Buying / Selling questions

[David Ellington]

We currently own a home and are looking to buy a new one. Its going on the market in two weeks. Going in to get a pre-approval letter this weekend and want some feedback on what to expect or what we should do in our situation. We were lucky and bought at the bottom of the market in 2012 at $158K. We owe $146K on the loan. Our current interest rate is 3.4%. Our market area is in a huge upswing and the realtor has put a listing price of 250-265K on the house, leaving us with a good chunk of equity. Say we sell in the middle of that range and we have about $110K in our pockets (plus we have about 15K in savings, 3 k in checking). The problem, my credit is abysmal (610), I have 30K in student loans which credit reports show I was 160 days late on many occasions. I know, I am dumb for letting that happen. I am paying for it, believe me. But I am consolidating and working to correct it, but it will take at least a year or two to see real improvements in my credit. We aren't even going to use my credit for the loan process, which means I can't use my income, correct? She makes 75K a year (I make 55K but I dont think it will matter in this situation). We only have 1 credit card ($150 monthly), one car note ($200 monthly), and paypal credit card ($35 monthly), mortgage payment of $1450 (includes taxes and insuarance) and her gross is $5600 monthly, leaving her debt to income ratio at 33%.. Together we gross $8700, I really wish I could use my income too. Oh well, my fault. Her credit runs from 706-725 between the three credit bureaus. We plan on putting 85-95K down on a 250K-280K home.

Is there a special type of loan approval process for current homeowners who will be putting down a descent down payment? Do you think we will have a problem getting a pre-approval letter for a home between 250K-280K? Do you think we will have trouble getting a similar rate as before (3.4%)? What type of loan should we go for? Does the bank figure in our potential equity when deciding, how does that work? Will they run my credit anyway and if so will that hurt our chances? Note: We are in the Houston area and her credit is about the same as it was when we purchased our current home. And we have never been late on mortgage payments.