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Old 07-03-2009, 08:24 PM
 
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Hello, my husband and I will be applying for either an FHA or Sonyma mortgage loan sometime next year. (any advice on why one might be preferable to the other is welcome)

My husband just started working "off the books" as a truck driver and earns about 900 a week. He was layed off 2 months ago from his paralegal position and took on a totally different industry.
My salary is "on the books" at $56,500. We are both working on fixing our credit to hopefully purchase a $350K home somewhere either in LI or Rockland.

My question is whether or not my spouses "off the books" income will be allowed/should be included? Will a letter from his employer/trucking company with his salary suffice? They pay him cash at the end of the week but he's not on their official payroll. With my little salary I doubt they will give me a loan for $350 even if I had great credit (???)

As a side question, what additional "cash on hand" would be needed (other than the $12,250 which is the 3.5% of 350K as an example) to purchase our home using this assumption.

Thank you everyone for any assistance you can offer.
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Old 07-03-2009, 09:36 PM
 
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The community property states are:
  • Arizona
  • California
  • Idaho
  • Louisiana
  • Nevada
  • New Mexico
  • Texas
  • Washington
  • Wisconsin
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Old 07-04-2009, 09:36 AM
 
Location: central, between Pepe's Tacos and Roberto's
2,086 posts, read 5,893,437 times
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Even in a community property state a spouse is not required to be on a mortgage. In the case of an FHA loan, an originator is required to include a non-purchasing spouse's debt in the debt to income ratio. Of course this doesn't apply being that you are in NY. Beng paid under the table will not be acceptable to an underwriter, as it is not documentable on a federal level. $350K may be possible on your income alone depending on what other debt you have in your name, but it's pushing the limits of what is acceptable. Bear in mind that I am using a formula of $700 per $100K financed, and it may not apply as I'm sure property tax is much higher in NY than in my area.

That said, perhaps you should look at less house. I personally would be looking at something that I could afford on one salary, given the current economic circumstances that have obviously influenced you and yours.
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Old 07-04-2009, 02:01 PM
 
Location: South Dakota
733 posts, read 3,897,311 times
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Quote:
Originally Posted by Daddys///M3 View Post
Even in a community property state a spouse is not required to be on a mortgage.
That isn't completely true. Many [all?] states have specific homestead rights vested in a spouse. Therefore, in order to encumber a marital residence the spouse must join in the mortgage. Sure, without the spouse the lender will still have a mortgage lien, but it will be inferior to the unencumbered spousal homestead interest.
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Old 07-04-2009, 03:22 PM
 
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It's possible that I am misunderstanding your description, but when you say your husband is being paid "off the books," do you mean that the company that is paying him is not complying with applicable state and federal tax laws? If so, I would be very surprised if they were willing to write a letter documenting that fact, and even if they were willing to write a letter, I wouldn't think a lender would be willing or able to accept it.
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Old 07-04-2009, 07:52 PM
 
Location: central, between Pepe's Tacos and Roberto's
2,086 posts, read 5,893,437 times
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Quote:
Originally Posted by windtimber View Post
That isn't completely true. Many [all?] states have specific homestead rights vested in a spouse. Therefore, in order to encumber a marital residence the spouse must join in the mortgage. Sure, without the spouse the lender will still have a mortgage lien, but it will be inferior to the unencumbered spousal homestead interest.
With all due respect, that is completely true.


From HUD's FHA Handbook 4155.1 Chapter 2 Sec 2 (rev 2003):

D. Non-Purchasing Spouses. If required by state law in order to perfect a valid and enforceable first lien, the non-purchasing spouse may be required to sign either the security instrument or documentation evidencing that he or she is relinquishing all rights to the property. If the non-purchasing spouse executes the security instrument for such reasons, he or she is not considered a borrower for our purposes and need not sign the loan application. In all other cases, the non-purchasing spouse is not to appear on the security instrument or otherwise take title to the property at loan settlement.

Where there are non-purchasing spouses who sign security instruments relinquishing their rights to the property pursuant to applicable state laws, these non-purchasing spouses do not have to sign the mortgage note. Signing the security instrument for such purposes does not make the nonpurchasing spouse a co-borrower.

