Below is my profile. My question is what do I need to get my score up to in order to qualify for a conventional mortgage. I don’t want to do FHA because of the loan limits in my county. I’m assuming I wouldn’t qualify for conventional financing with the scores I have now. MyFICO score simulator says that the most I could get my score up to over the next 12 month is 643. If I do that, would I qualify for conventional or do I need to be above 660 or 700? I’d like to apply next year, but if I have to be above 660 or over 700, then I will plan to wait longer (even though I don't want to!). I’ve been reading about GW letters and PFD. So, I’m going to go that route and see what comes of it. I just would like a general idea of where I need to get my scores; so, I can know what to work towards.
- Credit. – EX, 603, EQ 604, TU 604, per myFICO. My ex quit his job for no reason and the baddies are from that. We lived off savings as long as possible and eventually everything devolved and we went 60-120 days past for cc and auto loans and then then settled the cc and paid off the autos. I have one outstanding collection account and that’s with Midland for $7,200. I’m going to try PFD for this. Divorce was final in July ’13 but we separated as early as '10 No bankruptcies or foreclosures. Also, I have one small cc with a limit of $750 that I was mindlessly maxing out and paying off every month. I stupidly didn't realize this would hurt me, but I’ve since paid down to $30 and am leaving it there. It’s this action (paying down the card) that my fico simulator says will only get my score up to 643.
- Income. Gross $131,000 a year paid regularly each month from full-time employment. $10,200 in child support paid in $850 each month. So, a total annual gross income of $141,200.
- Source of income. Employed full time. I’ve worked at the same company for the last 4 years and the same industry for the last 12 years. Also, the $10,200 is child support.
- Monthly debt payments. I have a 8,000 left on my car loan and I pay $450 a month on that. No other debt.
- Employment (for those who are employed). Full time, 12 years in the same industry. Promoted twice in the last 4 years within the same company.
- Assets/Reserves. I will have about 30,000 saved. This would be $17,500 for 5% down and $12,250 for closing costs (I’m guess 3.5% for closing costs is that way to low?) I have $7,000 in 401K but my main retirement is a defined benefit plan that I can’t use for assets. So, aside from what I will have saved for down and closing, I won’t have a lot in reserves. Do I need more?
- Location. Austin (Round Rock or Cedar Park) TX.
- Property. Single family home. I want to build with a community builder such as Highland Homes, but I’m also open to resale.
- Value. Hoping to acquire ir build something up to $350,000
- Occupancy. Primary residence.
- Transaction Type. Purchase, first time homebuyer. I'm divorced.
Any guidance is greatly appreciated! 
Conventional only comes out ahead in the long run if you have a 720+ mid score.
Honestly, FHA isn't bad but if the LTV is more then 80% then you're paying PMI for the life of the loan unless the 2 conditions are met:
1. The LTV drops below 80% through payments (most people forget to go back and ask to have it removed. They have to remove it.
2. Your house is apprasied and the value goes up making the LTV below 80%.
In either case...PMI adds roughly $200+ dollars per month to the loan.
Honestly, FHA isn't bad but if the LTV is more then 80% then you're paying PMI for the life of the loan unless the 2 conditions are met:
1. The LTV drops below 80% through payments (most people forget to go back and ask to have it removed. They have to remove it.
2. Your house is apprasied and the value goes up making the LTV below 80%.
In either case...PMI adds roughly $200+ dollars per month to the loan.
btw - if you're a first time home buyer, they have programs to assist with things like down payment, etc. You shouse check it out. I'm not sure what the qualifications are, or if there are income limits (you may make too much??), but it's definitely worth looking into.
My advice, find a local mortgage broker that you trust. They can help guide you through the whole process and let you know EXACTLY what you need!!!!
Just be straight up with them, tell them your situation, and let them help you!!!! That's what I did... and I started with credit scores just slightly lower than yours just six months ago! So it can be done!
Good luck & happy house building!!!
- Assets/Reserves. I will have about 30,000 saved. This would be $17,500 for 5% down and $12,250 for closing costs (I’m guess 3.5% for closing costs is that way to low?) I have $7,000 in 401K but my main retirement is a defined benefit plan that I can’t use for assets. So, aside from what I will have saved for down and closing, I won’t have a lot in reserves. Do I need more?
One last thing... sorry, it's sunday and my mind is a little scattered
If you're looking to buy/build in the $350,000 range.... you have two other options that aren't as commonly talked about.
1. Builder/seller paid closing costs - you DO have the option of asking the seller or builder to pay closing costs, and increase the cost of the home. Say from $350,000 to $362,500. That way you can build it into the loan. It would require you to have a little higher down payment, but that would be a possibility if you're not paying for them out of pocket!!
2. Buy up your interest rate - a broker can assist you with this, but this is what I did for my first house because I didn't have the equity in the house, nor the cash. You DO have options to buy up your interest rate to cover part/all of closing costs. Example: say your interest rate is 4%... you can buy out "cash" to cover closing costs, but it increases your interest rate to 4.5%. Not a great option, but it IS an option!!! I did this... my interest rate was originally 4.25% and I bought up my interest rate to 4.54% and that "buy up" covered ALL of my closing costs!! For the pennies / month it cost me it was well worth it.
One of my BFFs is a mortgage broker here in MN.... and over the last six months I've learned more about how to "make things work" than you can imagine! Where there's a will, there's ALWAYS a way!!!!
By utilizing either of these options it would leave you just shy of $30,000 as a down payment. Your $7000 in 401k will equate to about $4200 in reserves (they take these at 60% value after cash-out), but it might be enough to cover your reserves. So, if you could save another $5,000 in down payment you may be all set!!
$350,000 cost
$35,000 down payment (your're short $5000 now)
$4200 reserves (401k)
buy up your interest rate.... to cover closing, and you're all set ....once you're at a 640, that it
Hope this helps!
