Posted on: 02nd Oct, 2010 04:41 pm
My wife and I have been bouncing around apartments every year (for one reason or another) and have 2 kids - we'd like to settle down in one place and stop throwing money away on rent.
Although I've been trying to research the subject, I'm still awfully confused about what we need to do to even try to get pre-approval for an FHA loan (or pre-qualification for that matter - is there even any harm in trying to get pre-qualified?)
What has really thrown a wrench in everything is that I was recently laid off (but prior to that I have a continuous 3+ year work history).
I have to make some pretty big living arrangement decisions soon which will have a HUGE affect on our overall plan for all of this, so some assistance pointing us in the right direction would be greatly appreciated.
Here's a bit more about our status:
- My credit score, although taking some hits lately due to being out of work, has always been over 700 - I haven't checked it recently but I'd be really surprised if it dropped below that. Hers on the other hand, it's not nearly as good. There's no way she would even qualify. I'm hoping to not have her considered as a co-borrower (I've heard that's possible even in community state like California)
- I'm expecting to make $75k a year once I start working again, just a small amount more than what I was making before, and we're looking at condos that list at $300,000 (holy smokes it's expensive to live here...)
- We've got about 10k in credit card debt =/
- We've got 2 auto loans, both with my name on them. One of them is only a year old because her old car was totaled and the other has only $6k left and will be paid off in less than 2 years. They each cost $300 a month
Obviously I need to start working again before I even consider taking actual action, but again I need to figure this plan out ahead of time.
Assuming I start working again soon, what are the chances soon after that we could be approved for a loan, even if it's not for the amount desired?
Also, we have the opportunity to move back in the family house and not pay rent. It makes sense to seize that opportunity to at the very least pay off all the credit card debt and the 1 auto loan nearing completion, right? And save enough for the 3.5% down payment assuming we couldn't get assistance or a 2nd mortgage for it?
At what point does it make sense to start talking to a Realtor?
Sorry for all the text, I had a lot to discuss and ask. There's so many things that are confusing no matter how much I read or how many calculators I use
Although I've been trying to research the subject, I'm still awfully confused about what we need to do to even try to get pre-approval for an FHA loan (or pre-qualification for that matter - is there even any harm in trying to get pre-qualified?)
What has really thrown a wrench in everything is that I was recently laid off (but prior to that I have a continuous 3+ year work history).
I have to make some pretty big living arrangement decisions soon which will have a HUGE affect on our overall plan for all of this, so some assistance pointing us in the right direction would be greatly appreciated.
Here's a bit more about our status:
- My credit score, although taking some hits lately due to being out of work, has always been over 700 - I haven't checked it recently but I'd be really surprised if it dropped below that. Hers on the other hand, it's not nearly as good. There's no way she would even qualify. I'm hoping to not have her considered as a co-borrower (I've heard that's possible even in community state like California)
- I'm expecting to make $75k a year once I start working again, just a small amount more than what I was making before, and we're looking at condos that list at $300,000 (holy smokes it's expensive to live here...)
- We've got about 10k in credit card debt =/
- We've got 2 auto loans, both with my name on them. One of them is only a year old because her old car was totaled and the other has only $6k left and will be paid off in less than 2 years. They each cost $300 a month
Obviously I need to start working again before I even consider taking actual action, but again I need to figure this plan out ahead of time.
Assuming I start working again soon, what are the chances soon after that we could be approved for a loan, even if it's not for the amount desired?
Also, we have the opportunity to move back in the family house and not pay rent. It makes sense to seize that opportunity to at the very least pay off all the credit card debt and the 1 auto loan nearing completion, right? And save enough for the 3.5% down payment assuming we couldn't get assistance or a 2nd mortgage for it?
At what point does it make sense to start talking to a Realtor?
Sorry for all the text, I had a lot to discuss and ask. There's so many things that are confusing no matter how much I read or how many calculators I use
Hi neonext ,
Welcome to mortgage fit,
Surely you can afford 300K home with monthly salary of 6k.But firstly you need to distribute the big task in parts of small tasks.
1.Get a job first.
2.Try to get a new fresh credit card on your wife's name and pay all the money on time so that her credit will increase.
3.shift to your family home so that you can save on rent and that saved money can be used for the down payment of the home.
4.once you enough cash in hand for the down -payment and loan processing then you can start talking with the Realtor.
Feel free to ask any further query if you have.
DIPA
Welcome to mortgage fit,
Surely you can afford 300K home with monthly salary of 6k.But firstly you need to distribute the big task in parts of small tasks.
1.Get a job first.
2.Try to get a new fresh credit card on your wife's name and pay all the money on time so that her credit will increase.
3.shift to your family home so that you can save on rent and that saved money can be used for the down payment of the home.
4.once you enough cash in hand for the down -payment and loan processing then you can start talking with the Realtor.
Feel free to ask any further query if you have.
DIPA
Thank you for the quick response. If you don't mind I already have a couple follow-up questions:
1. It sounds like you are saying that she should be a co-borrower or otherwise her credit score will have to impact the decision no matter what. Can you please elaborate on that? Also, can I have a credit card with both of our names on the account and I just use it and pay it off myself in order to increase her credit? (Figured it was worth asking, it sounds like we'll have to look up those tips I keep seeing links to for helping improve credit scores). She has a card entirely in her name but it's low balance and over the limit. Maybe she can use that card for everything and we keep wiping the balance ever month? I ask because I have my doubts that she'll be able to obtain a new card soon.
