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Old 01-19-2018, 07:22 AM
 
245 posts, read 148,912 times
Reputation: 648

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Quote:
Originally Posted by Wasted Potential View Post

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

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
(Our first home was in your area.)
Apply together.

Income: $8333
Monthly debts: $1800
(DTI - Debt-to-Income ratio: 21.6%)

FHA likes to see 36% but will go as high as 41%. They say 50% *sometimes* but avoid that.

At 36% DTI, your debts cannot cost more than $2999.88/mo: $1199.88/mo mortgage payment.
At 41% DTI, you debts cannot cost more than $3416.53/mo: $1660.53/mo mortgage payment.

Your credit is fine. When looking for a home, check the actual Tax History and don't rely on the site's numbers... they infrequently reflect reality. The maximum mortgage payment includes the TOTAL payment of mortgage, MIP, Taxes, and Insurance. For your area, insurance should be something around $800/year and, to be safe, calculate MIP at $60/mo, and an [likely over-estimate] interest rate of 4.2% for your rough calculations of what homes will be affordable.

Down payment will be 3.5% (and your $1000 down as a Good Faith payment will count toward that.) Then there are the closing costs. I'd recommend qualifying on the smallest payment possible - 30-year and only 3.5% down - in case of a layoff or urgent, unexpected repairs. (You can throw an extra $200/mo. on the principal if you want to pay it down like a 15-year mortgage.) You're in a good position to buy and when you find a home you like, your realtor will be happy to recommend an FHA-approved lender for you.

Good luck!
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Old 01-19-2018, 07:42 AM
 
245 posts, read 148,912 times
Reputation: 648
This home, for example:

https://www.zillow.com/homes/for_sal...t/11_zm/0_mmm/

Let's say you get it for $100K with a seller's concession of $3000 for closing costs. (Taxes are good at ~$2580 and it's on almost 3 acres. 3bd/2ba.)

$3500 down ($2500 at closing as $1000 will likely be given when you make your offer.) Look to drop around $8-10K at the closing table.

Your payment (including everything) should be under $900/mo. ~32% DTI.

eta: I've recommended spending as little as possible to get into the home because of your savings. With so much debt, I think it's better to have an emergency fund of 3-6 months because... Murphy's Law. You would have time to re-structure/find new employment/sell the house and not get behind on anything. You don't want to be left short in a crisis but you can always throw extra money at principal... although you would be better off throwing that extra at higher-interest loans first.

Last edited by LieslMet; 01-19-2018 at 07:55 AM..
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Old 01-19-2018, 08:03 AM
 
16 posts, read 6,625 times
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Quote:
Originally Posted by LoanChic View Post
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.
Even though many programs only 'require' a minimal down payment; it seems majority advise only doing the minimal down, and just pay additional per mo/ on the mortgage. Correct?
W/out doing the math, it seems in the end the total spent may be so close that I see no direct benefit to a large down payment compared to minimal down w/ extra on top of each payment.


Quote:
Originally Posted by SalamanderSmile View Post
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.
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.
This "gift" payment can simply be a check denoted as "gift?" I believe one of the prior LO's mentioned if the funds are within my account for over 6+ months then they do not question origin if no credit report shows similar loans. Is that a standard time frame or just personal to the provider?


Quote:
Originally Posted by LieslMet View Post
(Our first home was in your area.)
Apply together.

Income: $8333
Monthly debts: $1800
(DTI - Debt-to-Income ratio: 21.6%)

At 36% DTI, your debts cannot cost more than $2999.88/mo: $1199.88/mo mortgage payment.
At 41% DTI, you debts cannot cost more than $3416.53/mo: $1660.53/mo mortgage payment.

Your credit is fine. When looking for a home, check the actual Tax History and don't rely on the site's numbers... they infrequently reflect reality. The maximum mortgage payment includes the TOTAL payment of mortgage, MIP, Taxes, and Insurance. For your area, insurance should be something around $800/year and, to be safe, calculate MIP at $60/mo, and an [likely over-estimate] interest rate of 4.2% for your rough calculations of what homes will be affordable.

