What Could I Expect

[Anonymous]

I am taking the next 365 days to get all my ducks in a row in preparation of applying for a mortgage.

Using my goal score and debt to income ratio, what might I expect as in terms of approval amount, payment etc?

Location: Douglas County NV

Income: Job 1: 6 years of employment, Annual Salary $36,000 - Job 2: 3 years, Annual Salary of $16,000 which is reported as 1099

Goal Score: 650, but I understand that the USDA does loans as low as 620??

Debt: Here is the simple yet tricky explanation. I plan on having no debt but I have a judgement of $4,000.00 that is due to fall off middle of 2013 that I have been paying on via a VERY incremental wage garnishment for the last two years. Is that payment plan enough to satisfy a lender, or would the lender require it be paid in full?

All cars would be paid off.. cc's paid.. etc. All baddies, collections etc.. will have fallen off by my 1 year goal.

Any insight the experts of the Fico Forums could shed would be much appreciated!

[ShanetheMortgageMan]

If the payment history can be confirmed then it's unlikely the remaining balance of the judgment will need to be paid.  The payment will be included in your debt ratio, but from the sounds of it it's too small to impact things as your housing ratio will start to exceed that threshold before your total debt ratio will exceed it's.

If you have zero expenses from your 1099'd job, meaning you pay income taxes on all $16k, then using a 5.5% interest rate and USDA's monthly fee (which will be in effect at that time), about $180k is where you'd likely be approved for.  Most lenders are looking for 640 scores for USDA financing, a year from now I imagine credit will be a little looser and we'll see some, if not the majority accepting 620's.

[Anonymous]

Thanks so much for your input Shane. It is much appreciated.

The garnishment due to judgement was for $23.00 per paycheck(every two weeks). I have two years worth of paystubs thus far showing that payment. Is that typically sufficient or would I also need a statement from the courts and - or creditor?

The 1099 job is a contract position. To prove income would I supply the copies of the contracts or the 1099 from the company I work for?

Thanks again!

[Booner72]

Good luck getting your loan.

@Shane - why do you think lenders will get looser next year?

Thanks!

[ShanetheMortgageMan]

@ meettheheffs - you are welcome.  The payment history from the court/creditor would be needed, although the underwriter will see it on your paystub/auto-deducted and that along with the payment history should allow it to remain unpaid in my opinion.

The 1099 income is verified by reviewing Schedule C on your tax returns.  http://www.irs.gov/pub/irs-pdf/f1040sc.pdf - net profit (line 31) plus depletion/depreciation is typically what is used.

@ Booner72 - residential credit has already loosened up a bit over the past ~3 months, we've seen lower score requirements on FHA & VA financing, and residential lending was one of the first markets to tighten up.  I've seen charts that have surveyed originators of all types of credit regarding how "tight" they have felt their market's credit has become, and the charts indicate that residential credit tightens up and loosens up first, followed by commercial & consumer credit.  I believe easier credit would be a good thing for the economy, but restraint has to be excercised.

[Anonymous]

Shane your feedback and insight is awesome. I was unaware that the tax form would be needed. It gives me plenty of time to get my ducks in a row. Theoretically, if I was to consolidate my driving trips (I deliver guidebooks/brochures) so I would claim less miles etc, and cease using my home office, to eliminate a significant amount of deductions that I take. My NET income from the 1099 position would be higher, hence allowing me to borrow a larger amount?

Since NV is a community property state. I am now assuming my wifes reports would be pulled. Her current FICO is 661 and we just discovered a medical collection 2 years ago for $200 which we will PFD or pay if needed.. Her "simulated Fico" after paying down her CC would put her score at 741 in a year. How much would she play into our applying for a mortgage. She shows little to no income working PT in a daycare.

Thanks!!!

Rich

[ShanetheMortgageMan]

Thank you, yes if you have less expenses, that will increase your net income, and increase the amount you could potentially qualify for.

Yes in a community property state with FHA, USDA or VA financing the non-borrowing spouse's credit report is pulled, only to include the debts, not to consider the credit scores.  There should be no requirement to pay off collections or charge-offs, however if there are any judgments or tax liens (which can attach to community owned property) then those would likely need to be paid.   If her credit is excellent, and yours are just so-so, then she can help be a compensating factor in helping the underwriter feel more comfortable since they see a "responsible" person with credit on the mortgage application.

[Anonymous]

Shane,

I commend your willingness to hop on here and help out the community.. similar to what I do. I'm the Concierge Manager for two large hotel/casino properties so I hop on tripadvisor and the like and answer peoples questions quite a bit in regards to the tourist destination I live and work in.

Your input has been invaluable.

I visited your website. If you would be interested at all in working with me when my wife and I are 100% ready, I would welcome the opportunity. If your not, I understand as well. You can shoot me a private message.

[ShanetheMortgageMan]

Thank you.  I also like going on TripAdvisor and help out with advice when I can, it usually is right back after traveling to a place I really enjoyed... so it's been a couple years since I've been on there.  I am going to Cabo San Lucas in August though, so I'll probably scour TA to find the local's favorites and what not.  If you like discussing and sharing advice about "locations" then you may find http://www.city-data.com/forum/ a fun place to visit - there are always good real local converations.

Similar to TA, the "FICO forums" can't be used as a way to solicit business, but also like TA, consumers/visitors are permitted to contact industry professionals personally if they choose.  That is what separate TA and the FICO forums from a lot of other websites where soliciting (soft or hard) is permitted, the "quailty" of information shared here and on TA is far superior.