How much can we afford for a mortgage
- Credit. FICO ScoreWatch is 685, Discover FICO is 711, Husband's score are roughly the same. Both of these will most likely jump back up to 750+ as they were before after we pay off our credit cards which we are taking advatange of the 0% APR.
- Income. Myself 30k; Husband 20k+ (both yearly)
- Source of income. Both employed, I'm on salary and he works for his family's business.
- Monthly debt payments. Currently have 7k in credit card debts which we would pay off BEFORE applying for a mortgage. Therefore our monthly debt payments would be 0.
- Employment Both of us are working full time. We both graduated from school last year, and therefore have only started working this year.
It depends on your debt to income ratios - with those scores your looking at a 43% max back end ratio - this is all your monthly reporting debt and the new mortgage payment including taxes, insurance and mortgage insurance (only way to avoing mortgage ins is to put 20% down). The 40K in a safety deposit box is not something you can use, if you deposit more than 25% of your income into the bank the lender will ask where the funds were obtained and would want to see the "source" you can't source cash so they would not allow use of those funds. Now lenders go back 60 days on assets so if you deposited some of it
and let it sit for a couple of months before applying then they would be seasoned funds and you would be in the clear. A 350K mortgage with 5% rate is about 1878 a month add 250 a month for taxes, 125 for homeowners and a couple hundred for mortgage insurance you would be around 60% DTI and thats too high. Best bet is go get a pre-approval and they will tell you your max.
Our debt to income ratio is 0 I believe. Only monthly bill we pay is phone bill for 100$ a month but from my understanding that kind of bill isn't included. So if we deposit about 10-12k in our account and let it season for a few months we would be able to use it no questions asked. It seems like we would be able to possibly squeeze a 300k mortgage so whatever is over we would need to pay as a down payment?
That is correct, only what is reported on your credit (or new accounts not yet reporting) is counted in your DTI. You have the front end and back end aka totoal DTI. Front end is current debt and back end current debt + proposed mortgage including taxes and insurance and MI if you don't put down 20%. If you deposit your cash now and buy at the end of the year you will be fine, it will be plenty seasoned, put it in an account you don't use much, lenders love clean bank statements. If your DTI is tight BUT you have compensating factors such as high reserves (monet left over after closing) you can go over the max allowed DTI but not by much. Honestly getting pre-approved by a lender is your best bet. Dont forget you have down payment but also closing costs and on 300K they could be on the high side,Source: ficoforums.myfico.com