Down payment will be 3.5% (and your $1000 down as a Good Faith payment will count toward that.) Then there are the closing costs. I'd recommend qualifying on the smallest payment possible - 30-year and only 3.5% down - in case of a layoff or urgent, unexpected repairs. (You can throw an extra $200/mo. on the principal if you want to pay it down like a 15-year mortgage.) You're in a good position to buy and when you find a home you like, your realtor will be happy to recommend an FHA-approved lender for you.
In your above monthly debts, my fiancee's 1% of total school loans alone will be $2200/mo (more than her actual payment so it seems that's what the LO will use for calculation purposes); on top of her say $500/mo other obligation payments, this is the only concern I have for the dual application. Or am I missing something entirely?


Quote:
Originally Posted by LieslMet View Post
This home, for example:

https://www.zillow.com/homes/for_sal...t/11_zm/0_mmm/

Let's say you get it for $100K with a seller's concession of $3000 for closing costs. (Taxes are good at ~$2580 and it's on almost 3 acres. 3bd/2ba.)

$3500 down ($2500 at closing as $1000 will likely be given when you make your offer.) Look to drop around $8-10K at the closing table.

Your payment (including everything) should be under $900/mo.
We are mainly looking for the correct 'hunk' of land. She works in Auburn, and I am going to be in Syracuse, or right on the east side of Onondaga Lake, for this reason that is why we are looking for that area.
I grew up in Fabius/Pompey and I would love to have that school district and areal open-ness, but career choices demand opposing location (can't win them all).
Our home choice will be for a 5-10 year house on "forever" land, therefore any land/building improvements, (come on huge pole barn garage!) will be utilized without hopping from home to home.

It seems I lack the appropriate knowledge on the closing costs on our buyer end; last time we looked at houses I intended on sellers concession, but is no guarantee of course.


I appreciate everyone's help. Positive and negative (negative helps me be more realistic) view points are enjoyed.

Local lenders (at least one credit union), is offering the FTHB incentive of matching payments into an account for X amount up to $7500 on their end; does this incentive seem to be worth it or in general to credit unions just sell off the loan and I end up SOL anyhow?
I am looking to start by just depositing funds into the account as if I end up utilizing their services it is "free" money. It seems generally those who offer these incentives lack elsewhere (just an assumption). Therefore, best to go private lender or credit union route? My preferred private lender doesn't offer FHA (I can see why), but have a secondary private lender which may be best bet other than the credit union due to their incentive program.

As others have mentioned I should have a "stash" of cash to fall back on in case of hardship, therefore should I reduce my down payment merely to the 20%+ to avoid PMI, or is PMI always required for an FHA loan? Therefore, I can reduce the 30k down payment and stash away whatever the remainder is? Of course, that 30k is an estimate, could be 25k, could be 45k.

Last edited by Wasted Potential; 01-19-2018 at 08:13 AM..
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Old 01-19-2018, 08:33 AM
 
16 posts, read 6,625 times
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I plan on talking to an LO after I receive the job acceptance letters in order to start the process of preparing (as stated before, mortgage application expected ~18 months). Always try to learn more than I need to before I should.
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Old 01-19-2018, 08:44 AM
 
245 posts, read 148,912 times
Reputation: 648
As other posters have pointed out, it is not 1%; it is the actual monthly payment. 1% only factors in if the credit bureaus are incorrectly reporting NO payment. Have them report correctly and the 1% will not be an issue.

I grew up on Cemetery Road (but did not attend FP, though I was in chess club with Mr. Drexler and worked at Tog) so I understand the desire to have some land and be tucked into rolling hills.
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Old 01-19-2018, 09:50 AM
 
16 posts, read 6,625 times
Reputation: 10
Quote:
Originally Posted by LieslMet View Post
As other posters have pointed out, it is not 1%; it is the actual monthly payment. 1% only factors in if the credit bureaus are incorrectly reporting NO payment. Have them report correctly and the 1% will not be an issue.

