TX FHA Loan and down payment assistance

[Anonymous]

Long time lurker and first time poster. 

Quick recap of my current situation and score:

7/30/19    Ex. 640 FICO 8        582 FICO 5

7/30/19    Eq. 639 FICO 8        633 FICO 2

8/2/19      TU 639 FICO 8         620 FICO 4

I am currently building a new home with a builder that I don't really want anymore. I never signed any contracts with a lender but the lender did say I was prequalified for the home but needed to do some work on my credit. I was told I would be called and that they would help guide me through the process, but I ultimately ended up just paying down debts and doing everything on my own. I don't know how much I'm approved for and looking to purchase ASAP. The last time my credit was pulled for the lender was in May 2019. So this is where my questions come in:

Can I apply to multiple lenders to shop rates and how much I'm approved for in a short period of time? Will it hurt my credit more if I apply to say, 2-5 different lenders compared to just 1?

How do I increase my buying power? Just reduce my DTI and/or put more money down? 

I have one missed payment on my history that was a complete screw up on my part as I simply forgot to pay my Kohl's card when I went on vacation and it shows as 30 days late. I asked them to remove it and they reviewed and said that it was correct and that it was going to stay. I sent them a letter in the mail asking for goodwill.

I have 59% credit utilization that I have some money to pay down, but was trying to save up more for my down payment. 

Which brings me to my next question...There are down payment assitance programs and was wondering if anyone has had any experience with them? I was hoping to apply for one and get 5% down in the form of a grant or forgivable loan after living in it for 3 years. Please share any advice.

Sorry for the wall of text and loaded questions in advance and please let me know if any more information is needed. 

Thanks for everyone's time in advance!

[Anonymous]

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@Anonymous wrote:

Long time lurker and first time poster. 

Quick recap of my current situation and score:

7/30/19    Ex. 640 FICO 8        582 FICO 5

7/30/19    Eq. 639 FICO 8        633 FICO 2

8/2/19      TU 639 FICO 8         620 FICO 4

I am currently building a new home with a builder that I don't really want anymore. I never signed any contracts with a lender but the lender did say I was prequalified for the home but needed to do some work on my credit. I was told I would be called and that they would help guide me through the process, but I ultimately ended up just paying down debts and doing everything on my own. I don't know how much I'm approved for and looking to purchase ASAP. The last time my credit was pulled for the lender was in May 2019. So this is where my questions come in:

Can I apply to multiple lenders to shop rates and how much I'm approved for in a short period of time? Will it hurt my credit more if I apply to say, 2-5 different lenders compared to just 1?

How do I increase my buying power? Just reduce my DTI and/or put more money down? 

I have one missed payment on my history that was a complete screw up on my part as I simply forgot to pay my Kohl's card when I went on vacation and it shows as 30 days late. I asked them to remove it and they reviewed and said that it was correct and that it was going to stay. I sent them a letter in the mail asking for goodwill.

I have 59% credit utilization that I have some money to pay down, but was trying to save up more for my down payment. 

Which brings me to my next question...There are down payment assitance programs and was wondering if anyone has had any experience with them? I was hoping to apply for one and get 5% down in the form of a grant or forgivable loan after living in it for 3 years. Please share any advice.

Sorry for the wall of text and loaded questions in advance and please let me know if any more information is needed. 

Thanks for everyone's time in advance!

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You can shop around and it only be on inquiry on your creidt report. There are down payment assistance grants for several different scenarios in Texas but you have to have a credit score of 620 to qualify. 

[Anonymous]

I spoke with a lender today and they said I would not be approved my the price of my home due to my student loans making my monthly DTI 55%.

Any one have any ideas on what I can do other than just wait and pay down my loans? 

[Mortgage-Specialist]

As you may already know, most lenders have major overlays. Some lenders wont allow above 43% debt ratio, others cap you 48%... FHA guidelines do allow for up to 56.99% debt ratio which we convert many turned down buyers into closed loans quite often by following true FHA guidelines without the overlays. However, the down payment assistance rules will not be on board w this so you would be required to put down the required 3.5% down payment.

[homeloanexpert]

You have options. I have a DPA that is available in Texas that has no DTI caps other than a AUS Approve/Eligible requirement. I recently closed on one just under 57% DTI.

Best wishes to you!

[VALoanMaster]

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@Anonymous wrote:

Long time lurker and first time poster. 

Quick recap of my current situation and score:

7/30/19    Ex. 640 FICO 8        582 FICO 5

7/30/19    Eq. 639 FICO 8        633 FICO 2

8/2/19      TU 639 FICO 8         620 FICO 4

I am currently building a new home with a builder that I don't really want anymore. I never signed any contracts with a lender but the lender did say I was prequalified for the home but needed to do some work on my credit. I was told I would be called and that they would help guide me through the process, but I ultimately ended up just paying down debts and doing everything on my own. I don't know how much I'm approved for and looking to purchase ASAP. The last time my credit was pulled for the lender was in May 2019. So this is where my questions come in:

Can I apply to multiple lenders to shop rates and how much I'm approved for in a short period of time? Will it hurt my credit more if I apply to say, 2-5 different lenders compared to just 1?

How do I increase my buying power? Just reduce my DTI and/or put more money down? 

I have one missed payment on my history that was a complete screw up on my part as I simply forgot to pay my Kohl's card when I went on vacation and it shows as 30 days late. I asked them to remove it and they reviewed and said that it was correct and that it was going to stay. I sent them a letter in the mail asking for goodwill.

I have 59% credit utilization that I have some money to pay down, but was trying to save up more for my down payment. 

Which brings me to my next question...There are down payment assitance programs and was wondering if anyone has had any experience with them? I was hoping to apply for one and get 5% down in the form of a grant or forgivable loan after living in it for 3 years. Please share any advice.

Sorry for the wall of text and loaded questions in advance and please let me know if any more information is needed. 

Thanks for everyone's time in advance!

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Hi Soniii93,

Unfortunately FHA recently updated the automated underwriting systems so it's more difficult now to get approved when you use other people's money for your down payment. That means down payment assistance programs & gift funds.

Why would FHA do this? Because these types of loans have a higher rate of default/foreclosure.

Factor that in with your debt to income ratio & credit scores and my gut tells me you're going to have a difficult time getting approved using a DPA instead of your own money. 

The other issue is DPA programs generally have higher interest rates which is going to compound your debt to income ratio problem.

A couple of additional points.

I have a DPA program here in Texas where the grant is forgiven after 7 or 10 years depending on which option you choose. For 5% down, that rate for the 7 year option is 5.5% & some of the other programs don't even offer 5% down anymore because the rate was so high.

You're better off using your own money for the down payment in my opinion.