First Time Home Buyer... Help

[OneCanHope]

Hi everyone,
Here is some info about us. I had a chap 7 bk that discharged in march of 07 and now my gf and i want to buy a home together. we make about 80k together, she has a credit score in the mid 700's (never once late on anything and my credit score is around 640. I have a Car loan and Motorcycle loan since the bk(car is completely in my name, she cosigned on the motorcycle.) Ive not missed one payment nor late on anything and have had the car for over a year with solid payment. I have two credit cards which have both completely paid off and have always been on time on. We found a townhome we want which is a model that is 175k. We can put 3% done immediately. Here are my questions. My bk will be discharged exactly 2 years in March. If we buy this house we wont close until may 31st. Can i apply for a fha yet or do i have to wait for march? everyone ive talked to said we need to get preapproved. Im not sure how this process goes. Do we even have a chance due to this economy and my screw up from the past. Any help/suggestions will be greatly appreciated.

[Flamingo]

Your Bk and credit score will hurt you in some way - don't think it won't; however, that does not mean you may not get approved. In this market/economy, you won't know until you try. Your GF's score and record is good but when there is a BK on a record it can offset anything, even if you have kept things current since discharge, but the only thing that really helps those discharged from any BK is "time" and by that I mean several years of showing that one can handle finances after a BK. Less than two years may not be enough for some lenders. I would suggest contacting a good broker to see what options there are out there; a good place to start is with the attorney who handled your BK for some recommendations (as we did for our refinancing) or if your GF has any friends/contacts in that area who can help. Best of luck to you!

[StartingOver08]

Do not go to a mortgage broker for your financing.

Go to a mortgage banker.
The difference is night and day. A broker is the intermediary that finds the money, but is subject to the whims of underwriting changes without advance notice.

A mortgage banker, or correspondent lender, actually funds the loan you are seeking. So when you make application the mortgage banker knows right away if you fit within the underwriting guidelines. You do not waste your time and most importantly, you do not get 12 inquiry's like you do when a mortgage broker shops your loan. Mortgage bankers are much more reliable, generally, than mortgage brokers. The mortgage banker does sell the loan after it closes, but that does not affect your loan terms at all. The point is, go to someone that is actually funding the loan to get the straight info right from the beginning.

[liverichly]

Once the BK is discharged for 24 months, and since your credit has been on time since, you'd be eligible for an FHA mortgage. It depends on the lender but some will pre-approve you now but with the condition that you cannot close on your loan until the 24 month mark, and might even require another credit check to make sure all of your payments were paid on time from the time you apply until the 24 month mark (because no new negatives after the BK is important)... the others will want to wait until you are at the 24 month mark though.

Depending on how much your debt payments are, your debt to income ratio should be OK for the home you are trying to buy. You'd need to list them all out to get accurate feedback on that though. Where you are buying certainly helps with property taxes/homeowners insurance estimates too.

As far as StartingOver's comments, they couldn't be more wrong except for the definition part at the beginning. Mortgage brokers get guideline change announcements at the same time lenders make the announcements - there is no delay, the mortgage broker doesn't have to go hunting around for these changes, they are right there on the wholesale lenders website or are actually emailed to the mortgage broker if they set themselves up that way. Further, by going to 12 different direct mortgage lenders (after the first 11 say no) you will have 12 different mortgage inquiries. You can't go to Countrywide and say "Hey Bank of America checked my credit, can you use it?". However you can go to a mortgage broker, get your credit checked once, and then your mortgage broker can re-issue that credit report with their wholesale lenders so there isn't an additional hard inquiry (a soft inquiry appears but that does not affect scores as you are aware of, nor does it appear on the inquiry list a new creditor would see). Further, because your mortgage broker already has established relationships with dozens of lenders, he doesn't actually need to submit your loan to each lender to see if it gets approved - he can check the printed program & lender guidelines or even call up and speak directly to an underwriter to find out if everything tricky on the transaction would get approved.

Case in point - going to Countrywide they won't even fully pre-approve you without you being under contract. Yes the loan officer will review your docs and will give you a pre-approval letter - but that doesn't mean the underwriter did. My FIL & his wife applied with Countrywide, got pre-approved, made an offer on a home... then days before closing the underwriter asks for a 2-year work history verification for my FIL's wife (since she was working in China previously) and since no one at her employer in China spoke English, it was a dead deal. Lot of good it did them to go to a direct mortgage lender, get a pre-approval which wasn't worth a hill of beans, and make an offer on a home. Not all direct mortgage lenders are like that though, just one situation (although it's not an uncommon one).

So actually, by going to direct lender after direct lender rather than going to a mortgage broker - you will likely have more inquiries and will likely spend much more time. Pretty much the exact opposite of what StartingOver08 said. Now everyone doesn't need a mortgage broker, if your credit is excellent, been at the job for 2 years, have a good down payment, good reserves leftover after closing... you can probably just throw a dart at a dartboard and you'll be able to get approved with them.

However the absolute most important part of my post is this - choose the loan officer you are going to work with, not the company. Each company will have bad and good loan officers, but each loan officer can only either be bad or good.

