Should I Go Ahead With Mortgage Pre-approval??

[Aaron719]

Me and my G/F decided we wanted to start getting our paperwork together to meet with a lender to get pre-approved. Now this was not an overnight decision; we talked about it for months. We had great FAKO scores and not one blemish between the two of us until a couple weeks ago. I received a notice from experian about a change on my report and it turned out to be a $50 medical collection (copayment) that I didn't know about. All of the notices were mailed to old addresses. I'm currently going through the "HIPAA Process" to get this removed and WhyChat is graciously walking me through it in the Medical collection forum. I did however somewhat mess up the process by trying to fix it myself in the very beginning and am having doubts about it being removed.

 

With all of this being said, my real question is: What are my odds of getting preapproved for a 40k - 70k, single family home, with a DTI of 18% between the two of us, and now a 650 average FAKO score for me and a 730 FAKO for her? We make about 22k a year combined.

[luckydriver]

a 70K mortgage at 3.5 % is 314 P/I and you have to add in insurance and taxes

 

with 22K income your 29% front end would be about 531. so if your P/I and insuance and taxes were about that, you would be ok

 

using 40% as the back end (lenders do go higher frequently) that would be 733. so your other debt would have to be 733 minus 531 = 202

 

this is just the math portion of your question. i cant answer about how the collection affect things

[Aaron719]

Yah I figured as much although our monthly debt at the moment is 327 between the two of us, but 167 of that is a car payment that will be paid off in 3 months. So I could pay that off early and lower it to 160 a month. Thanks for the help.

 

Now can anyone offer any incite to the paid $50 collection that is only a month old. The bill was sent to an old address, the notice from the collection agency was sent to an old address, and when I finally found out about it from Experian, I paid it immediately. Surely a lender would be able to look past this.

[luckydriver]

if a car is due to be paid in 3 months i dont think a lender would even care about that.

 

i'm assuming you are trying to get the paid collection removed to boost the score? i'm pretty sure FHA has official guidlines on certain small issues not even needing to be paid but you'd have to google to find out for sure.

 

i just assumed you were doing fha, is that correct? if so then while 650 isnt the best, i think most lenders are ok with 640 and since you paid the 50 collection u wont have an issue

[road2freedom]

With the $50, I would expect you could pay the OC and get it recalled and deleted, but if Whychat is helping, just stick with that.

 

As far as your situation, even if you can get approved I do not recommend it. Buying a home is more than just affording the payment. There are maintenance and repair costs that could put you in a real tough position with your low combined income. You guys are better off renting imo until you get your income up and, hopefully, solidify your relationship a bit more. Financial strain on a young relationship could be disastrous and having a huge debt obligation tying you two together could make things really messy if it goes south in the next... 30 years.

[Brian B The Loan Professor]

You cannot get a loan with a judgment even for $50 get that cleared up first.

B

[luckydriver]

i didnt wanna address the personal issue but i do have one. my exes twin bought a house with a guy and it didnt work out after a few years and things were messy. not a single person in this world ever thinks they will break up. but to X percent of people it does happen. i hate to use the word prenup and it really couldnt even apply here because alone, neither of you can afford the house or you would do that now.

 

all that being said, i'm glad i got into the housing market at a young age, but it was alone

[road2freedom]

Yeah, it really depends on the circumstances. My wife and I bought our home about a year before we were married. We were already engaged though and had been dating for about 4 years and living together for over a year. It's a personal decision you have to make and be prepared to live with if it goes the wrong way.

 

My main concern about the situation above is income. Need a new AC or Heater? That's 25% of their annual income. New roof? That's 50% of their annual income. We are in a down market too... what happens when values creep up and taxes and insurance follow?

[Aaron719]

I appreciate the relationship advice and the financial advice, but both are in check and will be for quite sometime. I am a well organized person (more than most). Just like with any major decision I make, I think of all the negatives as well: Splitting up, house repairs, tax increases, losing jobs, anything else. Half of the negatives I listed also apply to renting.

 

I have 4 years of residential construction experience in all trades so I have a head on my shoulders when it comes to inspecting and repairing houses, we have emergency savings, and I guess there's not much you can do about taxes increasing once they have.

 

Without getting into a bunch of personal stuff, buying a house is by far a better option for us over renting. Especially since we are keeping the monthly payment well below our means. Every common negative situation that might happen is covered.

 

Also the 25% for HVAC and 50% for a new roof are quite high estimates, especially considering its going to be around 1000 sqft. with a 6/12 pitch

 

You cannot get a loan with a judgment even for $50 get that cleared up first.

B

What do you mean by "cleared up". Do you mean pay it? Get it removed? (Not meaning to come off harsh by the way). Because it is paid and was paid immediately after finding out about it, which was only 3 weeks ago because they were mailing bills and notices to old addresses.

 

I guess my question is: If I can get a loan with it reporting as paid, would it be a considerable increase in the APR? 1%, 2%? I'm just trying to see what my options are and if its worth it to me to start the process now or wait (which has its own problems).

Edited May 27, 2013 by Aaron719

[Brian B The Loan Professor]

yes it has to be paid and you have to document that - if you can show proof it was paid they should be able to get it through

it shouldnt impact your rate

[Aaron719]

Well that is great news... I needed to hear that. Thank you for your help Brian.