"I could probably eat shit everyday" - Kenny

Mortgage

I am 31 years old, married, with one small child. We would like to purchase a home in the not too distant future. But I don't know anything about the process of getting a mortgage.

Obviously, every situation is different, but I am wondering if I would qualify: Although my FICO score is 780, which is good, we have about $7000 in credit card debt, which isn't so good.

What else will the financial institutions look at? Based on the above, could I qualify for a decent mortgage?

Thanks for the advice.
Permalink Renter 
August 23rd, 2005
If its your 1st mortgage, you can qualify for an FHA loan. http://www.hud.gov/buying/insured.cfm
Often you'll get a better interest rate with lower closing costs going this method.

Your $7K of debt amounts to some kind of minimum monthly payment. Whatever that minimum is will be taken off your max monthly payment allowed for your monthy mortgage payment - thus reducing your overall loan amount.

Unless something changed, this is how they will account for your debt.

You need to find some way of increasing your savings rate. When my wife and I were young, we dealt with just one car for this reason. I either car pooled, or rode my bike to work. A car amounts to $3K - $10K in expense per year and is likely the easiest place to save money.
Permalink hoser 
August 23rd, 2005
$7k isn't bad at all if you make a decent wage. The key is your debt ratio, which is the total minimum monthly payments / gross monthly earnings. Only include credit payments, revolving credit, car, etc.), not utilities, groceries, etc.

Unfortunately, I can't remember the upper threshold for it - I think 45%, but it could be 35%. If you don't qualify ubnder that, you could still qualify for a non-conforming loan at a slightly higher interest rate.

When looking for financing, make sure you shop around for the best deal. Avoid brokers - they're just middlemen who tack on an extra fee.
Permalink Nick Hebb 
August 23rd, 2005
7k is WAY below the national average...
Permalink  
August 23rd, 2005
Research and compare alternatives. Spreadsheet the effect of all charges such as:

Establishment fees.
Monthly fees.
Interest on amount outstanding.
Exit fees.

- as well as the repayment period and repayment schedule.

Often (like credit cards) a competitive offering loses appeal when fine print penalties for missed payments are factored in.

Conversely a redraw facility is nice - allowing windfall sums to be tipped into prepayments and accessed later if desired. Ideally you should be able to have your salary paid in directly and redrawn for groceries, but I'm not certain if this is available in the US.

$7k in the hole isn't deep.
Permalink trollop 
August 23rd, 2005
Oops, you found an error!