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smckaybiz · Posted: Mon Mar 09, 2009 9:34 am Post subject: Can I even qualify?

Hello all,

I've finally made some the corrections needed to my credit report and I am now ready to pursue buying a home but first i wanted to get some honest advice here first as to whether or not I would even qualify for a Mortgage. Here's the run-down:

My credit score should be above atleast 650. I've worked for a bank for 5 years and my wife just started as a nurse a year ago. Between the two of us we make about 70K/yr. We are looking to stay between 75-150K. The only real debt we have is a student loans(365/month), car loan(265/month), and cc's(200/month). Our debt to income should be fine but we do have a ch 7 bankruptcy that was filed in dec of 04. I am looking to buy a home under value so I can finance the down payment b/c I could only come up with about 5% down right now myself. I am also looking for a simply 30yr fixed rate mortgage, escrow isn't really too important to me.

Any suggestions would be greatly appreciated.

gmakerley · Posted: Mon Mar 09, 2009 9:57 am Post subject:

scott, your best bet is likely to be fha; but you've got to get past the bankruptcy. i know that fha is more forgiving in its' bankruptcy guidelines, but individual lenders will be more, or less, temperate toward that issue.

from the standpoint of affordability, it would seem that you've got that sewn up, particularly since you are being somewhat conservative in the price range you're considering.

financing the down payment isn't really an option, unless you qualify for a bond program in your state (first-time homebuyer, usually). pennsylvania has phfa (pennsylvania housing finance authority), and i'm certain their website will have plentiful information for you. i know there are (or have been) non-profit organizations that will grant "soft seconds" to help borrowers with down payment requirements, also.

as for escrow, i gather you mean the paying into an escrow account for taxes and insurance. borrowers in 2009 don't have much choice in that matter - it's a requirement virtually everywhere, but that's not a bad thing.

keep plugging...and write a nice, florid explanatory letter for the bankruptcy. make sure the lender understands that you only filed because it was your last resort, and that you understand the meaning of good credit and that you've learned your lesson, etc. "make 'em cry" is always the key phrase.

smckaybiz · Posted: Tue Mar 10, 2009 2:58 pm Post subject:

Thanks for the quick response George,

Conservative is my middle name! I vowed after the bankruptcy to never get myself in the hole again and I havn't had one late payment since. It's gotta stand for something. That with the debt to income as good as it is I was hoping I can find a lender willing to work with me. I may have to save up some more money for the down payment though. PA does offer some assistance programs but they are very small.

Worse case scenario is I'll have to keep renting for a while but I'm just getting a bit jumpy with the econ. the way it is. All I know is that rates are low and values are low. Sure, they might get lower but they could always start skyrocketting at any moment and i don't want to take the chance. Besides, there are a lot of desperate sellers out there. We just might have to get creative. Wink

gmakerley · Posted: Wed Mar 11, 2009 12:54 pm Post subject:

boy if there's a skyrocket in the near future, i will be amazed. i don't think we'll see any great shakes in the values area, nor do i think rates are climbing any time soon. but then again, who am i? houdini? the great carnac? oh yeah, he just gives you the questions after your provide the answers.

Jessica · Posted: Thu Mar 12, 2009 6:29 am Post subject:

Hi Scott,

Nice to see you here again Smile

Feels great to hear that you're buying a home. Looking at your credit score, I do feel your best choice could be an FHA mortgage. Also, you don't have too many debts or too much of credit card debts. By the way, do you follow the minimum payment method in order to pay off cc debts? It takes years actually to clear the debt with minimum payments.

As for the bankruptcy, it's almost more than 4 years, so you could well qualify for an FHA loan. Regarding the down payment, it's ok to put down 5% if it's an FHA loan. But I'd advise saving some more cash before taking out a mortgage. Times are tough you see. You don't know when you may need more cash to pay off your debts.

I appreciate your plan to stick to a 30 year fixed mortgage (a simple one is better!) As for the escrow, I'd advise you have one because it is more disciplined and helps you to manage your mortgage payments well. Do you have any special reason for not using an escrow?

Frankly speaking, you have good employment history. But that's not enough for conventional loans. A credit score in the 700's does help. So, in case you don't qualify for the FHA loan, I'd suggest that you wait for a year and work upon to improve your score. By that time, your wife will have completed 2 years of service. So, in case you may want her to be the co-borrower, her employment history is likely to add value as a qualifying factor for the mortgage.

In case you'd want to know your mortgage debt to income ratio, you may calculate it using the DTI Calculator.

With best wishes,

Regards,

Jessica

smckaybiz · Posted: Fri Mar 13, 2009 8:46 pm Post subject:

Well George, I don't think things will go up any time soon either but then again, two years ago did you or anyone for that matter think that we'd be in this economic mess? You just never know.

Thanks for the D/I link Jess! My ratio right now is only 28%!

I'll tell you honestly. The thing on my credit that was dragging me down was a tax lien on a property that I no longer owned (what a mess!) My credit scores with the lien range from 6-650. I just recieved my first letter from TransUnion stating that they've deleted it so it should only be a matter of time before the others are removed. I don't know how much the tax lien dropped my score but it very well may be closer to 700. I should know soon.

As far as the escrow. I just hate the idea of someone holding onto my money for me collecting interest off of my money until the tax payments go out when I could be collecting the interest myself. I guess if it's a requirment to the mortgage then I'm all about it.

It's nice to be back, people that help and ask for nothing in return...
it doesn't get much better than that! Thanks again and I'll let you know how things turn out.

gmakerley · Posted: Sat Mar 14, 2009 5:03 am Post subject:

depending on your loan to value ratio, scott, many lenders (perhaps all) will allow you to avoid escrow for tax/insurance, etc. frankly, though i understand what you're talking about, i don't think it's much benefit to a homeowner to do it by him- or herself. it's going to cost you .25% to do it at closing with virtually everybody, and if your down payment is low, it's a mandatory feature.
after all, in this business, risk is the biggest factor in just about everything (not always been that way), and low down payment loans are riskier than all the others. consequently, lenders (and their investors) want to be in control of as many variables as possible.
even if your score doesn't bounce back to as high as 700, scott, i think you'll be in reasonable shape to qualify for a reasonable mortgage.

do i hedge my bets a little too much sometimes? after i type something, i wonder about that on occasion.

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Can I even qualify?