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I'm currently in the early stages of looking to purchase my own home, and I have some fairly basic questions that pertain to my situation that I wanted to ask here.
I am employed with solid, steady income and have been with the same employer for about a year and 3 months. My husband, however, is self-employed and for the past few years hasn't had profit on his business (but, of course, there's income--it just all gets deducted for tax purposes). We're thinking of trying to get a mortgage based off of my income since it's the "steady" amount. My question is: would it be even worth having my husband on the mortgage, considering that he shows no income on his business? His FICO score is probably slightly lower than mine, if not equal. I feel as if the self-employment factor might add more trouble than it's worth.
Another question... we're honestly at the moment renting a bit above our means, but we're able to handle it just fine (we have no other debt whatsoever). The place we're looking at buying has HOA fees of around $150/month, plus an extra special tax (called Mello Roos) of another $150/month. Is that going to be counted against my ratio when I apply for a mortgage? If it is counted, I feel like that's going to bring down our permitted monthly payment to be unnecessarily low. Could our current excellent renting history at a high % of our income help that at all? Or is that completely irrelevant? Even with the HOA/extra tax the places we're looking at would be $500 less per month than what we're currently renting for.
Also--how stringent is the 2 year work history requirement? I've worked for my current employer for about 15 months, and then worked for another employer immediately prior (but doing something different) for about 4 months, but then prior to that I didn't have steady income for about a year and half (I did random freelance work/sold stuff on eBay, traveled and basically lived off a ton of money I saved up from a prior employer... at that point in time trying to qualify for a mortgage 3 years down the road wasn't in my mind ).
Let me add that we're hoping to have 20% down when we purchase (family gift), however if not we'll probably do a FHA loan with 3.5-5% down.
My head is spinning... so much to think about! Thanks again!
Last edited by thepinksquid; 03-18-2012 at 01:52 PM..
I am employed with solid, steady income and have been with the same employer for about a year and 3 months. My husband, however, is self-employed and for the past few years hasn't had profit on his business (but, of course, there's income--it just all gets deducted for tax purposes). We're thinking of trying to get a mortgage based off of my income since it's the "steady" amount. My question is: would it be even worth having my husband on the mortgage, considering that he shows no income on his business? His FICO score is probably slightly lower than mine, if not equal. I feel as if the self-employment factor might add more trouble than it's worth.
Another question... we're honestly at the moment renting a bit above our means, but we're able to handle it just fine (we have no other debt whatsoever). The place we're looking at buying has HOA fees of around $150/month, plus an extra special tax (called Mello Roos) of another $150/month. Is that going to be counted against my ratio when I apply for a mortgage? If it is counted, I feel like that's going to bring down our permitted monthly payment to be unnecessarily low. Could our current excellent renting history at a high % of our income help that at all? Or is that completely irrelevant? Even with the HOA/extra tax the places we're looking at would be $500 less per month than what we're currently renting for.
Also--how stringent is the 2 year work history requirement? I've worked for my current employer for about 15 months, and then worked for another employer immediately prior (but doing something different) for about 4 months, but then prior to that I didn't have steady income for about a year and half (I did random freelance work/sold stuff on eBay, traveled and basically lived off a ton of money I saved up from a prior employer... at that point in time trying to qualify for a mortgage 3 years down the road wasn't in my mind ).
Yes the HOA dues and taxes are part of your debt ratio.
You don't need a full two year history with one employer, you'll simply have to list the job you were doing for the other 9 months on the application under prior employment. You'll only have to prove income for your current job.
If you can qualify for the loan by yourself, it'll certainly make things a lot easier. At any rate, the self-employed husband would have to file taxes differently to show income in order for him to help you qualify for more house.
yes the HOA fees and what not will be counted in your debt to income ratio, so take into account when you are looking for your new home.
The work history is important, you may have to explain gaps in your history, but for the most part will be qualified on your current income. The only thing to watch for here is if you are a commissioned employee, then you will have to have a stable 2 year history that you make commissions to qualify.
Most of what the lender will look for will be based on your FICO score and amount of downpayment. The better the score and larger the down payment the less your work history will matter.
I would staty away from FHA all together if you have a good FICO score and if you have put down 5% or more. FHA is very expensive upfront and per month.
The only thing to watch for here is if you are a commissioned employee, then you will have to have a stable 2 year history that you make commissions to qualify.
Not commissioned--just a plain vanilla W2 employee.
However, one more consideration... I'm hourly/non-exempt but I really should be salaried/exempt for all intents and purposes. I sort of have "mandatory overtime" in a way, that is factored into my pay. Are lenders going to take that into consideration? Or just look at my base hourly pay? I can show paystubs showing OT every pay period since I've been hired.
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