I am trying to figure out how I can get a home loan before the end of the year. I have paid off almost all of my credit card debt. I have about $4,000 remaining. I also have about $4,000 left on a car loan. My monthly income is $1,180 and I also have additional income of $1,400 a month (husband). My credit score before I paid off a chuck of my debt my credit score was good but hubby’s was not. We are trying to fix his credit score by paying off the debt he has. We are looking for a home where our note with insurance. PMI and tax is no more than $1,200 a month. Any suggestions?
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I work at a bank — GET a parent to co sign for you- they dont have to be on the mortgage — JUST THE LOAN !
Why waste money by paying MPI? This is an enormous investment and you should not rush. Save, get your 20% down payment. Don’t blow money on PMI. Many lenders are demanding this amount down PLUS loan costs.
Dont know where you live currently but we just got a preapproval from a lender. Tho the house we are trying to purchase requires us to get an approval from Bank of America. Never thought we would get any kind of approval from them since they are a premiem lender, however after my husband spoke to the lender it seems that Bank of America has a couple different programs that do home loans for those with crappy credit. Might try them. We got a preapproval thru Chicago Citicorp, tho we did it with a VA Loan.
Not sure exactly what you are after, help-wise…
To improve credit scores, do NOT close out the paid off accounts, or reduce the credit line on existing accounts. You want to show a low debt to borrowing ability ratio. But don’t go open any NEW accounts, either. Also, do not make any major purchases on credit while you are preparing to do this… no car loans, no furniture, no refrigerators, etc.
As for loan shopping, you should consider the percentage of your income that the payment represents before anything else. You shouldn’t be taking out a loan that will require you to spend half of your income each month to repay it ($1200/month is almost 50% of the total income you listed)… You should be thinking more in the 25-30% range. Save as much as you can in advance, as you will need down payment money, and closing cost money. They CAN roll some of it into the loan itself, but those are harder to come by (especially these days) without excellent credit. Whatever credit cards your husband has in his name, pay them off, but don’t close the account. Anything in his name, make payments that are on time (or early) and MORE than the minimum until they are paid.
Also, check your credit scores with the 3 big agencies (Experion, TransUnion, Equifax) for errors (you’d be amazed at what they can have erroneously applied to you or your husband’s record) and clear up any disputes BEFORE you apply for a loan.
Also, someone else mentioned PMI. That is private mortgage insurance. It benefits you ZERO. Don’t plan to pay it… save enough (usually 20%) of a down payment that it is not required. It is wasted money every month as far as YOU are concerned. If you DO end up with it, usually you are stuck paying it for a minimum of 2 years. When you ask about it during the loan process, they will tell you that you can get rid of it later, but don’t tell you that there is often a minimum time frame that you must keep it, nor about the reappraisal (b/c after the time frame is met, the original appraisal will be invalid)…. So keep that in mind. THEN, to get rid of it (even if you have paid enough to have 20% equity from your original purchase price), you must pay for a new appraisal by an appraiser the mortgage company approves of before they will consider dropping it. It’s not at all impossible to do, but it can be a bit of a hassle, and in the interim, you are throwing money away every month… that benefits you zero. Also, you could end up in a home that loses value… and when you pay (up front) for the appraisal you find out that you STILL don’t qualify to drop the PMI payments. Avoid it from the start, if you can.
You only chance is a fha loan and I can’t see a mortgage working on the numbers you gave us. 34 percent of income max mortgage is $877.20. You cannot really handle 1200 dollars – that is darn near 50% of income and only a fool would do that even if you could get the loan.
That said you are playing with fire. You are not ready to buy. You are 8k in debt. No savings, no emergency fund, no ability to survive any significant house repair or life crisis without financial ruin.
I am sorry, but you are not ready.
Claire, get a copy of your credit report and it is free. Then shop the banks and each one of them can get you a good faith estimate worksheet, which outlines cost, fees , monthly payment and all that. You can have them work out figures for you by letting them know what your credit score is. Do not give them your social security number because they will run a credit report on you. By giving them your credit score they will have an idea of what program is appropriate for you. Talk to a banker who will work with you. There are a few out there who will…because I am and I will work with my clients no matter what.
I have been trying to figure out the same thing myself. The best advice I have gotten is to go to a mortgage calculator and figure out how much you can spend according to your income vs, debt ratio. The better your credit score is the better interest rate you can get, usually only affects if you can get a loan if its really low. Income vs. debt ratio is the best way to know. Also the more diversified debt the better, such as 2 credit cards, a gas card, and a car loan. Also if you can get a small bank loan right now to pay down your other debt at a smaller interest rate i would look into that. Later you would have better luck going to the same bank for a mortgage loan. Also would be good to go with the bank that you have accounts with, especially if they are in good standing.1 other thing to look into would be starting a 401K type account with that bank, it makes you look like you have a long term goal with them. Hope that helps. Good luck!