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Old 01-18-2018, 01:33 PM
 
3,284 posts, read 7,128,221 times
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Quote:
Originally Posted by Wasted Potential View Post
I have had three different mortgage lenders state the following in regards to school loans of those applying for mortgages...

'For monthly debt to income ratio, lenders (especially FHA, and generally all others) must take your actual school loan payment AND 1% of the total outstanding loans into account for monthly debt/payments.'

The rule is: FHA takes the higher-of 1% of the balance vs. what is on the credit report.

FNMA uses the number on the credit report.

Income-based/Hardship payment letters are meaningless.


I am baffled and perplexed by this. Me too! Let me explain my situation (all income and debt amounts are on the most conservative side of actual amounts). I am about to graduate from Syracuse University w/ a B.S. in Civil Engineering, Fiancee is an audiologist, we have been renting for the past 6 years and are ready to build equity.

Myself:
Income: 50k/year - 4167/mo
School loans: ~80k -> 1% rule = 800/mo, AND actual repayment at 500/mo
Other loans/debts: 500/mo
D/I: (800+500+500)/(4167)=43.2%
Credit score: 690-720

Why are you adding 1% plus actual repayment? That's not how it works.

Fiancee:
Income: 50k/year - 4167/mo
School loans: ~220k -> 1% rule = 2200/mo, AND actual repayment at 400/mo
Other loans/debts: 400/mo
D/I: (2200+400+400)/(4167)=72%
Credit score: 710-730

Anticipated Mortgage:
Mortgage: 110k-130k
Down Payment: 30k
Interest rate: ?
Time frame: 15-30 year


Combined income: $8334/mo. (full time salary, right?)
Debts: $800+500 +2200+400 = $3900

But wait, why are you looking at FHA with those scores? Go FNMA HomeReady, it's 3% down and you use the payment on credit so now debts = $1800. Max dti=49% so 49% of $8334= $4083.66 - $1800 = $2283.66 max house payment (this includes taxes, insurance and an MI factor of .25 - which can be can
celled without having to refi, instead of lasting throughout the entire loan such as with FHA.




I believe FHA loans are no more than 35% debt to income ratio, other types of mortgages I believe go up to 42-45%? no, FHA can go to 54.99 and conventional can go to 49.99% (pending scores and reserves, and the housing ratio, but let's not get into minutiae.)

In essence, lenders have said that this "new" rule has been killing the hopes of many recent graduates expecting to build equity. Not that new. However, I find NO documentation on this rule, and feel that lenders are just covering their basis even though monthly payments will never be 1% of 220k. I can see 1% of 80k, that means 80k pay off in about 8-9 years which seems reasonable.

https://www.hud.gov/sites/documents/16-08ML.PDF

I presume it illegal to claim a spouse's income, and even more illegal to claim a not legal spouse's income?

Any lender advice, or opinions, or suggestions are welcomed.
I am in the central New York region and especially would love advise from a NY lender or someone w/ that experience.

Thank you

So let's reverse-engineer your price range. $2283 max payment. Are you thinking SFR/condo/etc? What zip codes are we talking about? I ask because the program i am suggesting has income caps but there is a Lookup tool that helps determine if you are ok.

https://homeready-eligibility.fanniemae.com/homeready/


And if you can't go HomeReady there are other programs.

Stay away from FHA.
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Old 01-18-2018, 01:57 PM
 
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I am looking between Camillus and Elbridge in New York, site states AMI=68k, Eligibility=100% of AMI (forgive my lack of abbreviations, I do not know what that is...), Income also rated at 68k.
I have positions that seem to be 60-75k; maybe I can be the employee who states "can you pay me less for a few months?"

I only have a relationship with a local credit union (who I believe immediately sells out their mortgages), are all lenders capable of FNMA HomeReady? I have never heard of it before to be honest.

Housing to be purchased will be a single unit/family 1200-2000 ft^2, 2-5 acres, things of this nature. I would hope that with the mortgage and taxes I can be below ~1400/mo.

I will do research shortly on this FNMA HomeReady mortgage; just sending out a few rapid emails...
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Old 01-18-2018, 02:13 PM
 
3,284 posts, read 7,128,221 times
Reputation: 4020
Quote:
Originally Posted by Wasted Potential View Post
I am looking between Camillus and Elbridge in New York, site states AMI=68k, Eligibility=100% of AMI (forgive my lack of abbreviations, I do not know what that is...), Income also rated at 68k.
I have positions that seem to be 60-75k; maybe I can be the employee who states "can you pay me less for a few months?" What?

