You really should look and see what your FICO mortgage scores are.
They can differ 25+- points (and more) from the FICO 08 scores.
Sure, you MIGHT get approved for the price range that you're wanting to buy in but step back and think about it. There's insurance, mortgage insurance, taxes that will most likely be escrowed, meaning, you pay them when you pay your mortgage.
That pushes that payment up, a good bit based.
Take us for example,
With a $178,600 financing on our house, our payment is less than $900/month. Add in taxes, insurance, PMI that payment now becomes $1250/month.
Mainstream mortgage lenders won't use your FICO 08 scores, they'll use FICO 04 or commonly called, mortgage scores.
Looking for some help from people with experience.
I have an income off $55,000. Been at job for 2.5 years.
pay $175 Student loans/ month
$500 Car payment
$125 CC payments
Capital one ..Judgement $1100 - Paid in full / Satisfied from 3/2013
2 CC charge off's ... Macys $330 , Cap 1 $1100 (above) both paid in full
$12,500 down payment.. Should I have a problem getting pre approved and for how much ?
Thank you , and appreciate any response
As others have said, DTI is hugely important. 43% is typically a pretty consistent ceiling for the backend ratio. $55,000/12 gives you a gross monthly income of $4583.
$4583 x 43% = $1970 (acceptable backend ratio).
$1970 - 175 (student loans) - 500 car - 125 CC = $1170 remaining for your monthly mortgage payment to keep you at 43%.
If you factor in MIP, taxes, insurance, and a 4% interest rate, you are looking at a house around $180,000 to stay at 43% backend DTI.
If I were you, I would reduce my downpayment to 3.5% ($7000) and pay off the credit card. That way your credit card debt will be zero, and will not factor into your DTI. Additionally, it will improve your credit score.
This will afford you $125 more towards your mortgage each month, allowing you up to $1295/month. That would put you right at a $200,000 home.
I know it can be confusing, but let me know if you need any further clarification!
-Mortgage Loan Officer in CA
Also, if you have had your car for a while, you could refinance that to afford yourself a little more towards your mortgage each month. $250-275k will still be a bit of a stretch unfortunately.
Per FHA guidelines:
"The relationship of total obligations to income is considered acceptable if the
total mortgage payment and all recurring monthly obligations do not exceed
43% of the gross effective income.
A ratio exceeding 43% may be acceptable only if significant compensating
factors, as discussed in HUD 4155.1 4.F.3, are documented and recorded on
Form HUD-92900-LT, FHA Loan Underwriting and Transmittal Summary."
Compensating factors could be large cash reserves or potential for increased earnings in the near future (just to name a couple).
It is possible to go over 43%, but it gets difficult.
good god i thought i was reading my own stats there for a minute,
Most of it is identical to what I have.
My Fico scores averaged 705
Yearly salary is $60,000
Car payment $350
Student loans $500
CC paid in full each month
Capital One judgement $1300 paid off 3/32015 fully satisfied and **** Lien Released*** you need to look into that
First I will say that yes you can get approved for an FHA loan as I did with my info above, but I had to pay off my car to make it work ($2500) is what I had left.
Now unfurtunately you may not get what your looking for as far as price range $250,000. I was only approved for $160,000 but I asked if i could go higher got a max of $17500 ended and up buying a house for $175,000 with a downpayment of $6000 payments out to be $1160.
Now keep in mind that even though we had similar factors it may not be identical for you. One thing I would like for you to really look into is ask a title company to do a title search in your name to see if there is a lien on you. I found this out with my judgement. This right here almost surely would have killed my deal.
Heres how it was explained to me. When you have a judgement against you the creditor will put a lien on you even if you dont own real property. Now with the judgement being paid off and satisfactory you need to verify if they filed and record a release of lien. How my title company explained it was that sometimes creditors can draw up papers and sign them but may never actually file them or they go out of business so now your stuck with a lien on you. Call your Register of Deeds office and general sessions court where the judgement was taken out on you to see if there has been anything recorded. Usually your judgement will have the court docket number on there. Next best thing is to get in contact with the creditor who sued you and get all the copies of everything they filed that has your name on it.
I hope this helps. If you have any questions let me know. Im closing on my house on Wednesday April 1st so there is still plenty of opportunity for you.
Hey Everyone , just wanted to get back to you all and let you know that my pre approval came back yesterday. The loan officer said my Mid Score was 644... not too far off from my FICO scores and I would Qualify up to $250,000 with $15,000 down. That is the absolute max and he would recommend staying in the $225,000 range.
Getting there , after eliminating a few other things on my Credit Report I can hopfully climb to the $250-275k range.
Thanks again for your replies and preparing me for what to expect.
Thank you for the update. I am in a very similar situation and was wondering how you made out. This was very helpful.