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Mortgage qualification question?
My wife & I are getting ready to apply for a mortgage. Our current before tax income combined is right at $95,000. My credit score is a 561 & her credit score is a 731. The only debt we have is 1 student loan I have wich is around $11,000 and is current and she has a car payment which is current as well. We are hoping to buy a house that is selling for $135,000. Is this possible? Any advice would be appreciated.
The reason for my score being a 561 is due to past credit history. I had some accounts that had been in collections. However, all accounts have been paid off and any open accounts are in good standing. I spoke with a Credit Consulting Firm and they said it will just take time for the past negative history to age and my credit score will improve as long as I keep everything now current going forward.
Concerning the down payment all reserach I have done says that in Missouri (the state I reside in) requires 3.5% down plus closing costs. I have the means to put down about 7% plus closing costs currently.
3 Answers
- LandlordLv 78 years agoFavorite Answer
Since you have a credit score below 580 FHA require a 10% down payment. All funds must be the borrower's own funds. No gifts are allowed and no seller's concession allowed. They will also require 3 to 6 months reserves.
Your research is faulty, you are researching for people with average credit.
- Go with the flowLv 78 years ago
For a mortgage, that is what a mortgage company needs to see.
Items in collections showing $0/PAID.
Now, did you just pay these off last week?
Be aware that it can take 90 days for reports to update and for a score to update from the reports information.
7% will be the averegage costs out of pocket for you.
This includes 3.5% down, closing costs, and some insurance and taxes upfront.
A mortgage company may also want to see 2 months of salary left over.
Wait for your credit reports to update, then try another well known mortgage company.
You are on your way to owning a home.
If anyone has any credit cards, make sure they are paid in full each month.
- Steve DLv 78 years ago
With 3.5%, minimum, that is an FHA loan. FHA requires two years of clean credit history (no past dues at all). If your paid off collection accounts have been paid for 2 years, you should be okay. If you paid them off within the past two years, you will probably get declined.
The only other way to get approved would be to go conventional financing (non-FHA) which is underwritten by a bank/investor - and for which you would have to find a lender/investor with slightly less rigid underwriting qualifications (hard to do in this day with the recent real estate crisis). For that, you will need 20 percent down (plus closing costs).
