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Estimated Mortgage Approval (differing credit scores)

My partner and I would like to purchase a house within the next year or so. We are in the Minneapolis/St. Paul area.

We are both recent college graduates (23 and 25 years old) just starting out (I graduated a year ago, he graduated over two years ago).

Me: I have a good credit score (around 750). I make around $35k a year.
My partner: He is an independent contractor who is set to make between $45k and $55k this year. He currently has a credit score of 565 (he has credit cards in collections from college and is starting the process of settling his debts - he plans to have everything paid off/settled by September 1st). We are hoping he'd be able to improve his score to around 650 by Summer 2013, which is when we'd be looking to purchase a home.

We plan on having a down payment of around $10,000 saved.

Our main question is: what kind of loan approval amount can we expect? We were hoping to purchase a house in the $150k-$225k range. Is this feasible with our incomes and credit scores?

Also, as professionals in this field... what kind of interest rate would we be looking at considering our credit scores?

Any and all help/advice would be greatly appreciated. Thanks!
  • May 15 2013 - Minneapolis
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Answers (4)

Profile picture for Furlong Team
Thank you for your question.  640 is a good target score, as this is the minimum for many lenders.  For us, a 640 score may qualify you for an FHA loan.  You can get a good idea of FHA rates by reviewing the Zillow mortgage marketplace, or by checking online with a couple of the large local banks.
The independent contractor piece is concerning - most guidelines require a 2 year history of self-employment.  Underwriters are looking for a stable income history and a high likelihood of continuance, so the recently self-employed piece could be your primary hinderance to approval.
Feel free to contact us and have us review your employment and income in more detail to give you better direction.  Hope this helps!
  • June 26 2013
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You should seek out a reputable lender in your area to look into your situation so they can give you a solid quote. No one on zillow will be able to give you a very accurate quote from just a scenario, it is better to get a real quote so you have a better idea where you stand.
  • May 15 2013
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It is time to start building your team for home purchase.  You need an experienced professional Realtor, a credit score repair professional, a great loan officer experienced in your type of loan, and an experienced inspector.
You should be speaking with these people now so you know exactly what you must accomplish to make your goals happen.  Call or email if you have questions.
  • May 15 2013
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It is well worth applying for a mortgage to nail these down.  Your questions all require a little further in depth review.  A mortgage professional can review your partner's credit to make sure that you are properly paying off collections rather than a best guess approach. 

FHA loans will likely be your best bet and will offer the best level of flexibility. 

  • May 15 2013
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