I only have a relationship with a local credit union (who I believe immediately sells out their mortgages), are all lenders capable of FNMA HomeReady? No. I have never heard of it before to be honest. Shocker. (kidding)

Housing to be purchased will be a single unit/family 1200-2000 ft^2, 2-5 acres, things of this nature. I would hope that with the mortgage and taxes I can be below ~1400/mo.

I will do research shortly on this FNMA HomeReady mortgage; just sending out a few rapid emails...
Taxes at that level suggest a purchase price hovering in the $375k-ish range. YMMV

***OK, we're not going HomeReady because we need you both on the loan and you make too much. Instead, Do 5% down Conventional, seller pays about $9k in closing costs.

$375,000 price with 5% down payment, Conventional FNMA:

$1750 Base payment
$75 Insurance
$200 Property Taxes
$213 Mortgage Insurance

$2200-2300 house payment.**


**This is not a solicitation, nor should it be construed as an Offer in any way. This is merely an illustration.

Last edited by Pfhtex; 01-18-2018 at 02:23 PM..
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Old 01-18-2018, 03:00 PM
 
16 posts, read 6,063 times
Reputation: 10
After a glance at the Fannie Mae & Freddie Mac, it seems that my DTI will be too high for the convenient "conforming" loan; therefore, best case scenario will be a non-conforming loan (until we look at my DTI w/ mortgage below).

I still seem confused as to why it is being suggested for only 5% down?

Let me perform another short calculation with more "accurate" numbers with less safety factor implied...

Utilized will be a monthly mortgage of 1.2k for safety

Assumed HIGH Income Myself:
Income: 67.5k/year - 5625k/mo
School loans: ~65k -> 1% rule = 650/mo
Other loans/debts: 500/mo
D/I: (650+500+1.2k)/(5625)=42%
Credit score: 690-720


Assumed AVERAGE Income Myself:
Income: 58k/year - 4834/mo
School loans: ~65k -> 1% rule = 650/mo
Other loans/debts: 500/mo
D/I: (650+500+1.2k)/(4834)=49%
Credit score: 690-720


Assumed LOW Income Myself:
Income: 48k/year - 4k/mo
School loans: ~65k -> 1% rule = 650/mo
Other loans/debts: 500/mo
D/I: (650+500+1.2k)/(4000)=59%
Credit score: 690-720

From this, it does seem the FNMA Conventional loan is out of my reach due to debt that will be taken on from the mortgage. Therefore; FHA seems the only way to go?
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Old 01-18-2018, 04:38 PM
 
3,284 posts, read 7,128,221 times
Reputation: 4020
Quote:
Originally Posted by Wasted Potential View Post
After a glance at the Fannie Mae & Freddie Mac, it seems that my DTI will be too high for the convenient "conforming" loan; therefore, best case scenario will be a non-conforming loan (until we look at my DTI w/ mortgage below).

I still seem confused as to why it is being suggested for only 5% down?

Let me perform another short calculation with more "accurate" numbers with less safety factor implied...

Utilized will be a monthly mortgage of 1.2k for safety

Assumed HIGH Income Myself:
Income: 67.5k/year - 5625k/mo
School loans: ~65k -> 1% rule = 650/mo
Other loans/debts: 500/mo
D/I: (650+500+1.2k)/(5625)=42%
Credit score: 690-720


Assumed AVERAGE Income Myself:
Income: 58k/year - 4834/mo
School loans: ~65k -> 1% rule = 650/mo
Other loans/debts: 500/mo
D/I: (650+500+1.2k)/(4834)=49%
Credit score: 690-720


Assumed LOW Income Myself:
Income: 48k/year - 4k/mo
School loans: ~65k -> 1% rule = 650/mo
Other loans/debts: 500/mo
D/I: (650+500+1.2k)/(4000)=59%
Credit score: 690-720

From this, it does seem the FNMA Conventional loan is out of my reach due to debt that will be taken on from the mortgage. Therefore; FHA seems the only way to go?
You have "absolutely no idea" what you are talking about and this has become a "waste of time."
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Old 01-18-2018, 05:06 PM
 
16 posts, read 6,063 times
Reputation: 10
Please elaborate.

Do lenders not add the anticipated mortgage payment into your DTI before final approval?
- After quick reading, it seems not. Rather, they just prefer your monthly mortgage payment to be below 30% of monthly income.

