Can I get approved for a home loan?

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My fiance and myself are in a frustrating situation, and we’re about at the end of our rope. We live in Minnesota, the metro area, and we’re considering purchasing a home versus renting for reasons I will mention later. We both make $ 26,000 a year, her credit score is in the low 600’s while my credit score is in the mid 700’s. I have limited rental history (just a year) and she has a deeper rental history, but she also has a foreclosure that is nearly 3 years old now.

With her score and relatively recent foreclosure she is certain she won’t qualify, however with my score I might, but every pre-qualification application and mortgage calculator I use says no lender would approve me for a loan–how can this be? Does it deal more with your income than it does your credit score?

Would we be capable of qualifying on a joint application even with the above-mentioned status? We originally wanted to rent, but we are finding that renting is way too expensive and with 3 children there are few places that allow more than 4 people in an apartment/town-home, and the income restricted apartments have a long waiting list.

We also have no desire to live in a Section 8 area, as we have seen most of them and they are, no offense, complete ghettos that we won’t raise the kids in. Also because we “make too much money” we do not qualify for any assistance. What exactly are we supposed to do?

Is there any hope at all with our salaries that we can qualify for a home around $ 100,000-$ 125,000? Share with me your thoughts please! I have tried FHA, and they have no lenders either in my scenario.

  1. Reply
    February 6, 2011 at 8:21 pm

    If you want to use both your incomes – they will review both of your credit ratings.
    Could you consider renting a house?
    Do not do rent to own if you do – you can get kicked out and lose the own part you paid for all those years.
    Just save your money instead.
    Rent a small home – and save for a down payment on a new home.
    If you don’t save aggressively – you will never make your dreams come true.
    You didn’t say home much you made – so no one will tell you what you can qualify for.

    Google “how much house can I afford”.
    But if FHA is turning you down – everyone else will – and that’s the truth.
    Save, save, save so you can have at least 20% down to put on a house someday.

  2. Reply
    Katrina Derrico
    February 6, 2011 at 9:12 pm

    Oh my! First please don’t give anyone claiming to be a lender on these answers your personal info, being in the industry for over 20 years, they look very suspicious to me.

    To answer your question:

    Getting a mortgage loan approval involves your credit score AND income AND debt ratio. Your income will not qualify you for a mortgage in the $ 100k range, it will most likely require both of your incomes to qualify. The good news is that once the foreclosure is 3 years old (there are some programs that require only 2 years) there are several FHA loan programs that you may qualify for.

    Mortgage lenders will be looking at both of your scores but will use the lowest of your two middle scores to base your qualification on. If her score is in the 600’s there are prob. quite a few things that can be done to raise it quickly (such as paying down debt or adding her to one of your cards etc…)

    Find a local mortgage lender that is familiar with people in your situation and schedule and appointment with them. Bring a copy of each of your credit reports and scores from the three main credit reporting agencies (listed below). You don’t want the lender to pull them at this point, as it can/will lower your credit score) and ask them what you need to do to qualify for a home loan. They will be able to tell you specifically what you can do to improve your scores for your mortgage approval.

    Once you have your list of “things to do”, use one of the credit watch products to chart your progress. I prefer Equifax’s Credit Watch. The visual charts showing improvement not only motivates you to continue but also validates your progress.

    I have also begun a blog that will debut August 1, 2010 for people looking to rebuild their credit in preparation of buying a home. Be sure to check it out next month and subscribe for helpful tips to manage your credit, increase your scores and prepare to buy your dream home.

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