My wife and I were hoping someone on here could answer some mortgage questions for us. We are thinking about going for a mortgage after I clean up my credit a bit. Her credit is immacualte. My Experian is 614 and Equifax is 620. I am hoping to be around 700 when all is said and done. I make $34,300 per year and she makes $16, 800. In July she will be around $19,000 or $20,000 and I will be making $41,000 come August. My first question is, how do they take a score from both of us to use for the mortgage? She is in 800-land, but makes less than me. Does the fact that I make more mean that her perfect credit is sort of insignificant? My second question is, how can we get approved for more? I mean, right now we would probably get approved for only about $115,000 or $120,000 max (as far as I can tell with respect to oour income). We would be looking in the $130,000 to $150,000 range ideally. If we get a co-signer, could we get approved for more than we would on our own or is a co-signer more to just get a mortgage when credit is bad (but still the same approval amount)? Any help and advice would be greatly appreciated. Thanks! Dan
You can try for a non-discloser of income loan. You will have to put down at least 20%. This type of loan was originally developed for the self-employed. The interest rate on this type of loan is about 1/4% higher. As always, don't buy what you cannot afford. Remember, that mortgage is due every month for the next thirty years. Iv
We don't have many bills and can easily afford a $1200 payment. We bring home $3400 per month after taxes.
I dont know what kind of area you are in but in a rural area I would check out a USDA loan. Because of your (no pun intended) low income you may qualify for a low income loan. Rates vary from 1 percent to 6.75 percent in my area (I am not kidding). Go to USDA.GOV for more info.
Do you have a lot of debt. If not your combined income should easily get you into the 130-150 range. You should look into FHA. You will get a better interest rate and the qualifying is easier. Kim
How much do you plan to put down as a down payment? Sometimes lenders will be more leniant if you have a good down payment.
The only debt we have is student loans ($309 per month), a car loan ($285 per month) and a credit card (about $100 per month). Does anyone know what they use to figure out debt/income ratio? I mean, do they use whatever debts appear on your credit reports only, or do you need to tell them about cell phone bills, cable bill, etc.? The reason I was figuring we would not qualify for the 130 - 150 range is that we bring home $4240 per month before taxes. 29% of that (allowable amount for a mortgage payment from what I understand) is $1229. This is fine. But I also read that the $1229 plus other debt can't be more than about 40% of monthly income. That is why I am wondering what they consider "other" debt. Even only using the three things that appear on our credit reports ($694 total), then our amount of a mortgage (if it was about $1200) and monthly debt would be $1894, which is about 45% of our income. If anybody could explain exactly how all this works I would really appreciate it. Thanks... Dan
They do what is known as front and back end ratios. Your front end is your estimated monthly mortgage payment divided by your gross monthly income, most lenders like to see 25% or so. Your back end is all your monthly MIN payments, such as credit cards, installment loans etc and your mortgage, you take the total and divide that by your GROSS monthly income, I have seen FHA go as high as 48%. Your monthly utilities are not factored in, also car insurance, health insurance etc, this is what sometimes gets people in trouble, they always qualify for more than you actually can comfortably afford.
Dan, I was in the same boat as you a year ago. My husband and I knew we could afford a 200K home, but the banks kept preapproving us for 125-150K loan. I had a fun time trying to explain to the bank that we could make a $1500 mortgage payment compared to our $625 rent payment (they weren't buying it). This is what I did. I made up a binder with our W2s for the last two years, the financial statement for our assets, our current credit reports, and an Excel worksheet showing our revenue and expenses each month (I even included cable, savings, and an entertainment fund). I went through the chart showing her we could do this. She was surprised on how much work I did in organzing and how serious I was in buying this home. She pre approved us for $200K. She also sent a note to the underwriter explaining her reasoning for allowing us a home that took 45% of our net income. The underwriter put the loan through. It is possible to do it, but you have to be organized. Basically, they were taking a huge risk with my husband and I and we knew it. All it takes is a really good broker who is willing to work with you. Good luck. Dani
Dan- I'm kind of in the same boat as you (income wise). I went to a mortgage consultant back in March and all we qualified for was $75K single family or up to $200K for duplex/triplex. We make $54K a year, our bills (at the time) were 1 car payment $480, truck $280, CC $100. OUr debt to income was 45%(?) basically we couldn't afford more than $850 a month for mortgage. Plus we have a few hidden med bills, car ins., lights, phone, water etc. I *thought* we could afford $1100 a month, but this woman really shed some light on the mortgage process. They only figure into the D2I ratio what shows up on your CR's.
