Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
had a discussion with a mortgage lender today and it was...interesting. I'd like to get some opinions.
Without going into the kind of detail that sounds like gloating, my wife and I have have a very sizable savings account, and an investment account, the latter of which we have to withdraw several hundred dollars a month from just to avoid tax penalties, without touching the principal--between the two we could purchase a home outright, for cash, but we don't want to immediately deplete our cash reserves by that much. I recently moved here for a new job, and just started two weeks ago. My wife is still teaching in West Virginia, until she finishes her contract at the end of May. She doesn't want to continue teaching, as I've mentioned before, but she would if she had to. And so between everything, we essentially have the money, income and good credit that we aren't a loan risk at all.
I spoke to a lender on the phone this afternoon, who was recommended by a realtor I'm considering working with, and his position was that since when my wife moves here she will be technically unemployed, he has to consider her unemployed for purposes of approving a loan. He also won't consider the savings account, and won't consider the investment account past the monthly disbursement a we've taken. Essentially, then, he said he has to consider all my family's shared debt, but only my current income, in processing a loan application. All sounds very too-by-the-book to me, until he then says we consider taking out a second-home mortgage---at a higher interest rate of course---because, technically, until my wife gets here, it will be our second home, even though we have no intention of treating it as a vacation home.
Bottom line is it all sounds kind of shady to me, and I'm wondering if others--either those who have recently gone through the loan process here or are connected to the industry--can share their opinions of the scenario I've described.
I mean, am I wrong to think that if I can demonstrate, concretely, that my wife and I could purchase a home for cash without going bankrupt and still living comfortably, that that should go along way toward securing a home loan? !
I haven't tried to get a mortgage in a few years but when I did I had a similar problem. I had enough assets to purchase my home for cash but wanted to take out a mortgage. I am retired so I don't have any W2 income. The lenders would not consider my assets and were only interested in the income I received from my investments. My portfolio was not designed to generate income because rates today are so low. To make a long story short even though I could purchase the home for cash I couldn't get a mortgage. I ended up purchasing the home for cash.
The fact you can pay for the house cash means ZERO. The lender has no claim to that money, you can spend it all the day after you close the loan. If you wish to put up that money as direct collateral then yes it matters, but obviously you don't want to do that.
The reality is 99% of lenders are selling their loans to fannie and freddie. There are very strict guidelines as to what fannie and freddie will accept. If the lender doesn't follow fannie/freddie rules and you default, fannie/freddie get to come after the originator for the money. Each individual lender can add on additional requirements (overlays), if they want, but everyone is at least playing by the same underlying fannie/freddie rules.
Almost everything the loan officer told you sounds correct to me. The only part, you might be able to qualify for it as a new primary residence. It sounds like you already have a primary residence? Buying a second home while keeping your old home (converting it to a rental) requires a lot of income and savings since you need to be able to afford both without any rental income along with all your other debt and you need 3-6 months of payments in reserve for BOTH properties after you pay the down payment on the new home.
The fact you can pay for the house cash means ZERO. The lender has no claim to that money, you can spend it all the day after you close the loan. If you wish to put up that money as direct collateral then yes it matters, but obviously you don't want to do that.
The reality is 99% of lenders are selling their loans to fannie and freddie. There are very strict guidelines as to what fannie and freddie will accept. If the lender doesn't follow fannie/freddie rules and you default, fannie/freddie get to come after the originator for the money. Each individual lender can add on additional requirements (overlays), if they want, but everyone is at least playing by the same underlying fannie/freddie rules.
Almost everything the loan officer told you sounds correct to me. The only part, you might be able to qualify for it as a new primary residence. It sounds like you already have a primary residence? Buying a second home while keeping your old home (converting it to a rental) requires a lot of income and savings since you need to be able to afford both without any rental income along with all your other debt and you need 3-6 months of payments in reserve for BOTH properties after you pay the down payment on the new home.
It's a whole new lending environment post 2008.
We do have a second home, technically, but it's on the market. It's also on the east coast and so people haven't bern knocking down the door the last couple weeks for showings
It's just a tricky situation all around I suppose. I guess we may be getting to the point of buying with cash
The fact you can pay for the house cash means ZERO. The lender has no claim to that money, you can spend it all the day after you close the loan. If you wish to put up that money as direct collateral then yes it matters, but obviously you don't want to do that.
The reality is 99% of lenders are selling their loans to fannie and freddie. There are very strict guidelines as to what fannie and freddie will accept. If the lender doesn't follow fannie/freddie rules and you default, fannie/freddie get to come after the originator for the money. Each individual lender can add on additional requirements (overlays), if they want, but everyone is at least playing by the same underlying fannie/freddie rules.
Almost everything the loan officer told you sounds correct to me. The only part, you might be able to qualify for it as a new primary residence. It sounds like you already have a primary residence? Buying a second home while keeping your old home (converting it to a rental) requires a lot of income and savings since you need to be able to afford both without any rental income along with all your other debt and you need 3-6 months of payments in reserve for BOTH properties after you pay the down payment on the new home.
It's a whole new lending environment post 2008.
definitely different now:
2014.. loan guy… need to see everything.. hmm 700 score is ok but not great…50% down.. hmm not enough…job only 3yrs.. not enough.. i will need collateral, 2 arms and a leg should suffice…
2006.. loan guy.. ya need a loan? 600 score.. no money down.. job who needs one.. blah blah blah here's a quarter mil… go have some fun…
Once a friend of mine was pregnant and she had to buy the house before the baby was born because they qualified as a couple but would not qualify after the baby was born. Wonky but true! Sort of the same as your wife being considered unemployed.
I paid cash to avoid all this. And it's nice to not have a mortgage too! If you really want to go that route, check out a couple more companies and see if they can do you a better deal.
Ugh. It's just frustrating, is all. I mean, I feel like the financially responsible thing is to NOT drain a ton of money from savings, and yet the ridiculous lending rules seem to be pushing us toward the irresponsible choice.
And what bearing do my 2012 tax returns have on my financial situation presently? Wouldn't, oh, I don't know, my 2014 returns be more relevant? Why do they need the last 30 days of paystubs for a job I no longer have? What does that prove about my present financial situation? Isn't, in other words, my current financial situation a more relevant indicator of my present financial situation than my previous financial situation ?
In my perfect world this is the exchange: "hey jack. I see you have perfect credit, a decent income, a lot of liquid assets, you always pay your bills on time and the irs has never come after you for anything. Let's work together!" But I guess I'm crazy.
Please register to post and access all features of our very popular forum. It is free and quick. Over $68,000 in prizes has already been given out to active posters on our forum. Additional giveaways are planned.
Detailed information about all U.S. cities, counties, and zip codes on our site: City-data.com.
Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
