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I am doubtful that we'd qualify, but I want to ask anyway: What are the chances that we'd qualify for a mortgage given these "issues":
1. We collectively gross $108,000/year, but my husband works as a contractor.
2. We have about $55k in debt (including student loans, which total about $20k)
3. Our credit scores are around 650 (I believe).
4. We have a 60 day late payment from March - prior to that, we had no late payments, and since then our payments have been perfect.
5. We have no money for a down payment, but do have cash to cover closing costs/fees.
We are interested in paying under $185k for a house in Raleigh.
Any information you can provide would be great - thank you so much!
If your score is indeed 650 and have a single late pay from March you would no problem from the score / negatives issue. Debt is little high but so long as that $108k of income is documented you should be OK, in fact the house you are shopping for is probably WELL within the guidelines.
How long have earnings been at current level? If you have gaps in employment that could throw a monkey wrench into things...
623 credit isn't going to cut it, but neither is your husband's employment. You need to show 2 years in the same industry. If he was salaried and now "self employed", you're going to have an issue as you have no tax returns showing the consistency of the new, higher income. They'll also wonder why you make $108k and have no savings... Not sure you've heard, but 100% financing is not really available these days unless you get a USDA loan.
Getting qualified doesn't mean you will get approved. In fact, far from it.
Since your husband was earning so much less as recently as a few months ago, may I suggest you consider what you would do with this house if he lost his current job and was only earning what he used to? Would you be able to afford this house?
100% financing???? Please, go to an online calculator and really figure out what that's costing you.
In the meantime, it's great your husband has this increased income. May I suggest you not rush into buying a house that could easily become your worst financial nightmare and instead concentrate on taking that extra income, build a substantial emergency fund, and enough for closing costs plus 10% down - preferably 20%. If you're diligent, it won't take as long as you think.
And what about that substantial amount of debt you already have? What is it besides student loans? Credit cards and new cars, I'd bet. Get rid of most of that mess before you take on more debt, and you'll sleep better at night.
Thanks for your honest answers! As I said, I was doubtful about it but wanted to confirm my thoughts. We will be able to apply for a VA loan next spring (1 year after the late payment), so we're just going to stay put, pay off debt, and save.
My thought was to get settled in our own place where we'd be putting what we pay for rent into an investment instead. Can't blame a gal for weighing all options!
Consider it this way: you are investing in getting rid of that debt, having a secure financial future and, when you are truly ready, owning a home that you and your family can continue to afford and enjoy for years to come.
I'd call that a way better investment than giving tons of money to lenders in interest payments and PMI on a 100% loan.
And let's face it : there's no guaranty that real estate absolutely will appreciate. The quality of a home as an investment has really gone down the toilet in the past few years. And, IMHO, will not really Become an appreciating asset for many years to come.
Why you will likely NOT get a loan approved:
1. Debt-to-income is too high. Pay off your debts asap.
2. Credit score is too low for cheap financing.
3. Down payment is essential. Spend less and save, save, save.
Assuming that the $55K is fairly recent student loan debt it is likely that the monthly payment is well below $600. That leaves a HUGE amount for housing on an income of $108K. Affordable Home Calculator from CNNMoney
Credit score of 623 will be OK for VA loan.
It makes sense to save up a bigger downpayment to not need to finance as much, as well as have emergancy fund and a cushion for normal savings too.
Lack of work history will be toughest thing to over come, and the only way to really "solve" that is by plugging away will the clock runs...
It is silly to say "pay off your debts ASAP" without knowing the OP's total picture -- the helpful online calculators can be abused but the ratios suggest the OP is WAY WAY "under shopping" and ought to be more than capable of shopping once the employment time is addressed. Frankly if the previous work was CONTINOUS and the current income is all verified the OP may be in pretty good shape.
Of course it is SMART to have a nice cushion for normal expenses as well as "emergancy fund" and that is a separate issue than merely "getting approved"...
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