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Old 11-16-2013, 02:47 PM
 
154 posts, read 369,759 times
Reputation: 149

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Hi, first-time homebuyer here, along with my wife. We're in our late 20s and the seller recently accepted our offer on a $200,000 townhouse. Never having been through the loan process before, I'm a bit nervous, since we love the home and would be devastated at this point if it fell through. We're thinking an FHA loan at 3.5% for $7k down.

Our situation is a bit odd to the outsider. We rented in New York City for 3 years straight out of college. My wife found work as a nanny for the child of a big-time Wall Street fat cat. He pays generously ($80k per year + $12-15k end-of-year bonus). Because of her salary she was the sole breadwinner, and I could take part-time work as a dog walker, making about $20k a year. We could afford a nice one-bedroom in Brooklyn.

We decided to move back to my home state of Virginia in early 2012 and rented a house for what felt like a minuscule $750. Given the strange arrangement of my wife's job in NY (she is live-in for one week, then off for another full week) she was able to keep it and just commute back and forth via Amtrak. I started work at a newspaper earlier this year and do some independent contracting as a dog walker. I make about $35-40k at best a year. So between us we're at close to $120k annual income.

We have about $15k remaining in student loans between us and a $15k car loan. That's the extent of our debt. My credit score is around 750, hers 700.

The only reasons I could see to be worried would be our semi-odd work situations. My tax returns from the previous 2 years reflect my $20k income, not the closer to $40k I'll be making this year, but I'm assuming that should be allayed by pay stubs from this year. My wife has been doing the Va. to New York commute for a year and half no and it's been no problem whatsoever, but I was mildly concerned when I saw a thread about lenders being put off by long commutes.

We have absolutely no trouble paying our bills at the moment and have plenty to stash away for savings. With the lower utilities in our new place, the our monthly expenses should roughly even out close to what they are now. I'm not in the least concerned about being able to afford the house, I just don't want the underwriter to get suspicious over anything.

Is my paranoia unwarranted? I feel like we're in a strong position but I've heard of deals falling through based on so many nit-picky little things. I'd appreciate any feedback.
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Old 11-16-2013, 05:04 PM
 
Location: Southern California
4,350 posts, read 4,931,746 times
Reputation: 2129
Worrying about it wont help, but if you have the cash why not go conventional 5% down or 3% if you could find someone that still offers it.
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Old 11-17-2013, 05:57 PM
 
154 posts, read 369,759 times
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Quote:
Originally Posted by thelopez2 View Post
Worrying about it wont help, but if you have the cash why not go conventional 5% down or 3% if you could find someone that still offers it.
I know worrying about it won't help. I was just looking for some feedback. What would be the major advantage of going with a conventional loan over FHA?
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Old 11-17-2013, 06:36 PM
 
4,787 posts, read 8,754,839 times
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The big difference between FHA and a low down payment conventional loan is the mortgage insurance. FHA's will be for the life of the loan which is going to add a sizable chunk of change onto your monthly payment for as long as you have that loan.

Your second problem is going to be your income. You're cobbling together what are essentially a couple of part time jobs. One of those jobs is self employment which is not going to show a full year income stream.

Tomorrow, get in contact with a couple of lenders and explain your situation. Find out first if you can be qualified for a mortgage using both your incomes or if only your wife's income will count. Then find out what mortgage programs might be best for you. Good luck
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Old 11-17-2013, 07:35 PM
 
154 posts, read 369,759 times
Reputation: 149
willow, thanks for your helpful response. We have been preapproved with a lender and are currently going through underwriting. Yes, my income is not at the level I'd like it to be (the job market can be cruel to English majors.) I was technically entirely self-employed from 2011-2012 (classified as an independent contractor, although that was hardly the case--but that's another subject for another thread). My 1099s show steady income of $15-20k during those years. Is there a particular reason a lender would look askance at this income, aside from its paltriness?

Like I said in the OP, I now work a part-time job at a newspaper in addition to my "independent contracting" as a dog walker, for a grand total of around $35k. I'm guessing the fact that I have only been employed at the newspaper since January will hurt me and may render that income completely irrelevant, which seems unfair, but I suppose that's the process.