Dan, I would suggest for you and your wife to sit down and go through all your current expenses, as well as the expected expenses that go with a home (maintenance, fuel, larger electric bill, etc.). Write down everything. Take your approximate revenue (after taxes) and subtract your expenses from that. The remaining amount is the highest monthly payment you should consider (also please remember such things as personal property taxes, etc. that are due only once or twice a year). When speaking with a mortgage broker focus on the montly payment that you feel comfortable paying each month, not the home cost. Good luck. Dani
Dan- Its a combination of lots of things, income, length at current job, length in the field (if at current job for less than 2 years), credit, most recent late pay, any unpaid CA's, charge offs etc. I *think* you would be HER cosigner, she would be primary. That way YOUR scores wouldn't affect anything as much, they be looking at your income more, and her credit more. I have heard that from 620-720 you get pretty much the same rates, 720 and up are much better rates. So if you can get overe 720 by the time you find a house, then you should be OK.
They will use TOTAL combined household income. For the reports they usually pull all 3 and take the middle report/score throwing out the high and the low report. -Peace, Dave
They don't get 1 score, they essentially get 2...they take the middle of your 3 and the middle of her 3 and use them to consider the mortgage (assuming NONE have unpaid chargeoffs at least within the last couple years). BUT they do NOT go by score alone...mortgage companies review your report AND score to make their decision. It is not like getting a pre-approved credit card with an online instant approval. It takes more than just a score to determine the loan. -Peace, Dave
Dan- JUST for a preapproval I had to bring my last 3 years W2's, 2 years of bank statements, 12 weeks of recent paystubs. That was JUST for the preapproval. Let's say your scores are 580, 640, and 650 they will throw away the 580 and 650 and go with your 640. Let's say your wife has 750, 790, and 820. Again they throw away 750 and 820 and go with 790. I'm not sure what they do with your 2 scores left, but let's hope (seriously doubt it) they add the two and divide it by 2, which in this scenario would bring you to 715. If it works ANYTHING like a car loan, as long as the primary has great credit, the co-signers credit (unless horrific) won't play a factor, basically by adding a second person, they have one more person to go after in case of default, plus your income is a major bonus. I am NOT a mortgage guru, in fact I'm not any type of guru, these are just my thoughts
Dan I'm not sure where to start with all the information that has been written about here. So let me just pretend that this is the only post you have read yet. I apoligize if I jump about a bit but I am going to try to answer all your questions and concerns. Mortgage lenders make the higher income person the primary person on the loan. In this case that is you. Your score is the one that matters the most, your wife's score will only be used to confirm you. Come August, you say your income will be about 41K and your wife's about 19K that gives you a combined income of 60K or 5000 per month. This income amount gives you a front end PITI loan amount of about 1400 and a total debt load or back end of about 2250. This means that you can get a house with a mortgage of about 150K based on a 8% int rate. This also figures in a 20% down payment. So that means you can get up to about a 187000 house. What are the problems on your credit and how old are they? Have you had good credit for at least the last year(meaning that you have been on time with all payments...ESPECIALLY rent). What type of work do you and your wife do and how long have each of you been doing that type of work? There are several additional questions that need to be answered before I or any other mortgage loan officer could tell you truly what type and for how much you can qualify for. If you wish, you may email me off board with contact info and I will be glad to talk with you and try to get you to the best mortgage for you. And yes you may be able to get a conforming mortgage with the scores that you have. fla-tan