Additional confusion from your advice of 5% down which was not clarified.

Edit: It seems worth mentioning that I am asking questions and looking for clarification on my logic as I am not stating I know this.

From this; let me refresh prior calculations with DTI.

High Income DTI = 21%

Low Income DTI = 29%

Seems these numbers allow for this "FNMA Conventional loan"

Last edited by Wasted Potential; 01-18-2018 at 05:27 PM..
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Old 01-18-2018, 05:34 PM
 
2,493 posts, read 1,333,007 times
Reputation: 1929
I believe the OP has too much debt/not enough income (yet anyway).

Why not wait a couple years, getting used to your new income, before diving into home ownership? What sort of savings cushion would you have after your down payment, etc.?
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Old 01-18-2018, 05:40 PM
 
16 posts, read 6,063 times
Reputation: 10
This is the problem my fiancée has; "just wait a few years before applying again."
Her school loans will never be paid off basically, after 25 years her loans are forgiven for some circumstance so the more she pays, she is no better off, as at her income there is no benefit to owing 220k, or a few years of payments and being at 190k. She will still owe too much.

It is easy for advice to come after others have learned through experience. It is harder for others to learn as they traverse the experience.
I appreciate the appropriate demeanor with advice and without negativity. Thank you.

I guess my problem lies at... the actual payment due income based repayment for myself will be most likely ~450/mo, that is equivalent to a 35-40k vehicle; but that is not seen as a lot of debt. Having 450/mo payments and owing 90k though, that's a no no. Only because the car can be collateral.
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Old 01-19-2018, 05:15 AM
 
91 posts, read 60,233 times
Reputation: 113
You really should make an appointment with a loan officer to sit down and discuss your options. FHA is the most lenient program, with the lowest down payment requirement, however, you'll be stuck with MI (mortgage insurance) for the life of the loan. I use FHA as the program of last resort for my clients, but sometimes it's the only one that works. It is always a possibility a borrower could refinance later down the road.

Conventional loans (Fannie Mae or Freddie Mac) have stricter credit score and DTI guidelines and are much harder to qualify for than FHA. HomeReady allows for a 3% down payment and low PMI (private mortgage insurance) but there are income caps to qualifying for that program. The next lowest DP is 5% with no income caps. You can request to have PMI removed once you have 20% equity in your home.

FHA rates are typically a half percent lower than conventional loans. However, the higher MI offsets the lower rate in most instances.

There are way too many variables for anyone here to give you the most accurate information you are seeking. Best thing to do is find a good LO, make an appointment and go over options. Find someone willing to work with you over the long term, until you are ready to buy.

Good luck to you!
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Old 01-19-2018, 06:47 AM
 
614 posts, read 420,359 times
Reputation: 1088
This should not be this hard. In addition to sitting down with a reputable lender (not a "mortgage company" or "mortgage broker") I suggest you and your fiancee take a first time homebuyer class. These are offered for free throughout the country, usually sponsored by the county or a local bank.

From the back-of-the-envelope you should be able to easily afford your goal of a 100k mortgage well within normal conforming guidelines if you apply using both of your incomes. What's more, you are even well under my normal conservative rule of having your total house payment be 25% or less of your TAKE HOME PAY. Many lenders will tell you that you qualify to borrow (as a previous poster, a lender, did) A BAJILLION DOLLARS. Don't do it, stick with your conservative goals and build the equity while having a sustainable lifestyle. Keep in mind that you are just starting your career and your incomes will continue to increase over time, so this first house will just be a comfortable starting point, it needn't be your dream house- just make sure it is well located and offers easy maintenance so that you can sell it when you are ready.

If you purchase using your income only then you may have to shop hard for a lender as your ratios alone look on the high end for a 100k mortgage. If you are committed to only borrowing under your name I suggest you work on either eliminating the $500 non-student loan debt OR saving up a bigger downpayment.

Also keep in mind- where is the down payment money coming from? If you are borrowing together then it can be from both of your bank accounts but if you are borrowing alone the lender will want to see that the $30k was saved up by just you. Your fiancee(or anyone else) could "gift" you some downpayment money but that will need to be well documented and to happen in a specific way and over a specific timeframe that the lender finds acceptable. It cannot just randomly appear in your bank account.

When it comes time to actually purchase the property I would imagine that were her funds involved in the downpayment, your fiancee would want to be on the deed even if she is not actually involved with the mortgage loan borrowing.
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