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Guest

Hello all. I have a couple of mortgage questons. Just attempting to understand, and I appreciate any assistance.

My credit score is sub 600 currently. I had some late payments at the beginning of this year. Everything has been current for 8 months. I did have some bad debts all of which have been satisfied. I addition two my mortgage I have an auto loan which is also current. Everything is current..

I would like to purchase a home that exceeds the FHA limits in a few months. With 12 months of on time payments, is it possible to purchase a home with a FHA as the prime, and get a sub-prime type mortgage for the balance. Even with both mortgages I'll have $60,000.00 in equity. Income is sufficient, debt to income is 35%. My current home is for sale.

I know the low credit score and the late payments are a challenge, and want the lowest combination of interest rates possible. The FHA limit for my area is $200K. The second mortgage will be about $35k.

Any suggestions? I am working on my credit score, and have had several inaccuracies removed. I have also considered adding a couple of secured credit cards to help improve the credit score. I have no revolving credit cards now.

larry · Joined: 27 Jun 2007 Posts: 3322 474.67 Dollars($)

Hi TedN,

Your credit score is low and you have some late payments. But you have on time payments foe the last 12 months and your debt to income ratio is ok. So you may qualify for the FHA mortgage but with higher interest rate.

Thanks,
Larry

Guest

In your situation you may qualify for a FHA mortgage but I am not sure if that can be a prime one with the late payments in your report.

Can you give the purchase price of the house and also do you have equity in this new house?

Guest

Its a bit complicated. House is being built on my land. The appraised value is $290,000.00 the construction cost is $230,000.00. Equity = $60k. The land is owned free and clear. Builder is financing construction. I know a prime interest rate at this point is not going to happen, but I thought FHA loans in general had better rates than sub-prime options.

Guest

I own two other homes. First one is our residence with $20k of equity. The second one is a rental which is scheduled to close in two weeks. Which will net a $15profit.

Samantha

Hi TedN,

Welcome to the forums.

It's a fact that FHA loans are not score-driven, these will depend more upon your debt to income ratio which should be around 41%. As you say, your score is below 600, then you can try out for an FHA. But the problem is, you are also looking out for a subprime loan that too a second mortgage which I don't think will be possible for you to get considering the fact that your score is too low and you also have late payments on your payment record.

Moreover, when you say you wish to purchase a home with two mortgages, I think you are probably talking about piggyback loans or 80-20 mortgages. is that so? but do you think you can afford payments on both loans simultaneously? Just check that out before you decide upon taking out two loans together.

My suggestion to you will be, wait for some more time till you can improve your score since you've already taken steps to do so. This will raise your score and then you can qualify for better loan terms and conditions and perhaps you need not also take out two loans; instead a single non-FHA loan will be enough to help you buy the home. By the way, consider trying out programs available at ACORN Housing and MyCommunity Mortgage.

Hope this helps...

God bless you.

Samantha

Guest

Thank you for the replies. Waiting is definately the best solution. It isnt that I cant afford the sub-prime mortgage, which I have been approved for the entire amount. I was looking for an alternative to to the higher interest rate. I will check into your suggestions. Thank you again.

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