Ashley, the only way you will know for sure, is to go to the source. Call up a lender in your area, preferrably one you know of from a freind that has used them, and tell them you are ready to get prequalified, then preapproved. As I stated before, if for some reason they say you cannot be approved right now, they should be able to tell you, literally, debt for debt, what you should pay, how much, and how frequently to get you where you need to be to make your purchase. I understand you are just looking for answers, but that is the only way you will know.

We sat down with the Broker back in January, and he said our ratio was excellent. Since then, we have both gotten raises as well. We are purposely getting a two (or more) family so we can rent on side out. He said since our ratio was great, it helps in getting approved. I'm still worried that our credit scores will cause them to second guess approving us.

3% Down leads you to a FHA loan. FHA loans have tough income guidelines. The ratio of monthly mortgage payment to monthly income need to be around 31%, and ratio of monthly total debt payments to monthly income around 43% of income.

Hi Ashley- If you see from my Profile, I work with First Call Mortgage. So first off you should see exactly what your family friend mortgage broker can do for you. If that doesn't quite work, please feel free to contact me.
We do FHA loans, and that would likely be the way to go for you given all the circumstances. In my experience, a loan is still possible (this week!).
Good luck,
Ken

Hi Ashley,
The very first thing you should do before going through all of the trouble, is to speak with a lender. Ultimately they will be the one to determine your success rate in getting a loan. By speaking with a lender, you can get pre-approved, or pre-qualified, and if not, most reputabley companies can tell you exactly what you will need to do in order for everything to work for you. You would surprised in how many clients I meet that say they know for sure they can't get approved, but when I put them in contact with a lender they get approval. There are several loan programs out there in different areas that don't rely as much on credit scores and look more at the person and their last year's history. Again, I suggest going straight to a lender to get pre qualified, then go from there.

Ashley,

FHA still performs manual underwriting for borrowers with credit scores below 580. Find a lender in your area who is willing to walk down this path with you.

Good Luck!

Your credit score can drop a lot in a very short period of time, and yet it may take months and months to recover the same distance.

A 580 FICO score is definitely not going to impress any lender, today, but the best way to find out is to contact a lender, and ask them to pre-approve you. Typical pre-approval is free, with no obligation, and depending on the lender, is valid for 60-90 days.

Getting the preapproval will highlight any problem areas with your credit, and your lender can give you an idea of what you to do to repair your credit and how long it will take.

I recently had a client who came to use with a 500 credit score, and three 90day late payments on their mortgage (among other poor credit history). It took almost three years, for that ugly credit history to fall off their credit reports, before their FICO score was able to rise to a 680, and replace that 8-3/4% Mortgage they'd been carrying.

Call a lender and go through the pre-approval process. It's can often be completed on the phone, it's free, no obligation, and will help you determine if you can go forward.

Good luck.

Ashley,
I believe almost anything is possible if you want it enough. You may need to look at alternative financing options. Some sellers these days are more likely than in the past to loan you a portion of the purchase price. Also, I would not limit yourself to the opinion of one mortgage broker, regardless of your relationship with them. Visualize what you really want. What you "see" is what you'll get. Good luck, it is a great time to be a buyer.