I applied for a mortgage. What have I done? (And what should I do?) I’m fresh (well, since May) out of college, and have been looking for a place to live. Against my better judgment, I let my mom coax me into using my bank’s “instant pre-approval” mortgage application to see if I could get an FHA loan to buy a condo, which would be cheaper than an apartment. “Instant pre-approval” turns out to mean, “We’ll send you a letter in a week asking questions,” and I, in turn, have a lot of questions for the hive mind.
With what I’m making, I figure I can afford about $2,000 a month for rent after all my other expenses, though I’m hoping for something closer to $1,250 a month, which puts me around $200,000 (ballpark) for a condo. I’ve found several places in the $150,000 range that still manage to be nice enough.
The past couple years I was working part-time in college, and made between $6,000 and $9,000 a year. I’ve since graduated and now have about $20,000 in student loans; this is a $200/month payment, and I intend to get ahead on payments once I get settled. (For now, I’m socking away as much as I can…)
I now have a letter from my bank stating that I need to provide them with a recent pay stub, past W2s, and an explanation for the gap in employment. (”Finishing college and finding a real job.”) They also sent me a letter with my credit score; I don’t have it on hand, but it was somewhere around 700. I’m meticulous about paying things off, having never carried a balance on my credit card and so forth, but I do have the $20,000 student loan, and am pretty new to having a credit card or anything of the sort, so I have a short credit history.
My parents have excellent credit and have said they’d be willing to cosign, but what I’ve read is that this really wouldn’t help me that much if my parents weren’t going to live there with me.
I’m spooked by something, though: the credit score mentioned that the number of recent inquiries/applications was hurting my credit score. I applied for an auto loan and was denied a couple years ago. So I’m worried that having applied for this loan is going to hurt me further. Thus my question is twofold:
- Are my chances of being approved for mortgage, “Slim but worth trying” or “Don’t even waste your time” slim? Besides the fact that my credit report and history are quite unfavorable, banks aren’t at their most eager to hand out money right now…
- Can I back out of this inquiry with a “Nevermind, I don’t want your loan” before it’s done and keep it from showing up on my credit rating? I was under the impression that it would be a quick thumbs-up or thumbs-down when I did it online, but it’s actually a grueling mortgage application. If I don’t/can’t back out, and I’m presumably denied, how badly is this going to hurt my credit?
Sorry if this is something that’s plainly obvious to most people, but I’m new to this whole thing and worried about doing more damage.