and updated to remove said comments, and FICO 8 is up to 694! The stars are aligning, lol.

[ShanetheMortgageMan]

Mortgages are very high-tech these days, everything can be done on the phone & computer.  I don't think I've had paper documents from clients in almost a decade.  Nearly all of the mortgage documents can be e-signed, even including a majority of the final paperwork that is signed with a notary/title company.  That's an amazing score increase, you should be proud of your hard work, I think you'll have a great chance of getting an FHA automated underwriting approval and conventional could very well be an option too.

[Jdaisy0805]

Just an update on progress. Taxes have been filed! It's a waiting game now for the transcripts to post to the account so we can make a payment agreement, fingers crossed. It's been 3 weeks now, so hopefully soon. 

looking at the documents from 23 and 24, and adding back in what is allowable for self employment (depreciation, home office), I'm getting 122k as an average of the two years. I also have all of your books updated for profit and loss statements. I have my eye on a particular property, and I'm wondering if we should pull the trigger for the pre approval step or if we need the payment agreement first? I'm starting to see the light after decades of renting and legitimately getting excited, even if we're literally looking at 2.5 times our rent..eeeww lol. 

one last question, when considering USDA (yes we meet the financial limit due to 8 dependents and are looking in rural areas), do you need to have made the three payments on a payment agreement towards taxes even if they are from the same year the taxes are due? That may be one last item to consider before pursuing the pre approval. 

thanks for listening and all of your guidance?

also, middle mortgage score is now 683..one point at a time right lol.

[ShanetheMortgageMan]

Nice going on your scores!

Tax transcripts can take up to 6 weeks to post from my experience, but most of them are 4 weeks or less, so hopefully you see them any day now.  You should be able to call up the IRS now and request a payment plan, no need to wait until the transcripts post (underwriting will require the transcripts but just needs them prior to you being able to close, not for the pre-approval).

You can get pre-approved now and the loan officer can then tell you how much the IRS tax payment plan can be for and you still remain approved.  FHA just requires the payment plan to be set up and all payments due have to be made on time, but USDA requires you to have 3 months of payments (regardless of if it's a tax lien or not) before you can get approved.

[Jdaisy0805]

Fabulous, thanks!! 😊 

[Jdaisy0805]

Good news is we were able to get an automated approval for FHA 🎉! I'm super excited, but also slightly terrified honestly. He did try to run it through conventional a few times with varying information, but it continued to come back as refer with caution, in other words, nope. Probably for the best since the payments on an fha loan are less expensive by about $250 per month. 

So strange, though, that the lender literally recommended going out tomorrow and getting a secured card to boost credit to try to qualify for conventional in a few months if that's the route we wanted to go. He teaches a credit class, lol. I had to tell my husband when we left..do NOT under any circumstances listen to that advice!! When it ran through the automation, he said the system didn't even give him any recommendations to improve credit lol. I guess that means I was right in thinking there was nothing left I could possibly do to boost it further. 😊

bow the tricky part-finding something in budget that works..this area is SO hard, ugh. If we push it to 425k we can find just right, but idk if we're ready for it.

[ShanetheMortgageMan]

That's wonderful news about FHA, congrats!  And yes, absolutely do not open any new credit until after you close.  

Automated underwriting doesn't provide tips to improve credit, it just explains what risks/strengths are present in the loan file.  The credit report will indicate what the major factors are that is impacting your credit though, such as:

TIME SINCE MOST RECENT ACCOUNT OPENING IS TOO SHORT
RATIO OF BALANCE TO LIMIT ON BANK REVOLVING OR OTHER REV ACCTS TOO HIGH

TOO MANY INQUIRIES LAST 12 MONTHS

LACK OF RECENT INSTALLMENT LOAN INFORMATION

TOO MANY ACCOUNTS RECENTLY OPENED

Etc.