I grew up on Cemetery Road (but did not attend FP, though I was in chess club with Mr. Drexler and worked at Tog) so I understand the desire to have some land and be tucked into rolling hills.
If the loans are reported incorrectly on the credit report, how can I enforce the loan provider to update their values under these? I thought the lender HAD to take the greater (1% or the actual payment amount), or that is an "up to the lender" sort of thing?

I lived on Pompey Center Road w/in 2 miles of Togg. Right on Route 91 near Pompey/Rte. 80 intersection, On Berwyn Road, and three other local places. The seasons are indeed harsh there, but when it is nice weather - it is a proper site to behold! I presume you left the area? I will only stay here for family and employment, otherwise warmer weather where there are still seasons, but winter not as long is where I would prefer haha.

Post from Pg. 1:
Quote:
Originally Posted by adjusterjack View Post

According to the HUD website it's OR not AND.

https://hudgov.prod.parature.com/lin...-s-liabilities

So you don't add the 1% to the actual payment, you use whichever is greater.
The 1% rule should make it easier to qualify. It used to be 2%.
From specified website:

If the payment used for the monthly obligation is:
less than 1 percent of the outstanding balance reported on the Borrower’s credit report, and
less than the monthly payment reported on the Borrower’s credit report;
the Mortgagee must obtain written documentation of the actual monthly payment, the payment status, and evidence of the outstanding balance and terms from the creditor.

Regardless of the payment status, the Mortgagee must use either:
the greater of:
1 percent of the outstanding balance on the loan; or
the monthly payment reported on the Borrower's credit report; or
the actual documented payment, provided the payment will fully amortize the loan over its term.


It seems my logic during reading this is failing. This DOES confirm, that when in repayment my actual value of repayment (with proof) will be utilized and NOT the 1% (which is greater).
This kept baffling me because of the first statement is the second paragraph. I apologize for needing it spelled out like a child.

It seems all concerns are accounted for, thanks all.
I should now look into refinancing/consolidation of private & federal loans, if possible and beneficial. A question better left to a new post...

Last edited by Wasted Potential; 01-19-2018 at 10:01 AM..
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Old 01-19-2018, 02:04 PM
 
12,532 posts, read 12,015,396 times
Reputation: 17116
"Income-based/Hardship payment letters are meaningless."


I thought they rewrote the rules for this last summer?
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Old 01-19-2018, 03:01 PM
 
16 posts, read 6,625 times
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We applied around May I believe. Every now and then I run into someone who states what you mentioned, like it changed, or that it is going to. Seems to be an ever revolving door. Very frustrating for what I thought should be a simple process when someone is looking to take on massive debt at the lenders profit.
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Old 01-19-2018, 05:52 PM
 
93 posts, read 64,776 times
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This is from Fannie Mae guidelines regarding student loans:

... for all student loans, regardless of their payment status, the lender must use the greater of
the 1% calculation or the actual documented payment.
An exception will be allowed to use the actual
documented payment if it will fully amortize the loan over its term with no payment adjustments.


A lender has to use 1% unless a borrower can document that his payments are less and that the payment is fully amortized over the length of the loan term. So if someone is repaying on an income-based plan, it's not a fully amortizing repayment schedule and a lender will use 1% for underwriting purposes.

With an FHA loan, the monthly mortgage insurance never goes away and it also doesn't matter how much you put down, you will still have MI.
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Old 01-19-2018, 08:45 PM
 
313 posts, read 242,378 times
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My understanding is that if you are on an Income Based Repayment (IBR), they will use the greater of 1% or your actual payment. Make sense. If you have a $150K loan, a $68 a month repayment doesn't seem reasonable over the life of the mortgage loan. I think 1% is actually pretty lenient.
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