Moving to Springs, question about a first mortgage (Colorado Springs: mortgage broker, credit)

[TheEricHarris]

Hello,

We are getting married in July and will be relocating shortly after to Colorado Springs. We currently live in Las Vegas and have been working for the same employers for almost 3 years. We currently rent and have never bought a house before. We are both fairly young (26/25) and out of college a few years ago.

So the question....if we move to Colorado Springs, how difficult will it be for us to get approved for an affordable mortgage with us only being at our new jobs for a short time?

She is a RN, so a decent paying job should not be hard to find. I am in IT (MCSE stuff), so it may take me a bit to find something comparible to what I have now. We both have credit scores north of 700 and have about $1100 of monthly debt. We only will be able to put around $15,000 (maybe $20,000 if the wedding gifts are good lol) towards the down payment, but we are only looking for houses $180,000 or less (which seems to buy a great starter house in CO Springs).

Will we need to rent for 6-12 months while we build a steady work history in CO before a bank will approve us? Or will our past employment records and the 10% down be good enough to get us in a house right away? Will banks let us get approved for a mortgage now while living/working in Las Vegas, or would they not allow that?

Thanks!


Eric and Danielle

[golfgod]

I'm sure we'll get some posts from more knowledgeable folks, maybe a lender or mortgage broker, but let me give some "grey hair" advice. Some of my advice on the mortgage/income may be a bit out of date.

Generally work in the "same career field" from one city to another is considered to be continuous work history and counts in your favor. Although a pay cut to accept a new job probably still counts against you.

Loans with at least 20% down are; (1) easier to get, (2) cheaper and (3) better for you overall.

Loans are much easier to get if your "consumer debt" (credit cards, auto loans, etc) are lower, or even better, NON EXISTENT.

I've made the mistake of buying houses prior to living in an area and getting a good feel first. BIG MISTAKE. Living in an area gives you clues to where your preferred restaurants and other amenities are, clues you in to traffic flow problems (and COS has some traffic problems) and where the neighborhoods are that are more compatible with your lifestyle.

20% down and getting rid of some consumer debt is pretty easy, particularly once your've rented for 6 months to a year.

I would recommend Dave Ramsey's books on financial management, particularly the "debt snowball" method. People think this stuff is hard, but it's easy if you have a PLAN.

good luck to you both.

golfgod

[Charles]

Another angle: It may be in your best interests to rent for a while anyway. 1) You can get familiar with neighborhoods, commutes, amenities so you make a good decision on purchasing a home and 2) A lot of people think the housing market hasn't bottomed out yet as a lot of the adjustable mortgage rates will be resetting in the next year or two perhaps adding more foreclosures and perhaps increasing supply which would lower prices.

[TheEricHarris]

Thanks for the quick replies guys. I totally agree about renting for a few months while we get familiar with the area, makes sense. We have been moving every year since we were in college (2000), so another move is just something we (especially HER) would like to avoid. But I think you are right, it would be best to get a cheap apartment for a 6 month lease while we get situated.

Our debt is not that bad really, IMO. The largest chunk is my car payment, $490, which could be sold if absolutely neccessary but I'd be upside down about $4K since I put $0 down. This car is my hobby (Pontiac GTO, lots of stuff to make it go faster), so I'm not getting rid of it, and the loan is 0% interest. The other big one is her car payment, $375, which is a lease. It is up in 2 years and we could always do a lease swap to get out of it. The rest is about $300 in school loans. No credit card debt.

I wish we had more than $15K to put down, spent a lot more than we saved the past few years. Do I regret it? Not at all, I still think we are doing pretty good for our age and having fun while we are young and no kids We also don't want to deplete all of our savings. I figure as long as we get a loan for $160,000 the payment should be pretty close to $1,100-1,200/month, which will be very doable, even if she did not work for a while with a kid.

Then we we are in our 40's, hopefully the house will have appreciated enough that we can move into our "Dream House", whatever that might be.

[Bob from down south]

The only way to know for sure is to ask a mortgage broker.

That said, with housing prices falling, very possibly for years to come still, the importance of a down payment has risen to the forefront again...lenders do not want to loan 90% of the value of a house, then have it depreciate 15%, leaving the mortgagee upside-down and more likely to walk away. That's reflected in the PMI (Private Mortgage Insurance) rates--PMI is mandatory for loans with a DP less than 20%--those rates reflect the risk level, and both are soaring.

I don't know how much you both earn, but the old tried-and-true income ratios are also back in vogue, so with a $170,000 mortgage and $1100 a month in other debt, my back-of-the-envelope income figures say you'll need an approximate $78300 gross annual income to qualify based on 28/36% income ratios and a 5.88% APR. I say $170K because you failed to deduct your closing costs from the $15K you have to put down, which come off the top before the loan figures are determined.

Last, right now multiple risk factors don't help...a potential lender may very well look at the history of frequent moves, short time in this job, and heavy load of other debt and see some instability they just don't like right now.

All that said, I think renting a nice apartment at first would be a good plan. You'll want get the lay of the land, build some confidence for yourself that another move isn't coming again after a year or two, and wait for the true nature of the housing correction to become apparent. And putting the stress of the uncertainties of this housing market on top of a new marriage might very well turn home ownership into a real curse.

I agree with golfgod that this whole drill would look a *lot* different with those car payments out of the picture and a 20% down payment (plus closing costs) in hand. Another good reason to get an apartment and wait a bit.

Regards

Bob