How much might we be approved for with a mortgage?

In My Humble Opinion
1

I’m stressing about this way too much. But I’m worried now.

My husband and I are meeting with a lender on Tuesday. Unfortunately, my credit is not good - my guess is that if we tried to get a mortgage jointly, we’d be turned down. His, on the other hand, is spotless. He has NO late payments, almost no debt, and I’d be willing to bet his credit score is pretty close to perfect. The debt is a little leftover from our honeymoon, but the money is in the bank to pay that, and from our laptop, just bought, but we plan on using our gift from his grandmother to pay that off at Christmas (she tends to give large cash gifts).

We’d like a mortgage payment that’s about 1/4 of our combined income. However, if we’re just using DH’s credit to get the mortgage, we’re not sure that he’ll be approved for a mortgage payment that’s a little under 1/2 of his monthly income. On paper, it would look like it’s way too expensive for just him, but since we know that it’s being paid with our joint income, it would be just right for us.

With credit as near-perfect as his is, will it be possible for us to get a mortgage that’s around this percentage of his monthly income? You hear all the time about people getting approved for way more than they can afford, and I know in this case, it would work in our advantage. We’ve done the math and we know exactly what we can afford, the thing I’m worried about is getting approved for that amount just under his credit.

Anyone?

E.

2

Yep, you’re stressing too much.

I don’t work in the industry, but when I was buying I was surprised how much the lenders were approving me for so I think they’ll do 50% without batting an eye, especially if you aren’t carrying a lot of debt ( credit cards, car payments, etc…).

3

I think you should be able to get the mortgage approved using his credit only. He can certainly list your income on the mortgage app, but he is is the only one asking for the mortgage. (In most states you would have spousal rights in the unfortunate event of a divorce later) (I speak from experience)

For years, mortgage lenders wanted the mortgage to be about 28-33% of gross monthly income. ( includes PITI) Total installment debt, including your mortgage, couldn’t be higher than 33-37% of gross monthly income. (Other installment debt includes car payments, credit cards, student loans, etc) In some places the percentages were higher. California was always higher due to higher home prices. Over the last several years I think those percentages have crept up a bit as Americans are spending more of their income on housing.

I bought a house in 1994, using my credit only, but including my wife’s income on the application. I had no problem with my lender. YMMV.

4

I’m carrying a fair amount of debt, but that won’t go into consideration if we’re just looking at his credit. His is very, very small, and a small car payment - all of whiich will probably be paid off at the first of the year (except for the car payment).

And yes, I’m overthinking it - :smiley: . I do that a lot.

the raindog, we’re not necessarily worried about getting approved - his dad doesn’t seem to think there’ll be any problem with getting it approved (his dad’s a realtor, and will be conducting the entire purchase after we’re approved), I’m just worried about the amount we’ll be approved for and that it won’t be enough for the houses we’re looking at- and we’re not looking to buy a hugely expensive house, in fact, it’s probably on the lower end of the scale.

I seem to be stressing over this more than he is.

E.

5

Here’s why you’re stressing too much about it: Fill out the info at eloan (20 minutes work, tops), and somebody will call you within an hour telling you exactly how much they’d give you.

-lv

6

I’ll see if I can convince him to do that tomorrow. If they pull a credit report, he won’t do it. But otherwise, he’d probably be willing to do it. Thanks.

E.

7

My husband and I bought our first house last Spring. Neither of us had great credit. (Not terrible either, but a few dark spots.) Our mortgage broker gave us copies of our credit reports and told us to send him a letter in a couple of days after we got the credit histories cleaned up. He went ahead with whatever he had to do to get us approved while we were taking care of the credit stuff. It wasn’t hard; it involved a couple of phone calls to collection agencies and a letter to a bank. I can’t remember if we had to pay any outstanding debts. It was a little stressful, but pretty easy in the long run. (We got a V.A. loan, and I understand that makes the whole home-buying process a lot easier, but I imagine the credit report stuff is the same no matter what kind of loan you’re getting.)

My point is, you don’t need a spotless credit history to get a home loan. If you’re willing to do a little footwork to clean up your credit you should be approvable. (That’s not a word, is it?)

8

It’s been my experience that lenders will be MORE than happy to give you enough rope to hang yourself with.