2. It also sounds like although it would help a lot, it is not necessary for us to pay off most of our credit card and auto loan debt. Is this true? Every time I use the affordability and qualification calculators all over the web, it seems like we are looking at too much of a monthly payment if we count both auto loans and finance charges (relative to the rent we're paying now) and also I keep reading we can't have a front-end debt to income ratio of 29%. Maybe I'm doing the calculations wrong because I don't see how that is possible to fit into a salary that's even 10k/year higher than that.
BTW, I'm trying to include 1% property tax, PMI, and HOA in the calculations. I'm not even sure if those count towards front-end ratio
Thanks again for the help =)
1. It sounds like you are saying that she should be a co-borrower or otherwise her credit score will have to impact the decision no matter what. Can you please elaborate on that? Also, can I have a credit card with both of our names on the account and I just use it and pay it off myself in order to increase her credit? (Figured it was worth asking, it sounds like we'll have to look up those tips I keep seeing links to for helping improve credit scores). She has a card entirely in her name but it's low balance and over the limit. Maybe she can use that card for everything and we keep wiping the balance ever month? I ask because I have my doubts that she'll be able to obtain a new card soon.
2. It also sounds like although it would help a lot, it is not necessary for us to pay off most of our credit card and auto loan debt. Is this true? Every time I use the affordability and qualification calculators all over the web, it seems like we are looking at too much of a monthly payment if we count both auto loans and finance charges (relative to the rent we're paying now) and also I keep reading we can't have a front-end debt to income ratio of 29%. Maybe I'm doing the calculations wrong because I don't see how that is possible to fit into a salary that's even 10k/year higher than that.
BTW, I'm trying to include 1% property tax, PMI, and HOA in the calculations. I'm not even sure if those count towards front-end ratio
Thanks again for the help =)
sorry i meant we cant have a ratio of above 29%, not at 29% since 29% would likely qualify
neonext,
Pay very little attention to DIPA. He is on here giving a lot of false information.
A few things..
1. You need a two year work history.
2. Do NOT get another credit card. Your scores are high enough.
3. chip away at that credit card debt and get rid of the auto loans. Your financial situation is not the best. Everyone needs wheels, but you do not have to buy NEW cars from a dealer. There are plenty of cheap used cars out there.
4. Do not speak to a realtor yet. You are not even close to looking at condos yet.
I also would suggest thinking about continuing to rent until the housing market turns around in California. I believe the market is going to decline even more. No reason to jump into an investment that will lose money. Remember, an FHA loan is 3.5% down. What happens if the condo loses 10% of the value? You will be stuck or will have to ruin your credit trying to dump the house via short sale or foreclosure.
Pay very little attention to DIPA. He is on here giving a lot of false information.
A few things..
1. You need a two year work history.
2. Do NOT get another credit card. Your scores are high enough.
3. chip away at that credit card debt and get rid of the auto loans. Your financial situation is not the best. Everyone needs wheels, but you do not have to buy NEW cars from a dealer. There are plenty of cheap used cars out there.
4. Do not speak to a realtor yet. You are not even close to looking at condos yet.
I also would suggest thinking about continuing to rent until the housing market turns around in California. I believe the market is going to decline even more. No reason to jump into an investment that will lose money. Remember, an FHA loan is 3.5% down. What happens if the condo loses 10% of the value? You will be stuck or will have to ruin your credit trying to dump the house via short sale or foreclosure.
thanks for replying eric. can you help me with my responses?
"You need a two year work history"
I had read a few times that a work history with just 1 employer is preferred but not necessary, especially when your new position is similar to your old one
"Do NOT get another credit card. Your scores are high enough. "
So I should just use my score for the loan, not my wife's? Even in California?
"chip away at that credit card debt and get rid of the auto loans. Your financial situation is not the best. Everyone needs wheels, but you do not have to buy NEW cars from a dealer. There are plenty of cheap used cars out there. "
I figured we'd have to get rid of the credit card debt first, but it would take forever to pay off her car. Isn't a single $300 plus some small school loans low enough for a back end ratio?
"Do not speak to a realtor yet. You are not even close to looking at condos yet."
Yeah, it's quite obvious there's a lot of things in my way. I'm just trying to plan the road to get there.
"What happens if the condo loses 10% of the value?"
Yeah if I lose my job and can't pay I'll be in the same boat as everyone else, otherwise I'll just keep paying for it no matter how much value decreases because it will still be cheaper than what I've been paying for rent.
Thanks again for helping. I'm sorry for the dumb questions - that's why I'm on here =)
"You need a two year work history"
I had read a few times that a work history with just 1 employer is preferred but not necessary, especially when your new position is similar to your old one
"Do NOT get another credit card. Your scores are high enough. "
So I should just use my score for the loan, not my wife's? Even in California?
"chip away at that credit card debt and get rid of the auto loans. Your financial situation is not the best. Everyone needs wheels, but you do not have to buy NEW cars from a dealer. There are plenty of cheap used cars out there. "
I figured we'd have to get rid of the credit card debt first, but it would take forever to pay off her car. Isn't a single $300 plus some small school loans low enough for a back end ratio?
"Do not speak to a realtor yet. You are not even close to looking at condos yet."
Yeah, it's quite obvious there's a lot of things in my way. I'm just trying to plan the road to get there.
"What happens if the condo loses 10% of the value?"
Yeah if I lose my job and can't pay I'll be in the same boat as everyone else, otherwise I'll just keep paying for it no matter how much value decreases because it will still be cheaper than what I've been paying for rent.
Thanks again for helping. I'm sorry for the dumb questions - that's why I'm on here =)