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Yawo64

Can I Qualify for an FHA Mortgage - Details Inside

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Hello Folks,

 

I am thinking of applying for a mortgage - either December 2013 or early 2014. Here are pertinent information regarding my credit, income, asset to help you make a decision.

 

Credit.  My current (November 2013) credit scores are:  EX=634 / EQ=649 /TU=666 .

  • No collections
  • 1 State tax lien reported by EX and TU
  • 1 public record reported by EX
  • 3 charge-offs (Orchard/HSBC card; National City/PNC Bank and Suntrust Bank car loan): Settled in 2010 for HSBC and Suntrust; Fully-paid off PNC Bank card earlier this year after several PDF attempts. Several lates on the above 3 accounts from 2008 until they were settled and closed in 2010.
  • 1 paid and closed account (Comenity Bank) but with lates between 2008 and 2010.
  • 3 lates on a Bank of America credit card in October - December 2012.  Still trying to GW a delete, but no succes so far.
  • Current credit (No Lates): 
    • 1 WellsFargo Secured Credit: Limit=$300; Balance=0  (Graduated in May)
    • 1 Capital One Credit Secured Credit Card: Limit: $800; Balance=$10
    • 1 Capital Bank Secured Credit Card:  Limit=$350; Balance=$0

Income and Sources.

  • Regular employment of 7+ years (salary/w2s):  Gross  = $5000/month.
  • Self- employment income, ongoing for about 1 year.  Gross =  $800 / month. 
  • Occassional consultancy (1099) income:  varies but about $10K each of 2011, 2012, 2013.
  • Married, but wife is unable to work. Hence mortgage will be based solely on my income.

Monthly debt payments

  • Credit Card payments:  $100-$200 (much lower now because of plan to keep utilization low)
  • Rent:  $2,000
  • Utilities:  $500
  • Insurance (Auto + Property): $400

Employment:

  • Salaried worker: same job since 2006
  • Self-employment / part-time - irregular hours
  • Occassional consultancy - varies and unpredictable

Assets/Reserves.

  • Savings:  $5000
  • 403B:  $70K (but can't touch it for reserves)
  • Physical assets (car and other household items) - can be sold if need be.

Location

  • NJ, Camden County

Property:  Condo (townhome)  // Condition - good.  I am currently renting it, and would love to buy it. I checked and my condo is FHA-approved

 

Value:  $250K - $260K

 

Occupancy.  Primary residence

 

Transaction Type.  Purchase; owner willing to pay (amount to be determined) some of the closing costs.

 

So here you have it - kindly let me know your thoughts ...
 

cheers, Yy

 

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The state tax lien and the public record (if different from the tax lien) are going to be barriers to any mortgage approval.  Any mortgage creditor is going to want that paid off before approving because the state can and likely will put a lien on the property to ensure payment.  ANY debt that can be come a lien on the property will have to be satisfied.  

 

You might want to do a phantom app now to see if any JDBs or CAs come out of the woodwork and place debt you forgot about back on your CR to force payment prior to closing.  You do it knowing they may not approve the loan but draw out the bottom feeders to deal with them before you are in the loan process and literally are forced to pay in order to close.

 

The only other thing that could be an issuer for the underwriters is the low amount in your savings.  Many lenders prefer to see 6 months worth of expenses in savings (and it is recommended) prior to a home purchase.  You might consider beefing up  your savings a little more.

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Thanks very much for all the advice.  Sorry I didn't make this clear - but the tax liens are paid and released, as well as the other public record (a judgement) is fully paid as well. 

 

The only other issue is the savings - when you say 6 months of expenses does that mean rent + utilities multiplied by 6?

 

cheers, Yy

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The lender will want to see 6 months PITI saved (payment + taxes + insurance) = so if your PITI is say $1,500/mo, they will want to see at least $9k in the bank... that has been on deposit for 90 days minimum.

 

 

Ideally, your house payment should not exceed 35% of your gross income - so $5k * 35% = $1,750 maximum. If it's lower, it's better for you. 

 

 

Also, many lenders will not count the self employment - they will want 2 years minimum. 

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I usually only see the 6 month requirement when a person already has a property and is buying a 2nd (or 3rd, etc...), banks will want to see 6 months reserves for all the properties. If you don't currently own, then with FHA you can have 2 months PITI in reserves and be okay, subject to individual bank overlays, of course.

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I think the best option for you is to get a free consulation with a mortgage company. They will take a look at all of your income, debt to income ration, w2 forms, etc.

 

Make sure when you lock in the deal you have the lowest rates. This service keeps me updated with the lowest rates.

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It's possible! Four years ago I bought a $200,000 home with FHA no money down 100% financing and I had two charge off totaling about $70,000. I did not have to pay them off or do anything. I had a very good underwriter. At the time I applied I had two banks offer me the loan. Wells Fargo was one. My credit scores were about like yours, though now they are almost up to 800. I also got a very good interest rate for the time, so you just might be able to.

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