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Old 02-14-2012, 11:56 PM
 
Location: Anthem Highlands
35 posts, read 131,209 times
Reputation: 36

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Hey everyone,

Long story short - 1st time homebuyers, my wife and I are private contractors and work 4 months on and 2-3 months off on a rotating basis. We have a combined credit score of 816. We are closing on a house that is 209k.

The underwriters just denied our conventional loan tonight, where we were putting down 20% ($42k) because we could not provide 30 days of pay stubs due the the fact that we are on leave from work until the end of March. We added my father to the loan to see if that would help, but were still denied. We even had our employer write a letter to the bank stating that we are contracted to go back to work in 30 days, but that did no good.

So we were just advised that we have 2 options -

#1.) Purchase the home as an investment property. I really don't know much about this, except we would still put 20% down but our rate would go from 3.875 to 4.675. (was told around $75 extra a month)

#2.) Use an FHA loan. Again, we were always looking to go conventional, so I don't know much about this - I know we'd have to take out mortgage insurance for at least 5 years. But would it be better to have some extra cash on hand for now and go in at a lower down payment (5% or 10%)? I was also looking into grants for FHA loans, where I could attend classes and if I meet the criteria, they could pay up to 10k for closing costs or matching a down payment. (which could help offset the mortgage insurance)


....my head is just spinning and I'm reading as much as I can right now, but I need to make a decision soon on how to proceed.

Any thoughts or opinions would really help me out...thanks a lot for reading this!
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Old 02-15-2012, 12:54 AM
 
Location: Denver
3,075 posts, read 6,399,321 times
Reputation: 2792
20% down and you were denied? That is insane. Find a different mortgage company.

If you have 20% you can avoid PMI on a conventional loan but not on a FHA. You have to pay a hefty monthly mortgage insurance for a min of 5 years. I was looking at a $160000 loan and it was almost 8k for MI over 5 years.

The only exception to that would be a FHA 15 year where the MI is much lower but you still have to pay 1% up front mortgage insurance for both the 15 and 30 year.

If you have 20% down avoid FHA and a FHA apprasial is more expensive than convential.
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Old 02-15-2012, 07:22 AM
 
3,575 posts, read 5,600,686 times
Reputation: 1426
OP mentions the key words, "private contractors"

OP question:

Does that mean you are self employed?

1. How long have you been self employed? If you are newly (within 2 years, it will be hard to get a loan, despite the 20% down). They usually want to see a couple of years of tax returns as schedule c/ schedule k etc.

2. Another key: How much is your "net" income. Not gross.
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Old 02-15-2012, 08:04 AM
 
Location: Anthem Highlands
35 posts, read 131,209 times
Reputation: 36
Quote:
Originally Posted by aneftp View Post
OP mentions the key words, "private contractors"

OP question:

Does that mean you are self employed?

1. How long have you been self employed? If you are newly (within 2 years, it will be hard to get a loan, despite the 20% down). They usually want to see a couple of years of tax returns as schedule c/ schedule k etc.

2. Another key: How much is your "net" income. Not gross.

We are not self employed - we have been working for our company for over 5 years now, but the way they work it is that we are hired for a contract then terminated once it ends - and the whole thing just repeats itself. So we are W-2.

We also have almost zero debt - no credit card balances, car paid off. We only have my wife's student loans ($12k). Our net income is roughly $67k. We have also saved around $60k for down payment/closing.
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Old 02-15-2012, 10:35 AM
 
106 posts, read 313,270 times
Reputation: 61
I recall 2 years ago, I was denied a loan for $150k in Las Vegas, Nevada. I was going to put 30% down and had a great credit score of 800plus. I was told by 2 different lenders NO loan because I already owned a home in Las Vegas.

I realize you have a different situation. I would check other lenders and see what they have to say, I would hate a different/higher payment when it seemed things were set in stone, sort of like bait and switch. Remember, its not the only house in the world, the housing crisis isnt over and you could find another lender and another (perhaps cheaper) house and take your time to do the house/lender search again.
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Old 02-15-2012, 11:37 AM
 
Location: Anthem Highlands
35 posts, read 131,209 times
Reputation: 36
Quote:
Originally Posted by forestgump View Post
Remember, its not the only house in the world, the housing crisis isnt over and you could find another lender and another (perhaps cheaper) house and take your time to do the house/lender search again.
Thanks! I know there are other homes out there...we've been looking for awhile, and we do really love this house and location.

A 30 year conventional with homeowners insurance, property tax, HOAs and LIDS all added in...we were looking at $1158.00/mo

if we go this investment way, it appears it would be $1231.00/mo

This is a short sale, and we've been after this home for over 7 months, and we do love it...

I just wonder if that extra $73 a month should be enough to make us pull out and start over.
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Old 02-15-2012, 02:55 PM
 
Location: Anthem Highlands
35 posts, read 131,209 times
Reputation: 36
Just as a side note, I just spoke to a local Las Vegas Credit Union...they seem to be under the impression that they could approve me for a conventional loan with just the letter from my employer stating we are heading back to work next month, I'm just not sure they could do it in enough time for us to close on March 14th.
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Old 02-16-2012, 09:29 AM
 
Location: Richardson, TX
8,457 posts, read 15,370,718 times
Reputation: 18615
"We have a combined credit score of 816."

What does this mean?
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Old 02-16-2012, 12:08 PM
 
Location: Denver
3,075 posts, read 6,399,321 times
Reputation: 2792
Quote:
Originally Posted by AbsolutKaz View Post
Just as a side note, I just spoke to a local Las Vegas Credit Union...they seem to be under the impression that they could approve me for a conventional loan with just the letter from my employer stating we are heading back to work next month, I'm just not sure they could do it in enough time for us to close on March 14th.
That letter is worth 8,000 + over five years in mortgage insurance....seems like it might be worth the wait.
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Old 02-16-2012, 02:08 PM
 
Location: Anthem Highlands
35 posts, read 131,209 times
Reputation: 36
Quote:
Originally Posted by Debsi View Post
"We have a combined credit score of 816."

What does this mean?
My wife's FICO and my FICO are 816.
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