Can you buy a second home with a 800 credit score and limited history of income?

Question

my girlfriend has a condo in los angeles which is worth 300K. She tried to start a business and quit her job 2 years ago. well suffice to say the business is and was not going too well so she went out and got a home equity loan of 50K. She squandered that money and got 25K line of credit. Mind you she doesn't have any income (REAL JOB) coming in except some money coming from her business and her credit lines.

I just found out she has an ARM mortgage on her condo which she was paying interest only and now it's about to go up to 2500 dollars a month. She finally got off of her but and got a real job paying pretty well for L.A. and She decides to rent out the place and move in with a friend to help pay for mortgage, line of credit, and equity loan because she is upside down on the property. Now that she has a tenant in her condo, she is now trying to buy a foreclosed house with her friend. Is this possible with all the mortgage dept she has? She has only been working for 2 1/2 months.

Answer 1

Lenders aren't going to like that she has only been at her job for 2 1/2 months.  They really like for a person to be at a job for 2 years or more.  Is the rent enough to cover the $2500 payment?  Some lenders don't like to include rental income either, especially if it hasn't been very long.  It doesn't sound good but the only sure way to find out is for her to call some lenders and ask.  The worst they can do is say no.

Answer 2

An excellent credit score can only help her to get a good interest rate.  The lender still has to check her income/debt ratio.  If it's too high, they'll denial her application.  If her friend also has excellent credit plus a high pay job and no debt, she has higher chance to get the loan.

Answer 3

There is something I am sure she is not telling you. Unless she has faithfully paid these loans on time she is not going to have a credit score of 801.

The short answer is that as long as she can show proof that someone is renting out the original property and it's not her, she can buy another house without any issues. Even with a  720 score.

Answer 4

Yes, she can.  You described the scenario well.  The going interest rate today is 6.75%.   When she buys the foreclosed home, she will pay 8.5%.   Why.  Because the bank understands exactly what is going on in her life.  She has no secrets.  If she tries to "fool" the bank, they won't let her have any loan.

And yes, when she gets her affairs in order  (when she marries you and you fix everything), she can refinance and get a 6.75% loan on her 2nd house.