[Trixie007]

I was a LO for a mortgage banker - and even they sometimes have to have the actual "Lender" do manual underwriting! Typically the mortgage banker figures out which program is best for you and then processes your loan application to fit the guidelines for that particular loan program. Also, as a mortgage banker, sometimes the rates we were able to offer were better than the rates if you were to go directly to the lender. This was also true when I worked for a mortgage broker.

Also, if you are shopping around, which I recommend, you have something like a 30 day window where multiple inquiries on your credit for mortgage related applications only hit your score once.

[fltoo]

Once again, true Trix. Shopping a loan for a mortgage only hits once, and I always found using a broker was as good as using a loan officer at the bank.

You sound like one of those old time, experienced brokers that I used when I was in the business.

Lately, and I think it has contributed to the predatory loan problem, all mortgage brokers are trained to do is enter info into the system and see what garbage comes out. They can't even interpret half the stuff and cannot answer questions on mortgages if it is not there right in front of them on the computer.

[Trixie007]

You sound like one of those old time, experienced brokers that I used when I was in the business.

Ok. That's just mean. I just turned 38 last week...

[fltoo]

LOL, let me say it again.

You sound like one of those young, experienced brokers that are smarter than most.

[Trixie007]

Gee, thanks. Much better.

[Flamingo]

I was a LO for a mortgage banker - and even they sometimes have to have the actual "Lender" do manual underwriting! Typically the mortgage banker figures out which program is best for you and then processes your loan application to fit the guidelines for that particular loan program. Also, as a mortgage banker, sometimes the rates we were able to offer were better than the rates if you were to go directly to the lender. This was also true when I worked for a mortgage broker.

Also, if you are shopping around, which I recommend, you have something like a 30 day window where multiple inquiries on your credit for mortgage related applications only hit your score once.

Multiple mortgage inquiries in a two week period on your credit reports only count as one inquiry so long as they are mortgage inquiries. It is obvious you are shopping around for a mortgage so of course there will be multiple hits for anyone. I was advised of this during a lunchtime credit course given at our workplace and the speaker was a bank financial VP for a major bank. So don't panic over multiple inquiries during a short time frame if hunting for a mortgage.

[OneCanHope]

To update, i have 370 dollar car payment for 4yrs 10 months left on the loan and a motorcycle loan with a payment of 216 that has 3yrs and 9 months left. She has 380 dollar car payment(3 years to paid off), and sstudent loan she hasnt had to pay on yet but s the balance is approximately 12000. Properties Taxes are 2.23% and home insurance is 300 a year since i only have to insure inside. HOA covers the outside of the townhome. I found out this townhome also falls into the USDA Rural area program qualifications. something bother to look into? Closing costs should be around 3200. Thanks again for all the help!

[fltoo]

Definitely check into the rural loan program when you are ready to buy.

With those vehicle payments, your debt to income ratio is high with purchasing a house for 175,000. How much are the condo fees and insurance premiums?

IMO, I would wait and save more money for a down payment. The price of housing is not going up any time soon.

I would also have a good size emergency fund in place before purchasing.

[StartingOver08]

Once again, true Trix. Shopping a loan for a mortgage only hits once, and I always found using a broker was as good as using a loan officer at the bank.

You sound like one of those old time, experienced brokers that I used when I was in the business.

Lately, and I think it has contributed to the predatory loan problem, all mortgage brokers are trained to do is enter info into the system and see what garbage comes out. They can't even interpret half the stuff and cannot answer questions on mortgages if it is not there right in front of them on the computer.

This is the problem that I have seen for the past 8 to 10 years. If you get a mortgage broker that is experienced - great - but in our area the mortgage brokers will tell you anything and not perform accordingly. They change the terms right at the closing table. But, as has been pointed out, not all mortgage brokers are equal.

I never had that problem with a mortgage banker - or direct lender. My experience is over the past 30 years with literally more than a thousand homes sold and working with buyers, mortgage brokers and mortgage bankers. Naturally your milage may vary!

[OneCanHope]

only fee is 115 dollars and thats the home owner assoc.

[Logan]

Do not go to a mortgage broker for your financing.

Go to a mortgage banker.
The difference is night and day. A broker is the intermediary that finds the money, but is subject to the whims of underwriting changes without advance notice.

A mortgage banker, or correspondent lender, actually funds the loan you are seeking. So when you make application the mortgage banker knows right away if you fit within the underwriting guidelines. You do not waste your time and most importantly, you do not get 12 inquiry's like you do when a mortgage broker shops your loan. Mortgage bankers are much more reliable, generally, than mortgage brokers. The mortgage banker does sell the loan after it closes, but that does not affect your loan terms at all. The point is, go to someone that is actually funding the loan to get the straight info right from the beginning.

Having worked for a mortgage broker and a mortgage banker I strongly disagree. A broker can shop many lenders and use the same lenders as a mortgage banker. They end up selling their loans to the same investor.

I suggest using a broker recommended by your real estate agent since they want to keep the agents business they should be more upfront about fees and an approval.

Logan