In any case, if you could explain to me how my financial history could actively HURT our chances as opposed to helping them or remaining neutral, I'd appreciate it. No matter the underwriter's interpretation of my income, my wife's returns and W-2s show around $90k per for the for the last three years. I know I'm a first-time homebuyer and a bit of a naif when it comes to this process--I've found much about it to be extremely counterintuitive--but I feel like her income alone would be solid for any marital unit, especially considering we don't have excessive debt or a terribly checkered financial history.
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Old 11-17-2013, 09:26 PM
 
16,489 posts, read 17,513,441 times
Reputation: 23546
Quote:
Originally Posted by SonicYouth View Post
I know worrying about it won't help. I was just looking for some feedback. What would be the major advantage of going with a conventional loan over FHA?
PMI Property insurance. FHA loans as of may 2013 are adding that fee for the life of the loan. It used to be till you reached a certain equity percentage but they changed it. It can add quite a bit to the normal mortgage.
And if house prices/values drop and rates go up you're stuck in a loan you can't refi.
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Old 11-18-2013, 02:23 AM
 
Location: Southern California
4,350 posts, read 4,931,746 times
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FHA is generally going to cost you more per month. It is like paying $2000 now versus paying $200 a month for the life of the loan. Those aren't real numbers, I want you to make your lender work for their money and educate you. If they aren't going to provide you with education you should fire them.

FHA might be required for you to get a loan, but I'm not going to speak for them. Ask them, why am I going FHA versus conventional. There might be a legitimate reason. Sometimes FHA buyer will pay more for a house and make a seller happier to sell it to them.

There is nothing wrong with clobbering your part time income together and you've claimed self employment for the last couple of years, and you make your wife's income sound sufficient. Everything sounds alright.

Your self employment just adds a schedules C to the process. There was a lender in California that would give you a higher interest rate adjustment for self employed borrowers, it was buried in their fine print, they have since changed their website.

Have your lender explain LPMI and SFPMI, UFMIP, and Annual MIP.

I don't want to pry or judge, but your wife score is 700, you get better opportunities with higher credit scores, have you considered , what it would take to improve it?

You have local part time jobs, your wife is a W2 employee that travel far to her work or even maybe travels a lot for her work and she has filed legitimate taxes, all sound good to me.
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Old 11-18-2013, 06:16 AM
 
Location: MID ATLANTIC
7,598 posts, read 17,618,792 times
Reputation: 8078
Do your tax returns show an unreimbursed employment expense for the bi - monthly commute? Does it show on your bank statement? Her commuting costs are not chump change and should be considered in the qualifications.

As far as your income goes, no one is going to count the highest possible calculation. Mixing it up with 2 jobs won't be tolerated without a two year history of doing both.

You mentioned 1099's - all lenders will use the net figures on your tax returns (the amount after all expenses). Make sure your lender has the full story, because it will come out. It's when someone tries to spoon feed their lender all hell breaks loose.
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Old 11-18-2013, 10:13 AM
 
4,480 posts, read 7,937,629 times
Reputation: 6404
You should keep renting until you find a real job. Why bog yourself down with a house you may not be able to sell once you land a good job in another area? Setup a budget and sock all that money away and use it for a down payment or remodel of a house you may buy in the future when you firm up your career.

Although the nanny job may work for her now, her job will be ending. Kids grow up. They could easily go to boarding school, or a number of different scenarios rendering her job finished. How will you pay for the mortgage then? Walking dogs?

Sit tight and save your money until you figure things out.
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Old 11-18-2013, 10:25 AM
 
Location: Boca Raton, FL
4,851 posts, read 8,319,922 times
Reputation: 5483
Smile Conventional vs FHA

Quote:
Originally Posted by SonicYouth View Post
I know worrying about it won't help. I was just looking for some feedback. What would be the major advantage of going with a conventional loan over FHA?
I'm a mortgage broker in Florida and I'd find a small broker where you are. They'll spend some time with you and find the appropriate fit (I do know someone in VA).

If you went conventional at 5% down AND then bought out the mortgage insurance, it would lower your payment and make it feel like you're in it for 20% down.

Ask your eventual broker about the lender credit that could be applied to your closing costs.

FHA has an upfront fee plus mortgage insurance for life.
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