Except for the obligations specifically excluded by state law, the debts of the non-purchasing spouse must be included in the borrower’s qualifying ratios if the borrower resides in a community property state or the property to be insured is located in a community property state. Although the nonpurchasing spouse's credit history is not to be considered a reason for credit denial, a credit report that complies with the requirements of paragraph 2-4 must be obtained for the non-purchasing spouse in order to determine the debt-to-income ratio.
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Old 07-04-2009, 09:15 PM
 
Location: South Dakota
733 posts, read 3,897,311 times
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Quote:
Originally Posted by Daddys///M3 View Post
With all due respect, that is completely true.
Read what you quoted from the manual. "Where there are non-purchasing spouses who sign security instruments relinquishing their rights to the property pursuant to applicable state laws, these non-purchasing spouses do not have to sign the mortgage note. Signing the security instrument for such purposes does not make the nonpurchasing spouse a co-borrower." That is absolutely correct.

The MORTGAGE [security instrument] is not the same as the MORTGAGE NOTE [the document creating the financial obligation].

You stated "Even in a community property state a spouse is not required to be on a mortgage." If there is a statutory spousal homestead interest the lack of the spouse's joinder in the MORTGAGE will result in an inferior lien.

Words are important. A MORTGAGE NOTE is not the same thing as a MORTGAGE.

Last edited by windtimber; 07-04-2009 at 09:30 PM.. Reason: Typo.
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Old 07-04-2009, 09:29 PM
 
Location: central, between Pepe's Tacos and Roberto's
2,086 posts, read 5,893,437 times
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Quote:
Originally Posted by windtimber View Post
Read what you quoted from the manual. "Where there are non-purchasing spouses who sign security instruments relinquishing their rights to the property pursuant to applicable state laws, these non-purchasing spouses do not have to sign the mortgage note. Signing the security instrument for such purposes does not make the nonpurchasing spouse a co-borrower." That is absolutely correct.

The MORTGAGE [security instrument] is not the same as the MORTGAGE NOTE [the document creating the financial obligation].

You stated "Even in a community property state a spouse is not required to be on a mortgage." If there is a statutory spousal homestead interest the lack of the spouse's joinder in the MORTGAGE will result in an inferior lien.

Words are important. A mortgage note IS NOT the same thing as a MORTGAGE.
Perhaps you should reread what I quoted. A non-purchasing spouse in a community property state must sign a Quit Claim Deed (the security instrument that relinqueshes property rights) and thusly do not have to sign the mortgage note (or promissory note, a promise to repay a debt and the terms under which said debt is to be repaid, vis a vis the mortgage). Signing the security instrument does NOT make the non-purchasing spouse a coborrower.


What is your background in real estate finance and how many FHA loans have you originated where the non-purchasing spouse issue comes up in a community property state? Does your experience trump the fact that I am a loan officer with an FHA direct lender located in the community property state of NV who has extensive experience originating loans with non-purchasing spouses?
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Old 07-04-2009, 09:43 PM
 
Location: South Dakota
733 posts, read 3,897,311 times
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I agree. Signing the security instrument does not make the non-purchasing spouse a co-borrower.

A quit claim deed is not a security instrument. Neither does it relinquish a statutory homestead right, at least not in a non-community property state which is what the OP was referring to - New York. Homestead interests arise irrespective of the existence of a recorded interest in title. Such interests arise pursuant to law. A spouse can convey away his or her ownership interest but the homestead interest remains. It must be specifically waived.

If the mortgage contains a homestead waiver and the non-borrowing spouse joins in the mortgage - fine. The mortgage lien is superior to the now waived homestead interest. Absent a specific waiver of homestead rights by signing the mortgage - or a separate specific waiver - I remain steadfast in my opinion that the mortgage lien will be inferior to the spouse's homestead interest.

As to qualifications for my opinion...I've practiced real estate law for nearly 30 years, closed countless FHA and conventional mortgages, and rendered enough title opinions to to sink a small ship.
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Old 07-04-2009, 10:03 PM
 
Location: central, between Pepe's Tacos and Roberto's
2,086 posts, read 5,893,437 times
Reputation: 952
You're right. A quit claim deed is not a security instrument. It is, however, the only form that we require in the state of NV to be signed by the non-purchasing spouse to relinquish property rights by way of title (this applies to conventional mortgages as well). The non-purchasing spouse is not on the note, not on title, and therefore not on the mortgage. A credit pull will confirm this. Even if a non-purchasing spouse does need to sign a homestead waiver (per other states), it still stands to reason that a non-purchasing spouse does not have to be on the mortgage. There are simply conditions that must be met.

EDIT: I will concede that your experience does, in fact, trump mine. I also looked up homestead law and in the state of NV, unless I am misunderstanding, there is no statutory homestead right unless a homestead declaration is made in writing and recorded as a conveyance. So it seems that the local real estate laws differ from the ones you deal with and possibly the rest of the country as well.

http://leg.state.nv.us/NRS/NRS-115.html

That's the link to Nevada Revised Statutes 115 which deals with NV homestead law.
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