FHA Loan & Self-Employment + Credit Question (loan officer, pre-approved, credit report, rate)

[SelfEmployed75]

Hi all, I have a couple of questions if you could be so kind of help me out.

I am looking to purchase a home using an FHA loan (due to Ch. 7 BK 34 months ago I can't do a conventional). My husband and I own our own business (for the past 7 years) and make good combined money, but if I only take a 50% share of dividends, then it would not be enough to meet the DTI ratio.

So first question is: Is it possible for me to claim all the dividends to raise the income level?

If that is not an option, we could possibly apply for the loan together however he has some old bad debt (5-6 years old) that is no longer collectable but still shows on the credit report, his credit scores are in the low 600s. I've read online that "collection" accounts have to be dealt with for an FHA loan, unless they are over 2 years old? Is this true?

Thank you for any help.

[nationwidelender]

Underwriters will use a 2 year average of the income that was netted on your tax returns.

Additionally, you might want to hold off on applying for a loan for at least 2 months. Most lenders are requiring 3 years from a discharge date, because they have what are called overlays. Although the federal guideline may say it is 2 years, the lenders perrogative to add their guidelines into the mix.

[SelfEmployed75]

I am wanting to purchase a new build which would take 6-7 months before it's ready, do you think it's possible to get a pre-approval now and then by the time closing comes around, it's be over 3 years, or does it need to be 3 years from Bk for the pre-approval as well?

As for the income, it sounds like the underwriters goes by what we claimed, so if on our tax return we claim a 80/20 split on dividends/"draws", then that should be ok. For 2011, we claimed 50/50 but when we file this year, I think we should be able to claim 80/20 (or higher?). I need to ask my accountant if the share split can be done at any time or if it needed to be done at the beginning of the year etc.

Thank you for the help.

[hollylends]

Have to agree with nationwide lender. I am signed up with about 30 different lenders (I am a broker) and most have a 3 year overlay, but there are a few lenders out there that offer 2 years from the discharge date. However, when I have submmitted loans that have a borrower with only a 2 year history from a chaper 7 discahrge date, the underwriters have kicked backed those files to me stipulating the circumstances were not extenuating enough. So it is best to wait the additional 2 months, unless you are up for the challenge.

As far are the income most underwriters will use a 2 year average on your personal 1040 and a few may take 1 year on a corporate return, but they only look at the net not the gross.

[SelfEmployed75]

Is the pre-approval process the same as the final loan approval? Like I mentioned, it's a new build. Can I get pre-approved now (on the basis that in 6-7 months, it will have been 42+ months since BK)?

[hollylends]

If you get pre approved or pre qualified now, the loan officer will just have to redo the application again when it gets closer to your closing date. So that means pulling credit again, redoing the 1003 and resubmitting updated supporting docs i.e. bank statements, pay checks, etc. Plus we can only lock (guarantee) a rate for short amount of time, and lenders cap us at the amount of times we can relock that rate. (It varies by lender.)