If you’re confident you can afford it you should be able to convince any number of institutions of it.

9

If you don’t want them to pull credit reports yet, then you should be trying to “pre-qualify”, which gives more of a rough estimate on the amount they’d lend you, based upon your income and outstanding loans and such.

10

The absolute top number we didn’t want to go over with the mortgage co. I worked for was 40%. That 40% was, as the raindog mentioned, all of your monthly debt added up and divided by your monthly income. Things that count: your laptop payment will almost certainly be on there, any car payments, the monthly minimums on any and all credit cards, student loans, any loan you co-signed for, your mortgage payment, etc. By the way, if you only go with your husbands credit, then only what is in his name, and your names jointly will show up on a credit report. And if it’s not on a credit report, then as far as the mortgage company is concerned, it doesn’t exist. So if you have a car payment that’s only in your name, it won’t show up on his credit, and therefore won’t be calculated in his back ratio.
If you want to go to eloan, or any other place for that matter, just don’t give them your social. Without that, they can’t pull a credit report. I would suggest calling someone, though. Keep hanging up until you get a company that will talk to you about hypothetical. Give your first name to be polite, but keep the rest about numbers. This is what my husband makes, this is what my husbands credit score is, and this is the approximate monthly debt we have. Then ask them to calculate it for you. They’ll have to do it based on an interest rate, and the rate they give you that day may be very different when you go to actually buy. Keep that in mind. (If the rate goes up, the max amount of your loan will go down, of course.) Anyway, if they’re remotely modern, they’ll be able to do it in like 10 seconds. Also, sometimes it helps if you repeat over and over “I know this is only based on the numbers I’m giving you, I won’t hold you to it.”
A little more about why I said “keep hanging up” there are companies out there that will not even give you the time of day unless you give them your name, phone number, and social security number. If they ask once, and you politely refuse, and they’ll talk, fine. But if they keep pressing the issue, just hang up. Seriously. It’s not rude, it’s business. They don’t want to talk to you unless you will provide valuable info. It’s a waste of their money and time. And you don’t want to give a blood sample to get some preliminary info. You also certainly don’t want to be calling for some info, and get pressured into providing maiden names and missile codes. Ask to talk to a loan officer. Ask said loan officer the hypothetical. If you like their attitude, write them down and remember them. Then call a few more. Get a feel for what the going rate is so you know that the guy who said “oh no, rates are at 9%, so you only qualify for $100,000” was full of crap. Just so you know, the mortgage rates are based on the 10 year treasury, which is at 4.24% as I’m writing this. The easiest way to get a broad ballpark of what rates are is to add 2% to that for perfect credit. So look for rates to be around 6.25%. And please realize… this is only a very broad rule of thumb. If the company is desperate for business they may cut their margins and the rate could be 5.85%, or if your ratios are super tight, there might be a level adjustment which means a higher rate, or an addition of points. I’m only including it so you know that the people who say 8% for perfect credit are trying to rob you.
OK, that’s a lot of writing, and I’m pretty sick, so good bet it’s really confusing. Just tell me what’s garbled, and I’ll try to translate it into normal people speak.

11

Well, considering we’ll still only be paying 1/4 of our total income as the mortgage, I don’t think there will be any hanging - we’ve already sat down and figured out exactly what we can afford per month and what amount we absolutely will not go above. My husband is so financially responsible that if he thought there was any chance we couldn’t afford it, he’d stop things in a heartbeat.

LordVor, it’s not that we don’t want them pulling a credit report, it’s that he’s already meeting with one person on Tuesday and we don’t want everyone we deal with to pull a report. If we decide to meet with another lender, he’s going to take the credit report he’s given from the first lender and give that to the lenders - this is on the advice of my FIL.

*The_Llama*, that was very helpful (and coherent). We’re doing this with my FIL, so I trust him, but it’s good to know what others say about interest rates, etc.

I’m starting to wonder if we might be able to go ahead and do this with my credit, too. I talked to a friend last night whose sister and boyfriend bought a house together, he had a bankruptcy, she had some bad credit, and they both had debt, and still got a mortgage. So it might be worth looking at.

E.

12

Sorry Elza B, I didn’t mean to imply you weren’t responsible, just that lenders will often agree to give an applicant more than may be prudent.