What type of loan, chances of pre-approval?

Pony4her · ‎06-02-2021

Well, I have gathered lots of facts here and now want to provide the big picture to gain thoughts of what my chances are of being approved for a mortgage and possibly what type of loan. Currently working on AZEO method on revolving debt below.

Current credit scores: Fico 8: 619 (eq) - 670 (tu) - 762 (ex) mortgage 5,4,2 scores: 662 - 690 -705
Compensation history: Hourly rate is $32.20, overtime for past 2 years reflect on my W2 (2019 - $104,307) and (2020 $95,681). Current 401k balance is $109k
Current home is on market and expected to sale with profit of $165k (using some to pay off vehicles, downpayment, closing cost).
Installment Debt:

Vehicles to pay off are (will use a strategy of paying off some of the vehicles for possible score boost and then remaining balance at closing of new home):

Vehicle 1 - $1024, no lates, balance $26,125, interest 2.85%

Vehicle 2 - $310 per month. no lates, balance $17,047, interest 7%

Vehicle 3 - $810 per month, no lates, balance $12,968, interest 6.071%

Revolving Debt:

HOA (currently in dispute - reporting incorrect balance, office had been closed due to COVID, 120 day late, will pay once resolved)

Am Ex: $1753/2300 (no lates)

Cap 1: $430/1000 (no lates)

Cap 1: $199/750 (no lates)

Lowes: $576/2300 (no lates)

Future Pay (charge off from 4/2020)

Based on the full picture above, what are your thoughts, any mortgage experts are welcome to chime in also. Would love conventional but ok with FHA. Do you think I can qualify based on income and debt or should I do something differently credit wise witht the above picture?

Home purchase: $450k, state of Georgia, seller credit $5k, new build

Thank you all for responding, y'all give me hope.

tooleman694 · ‎06-02-2021

Looks like you are right on the edge of FHA and conventional. If you pay down those cards your mortgage scores are going to shoot up. I think you might have DTI issues with those cars. Probably need to be paid off. I would pay off car 2 and 3 right now and then use those funds that you were paying and add it to car 1. Hopefully you can get it paid off by the time the home is ready.

Pony4her · ‎06-02-2021

Thanks for responding. As I recently began conversing with the builder LO, he did say we can pay the vehicles off at closing. I believe we will cure some along the way so when time comes for the 2nd credit pull, we are definitely at the conventional state. Remember, we are 5-6 months out from a build but closing on current home within 30 days to have the $165k in pocket.

1t2b · ‎06-02-2021

What is "on the edge" if you don't mind me asking? What should MMS be in order to be safely above FHA?

Michizane · ‎06-03-2021

@1t2b wrote:
What is "on the edge" if you don't mind me asking? What should MMS be in order to be safely above FHA?

Depends on the lender...technically the lowest middle score for conventional is 620, but the lender might have a requirement (overlay) for anywhere from 620-700 to get conventional. I have a middle score of 666 (but I applied with my wife who had a 802 middle score), and was able to get conventional with a local broker/lender and Wells Fargo. So chances are, your score will be good enough to get conventional with your current mid score (of course you need to have the right DTI, etc as well).

That said, the lower your score is the higher your interest will be with conventional which is why most will say 680+ is where you need to be for conventional. So the lower the score, the better the rate may be for FHA instead of conventional. However, depending how competitive your market is, you might want to eat the extra interest rate to get a conventional instead of FHA. For me, I was still able to get better rate quotes for conventional over FHA.

Once you have optimized your credit and are ready to apply (practicing AZEO, etc), the Loan Officer will be able to compare FHA vs. conventional rates (assuming you qualify for both) and give you a loan estimate based on the purchase price you are thinking.

tooleman694 · ‎06-03-2021

Yup once you hit 680 you need to look at both FHA and conventional and see which option works the best for your situation.

Pony4her · ‎06-03-2021

Thank you; today I paid in full the HOA, still waiting to confirm if they will remove lates as I've requested, she said she'll update it. I've asked for clarification and nothing via email yet soooo hopefully they're update will be removing the 120 day late.