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First off, thanks to everyone for taking the time to read this and hopefully answer/give me advice. I really appreciate it.
Here is my situation:
I have been married for 1 year.
I make aprox 40k atm, waiting on a list for a much better job.
My wife makes aprox. 65K a year.
We have about 40k saved up in the bank. Family states they can help us with a little cash for a house, I'm guessing 5-10k.
Car payments/student loans total for us is about $400-500$ a month
My wife and her brother bought a condo in Chicago, and my wife and I have been paying it for the last 4 years. Now we have a child and wish to buy a house. I'm looking in the Mt. Greenwood area of Chicago. The houses I like are going for 200-250k. We would like to rent out our condo when we buy a house.
My wifes credit is excellent 700+, my credit is only "fair" at 630 due to some medical bills that victims assistance has declined to pay. I plan on paying these bills off in the next month and clear them from my credit report.
How hard would it be to qualify for a mortgage with these numbers? Would already owning a condo make it harder for us to get another loan for a new house? We would really like to hang on to the condo and rent it out and have it for the future. How long should I wait for my credit to improve after I pay off those old debts? I have no credit cards atm.
I think you really need to talk with a local bank to talk about your situation since they can give you a better and more accurate answer, but if you are resorting to the internet, you are prolly looking for just an opinion.
With that said, there looks like there are a few "options" for you.
Conforming loan - Just your wife:
1) If you buy with just your wife's credit and income, she can most likely qualify for your conforming loan with 20% (most likely 25%) down and with a middle IFCO score of 720 or more for the best rates. You are going to have to talk with a loan officer to figure out how much she can qualify for. Especially since she owns a condo which will affect her front/back debt to income ratios.
Conforming loan - Just you:
2) If you were to apply for a mortgage with just you, I highly doubt anyone will allow you to apply for a conforming loan. The combination of your income, monthly debt, and FICO score makes it hard. Not even sure a letter of explanation will be good enough. There might be some local mortgage lenders in your area who can look past that. THEY DO EXIST, you just gotta find them. I doubt a big bank like Wells Fargo will accept your loan application.
Conforming Loan - Both of you
3) This gets complicated because of your FICO score, even though your combined income will help the borrowing amount. You will have to talk to a loan officer, but I am gonna guess that they will just want your wife on the mortgage.
The most likely mortgage you will qualify for is an FHA loan. They allow low down payments, you can include closing costs to the mortgage, and will allow for low FICO scores. Not sure if they accept 630 loan scores. There is usually a fee for a FHA loan, a monthly PMI paid to the FHA, and they have their own rules and regulation when the mortgage is created. It's a costly option, but allows for people who wouldn't normally be credit worthy for a mortgage to obtain a mortgage. Also, I think your wife will have to make sure the condo is not her primary residence.
If I were you, I would figure out if your wife alone will be enough. If the loan amount is enough with just your wife, then why bother complicating things with your lower FICO score. If not, then you might want to look into how to increase your FICO score (granted, you have the time), so that your income can be used without having your mortgage app denied. Mind you, FICO scores look at your records for the past 6 years. If that fails, go the FHA route. Works for millions of Americans.
Of course there are more risky loan options, but I will leave that to the loan officers to suggest.
Thank you very much for the reply. I appreciate you taking the time to give me some advice. We will be going to a lender soon to discuss options, and you are correct I was looking for opinions.
I am in the process of cleanig up those medical charges on my credit report, I should have them paid off by the end of this month. I hope my credit score raises. We can wait a year or two before we buy a house. Our daughter is still only 3 months old.
Paying off old, owing collections will update the date of last activity to a recent date, and while they will report a $0 balance, the fact that there is a recent date of last activity might actually lower your scores instead of improve them. It all depends on how long ago the last date of activity is from now, if it was last month, then paying them off will only update the date of last activity by 1 more month, not hurting your scores much at all... but if they were from years ago, the scores will most likely sink a bit.
Good afternoon chicagoparamedic, you should have no problem qualifying for an FHA mortgage. The fico score requirements with most mortgage lenders is 620. They will use the lower of the two middle scores for qualifying so your wifes 630 score will be fine. There are other investors who will do FHA loans with fico scores as low as 580, however the interest rates can be a bit higher. Now may be the best time to buy with mortgage rates at historic lows, and home prices looking too attractive to pass up. You might be able to buy a new home for your growing family for not much more than you pay for rent depending on your price range.
I wish you the best of luck!
Last edited by Josh Harmatz; 09-25-2009 at 12:07 PM..
Thank you very much for the reply. I appreciate you taking the time to give me some advice. We will be going to a lender soon to discuss options, and you are correct I was looking for opinions.
I am in the process of cleanig up those medical charges on my credit report, I should have them paid off by the end of this month. I hope my credit score raises. We can wait a year or two before we buy a house. Our daughter is still only 3 months old.
Thanks again.
I have a preapproval for an FHA loan with a 655 score. Like everyone said, your best bet is to just talk to a mortgage person. They've seen and heard the worst cases so they know what's what, and then you will know where you stand.
My step sister in another city told me today they got into an ARM about 4 years ago, their payments jumped from $1500 to $2300 a month, and they are trying to refinance and lower their principal from $200,000 to $155,000, the amount they think their house is worth. Is that possible to do? I knew you could refinance an ARM, but didn't know you could lower the principal on your mortgage. If that's the case, why are so many people walking away from their mortgages.
My step sister in another city told me today they got into an ARM about 4 years ago, their payments jumped from $1500 to $2300 a month, and they are trying to refinance and lower their principal from $200,000 to $155,000, the amount they think their house is worth. Is that possible to do? I knew you could refinance an ARM, but didn't know you could lower the principal on your mortgage. If that's the case, why are so many people walking away from their mortgages.
Not many qualify for a short pay refinance. You sill have to have good credit, income, etc to qualify for the new lower loan, and be able to convince your current lender to take a lower (short) payoff.
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