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Purchase Price of new home: $255,407
Down payment: %20
Outstanding debt: $52 a month for student loan (4,300 outstanding balance)
FICO score: 751
Annual salary: 39K
Applied for mortgage loan from a home builder lender, which is affiliated with Wells Fargo. We tried both the conventional and FHA. Both are 30 year fixed at 4.75%
I did not get approved for both because of my unreimbursed business-related expenses that only occurred for the last two years, Form 2106. Both average around 10,000 a year for 2008 and 2009 Tax Returns, which I feel is inaccurate. It is deduced from my gross earning. Either way, I might have miscalculated to get higher tax refunds, but I think I basically screwed myself. The expenses were only related to auto repairs that had to be done on my vehicles, which is all fixed now. The loan broker with the home builder said this was due to Wells Fargo's restrictive policies and like many other home buyers, I basically got "clobbered."
I *know* I don't have any other business-related expenses for this year. My real estate agent and I are in the process of talking to another lender that is supposedly her friend, but I still have concerns about the 2106 expenses denying me the opportunity to obtain a loan.
Are most underwriters nowadays using the 2106 expenses as a guideline to determine a borrowers' gross income? More importantly, what can I do to improve my chances? From what I've been told by the loan broker, my application went through the automated underwriting process where it is either pass or fail. He recommended that I find a lender that is less restrictive on their approval process.
Last edited by TimC2462; 04-22-2010 at 04:30 PM..
Reason: subject heading
I think your problem is that you make 39K and want a 255K house. You would be paying around 1/2 of your salary (I hope that number is after taxes) as PITI. Not a good percentage. I'm no pro so take what I say w/ a grain of salt, it is just an opinion.
I think your problem is that you make 39K and want a 255K house. You would be paying around 1/2 of your salary (I hope that number is after taxes) as PITI. Not a good percentage. I'm no pro so take what I say w/ a grain of salt, it is just an opinion.
You might be right.
But it wouldn't make sense to me why the loan broker offered me several different loan scenarios. He suggested the FHA 30 year fixed which added on the PMI cost of 84 dollars a month, even with the 20% down payment. The monthy mortgage payment including real estate taxes amounted to 1500 a month.
With the conventional loan, it would be 1300 a month with the 20% down payment.
But what what is really confusing to me, is why he suggested the FHA 3.5% down payment where the monthly payment would be 1700?
But it wouldn't make sense to me why the loan broker offered me several different loan scenarios. He suggested the FHA 30 year fixed which added on the PMI cost of 84 dollars a month, even with the 20% down payment. The monthy mortgage payment including real estate taxes amounted to 1500 a month.
With the conventional loan, it would be 1300 a month with the 20% down payment.
But what what is really confusing to me, is why he suggested the FHA 3.5% down payment where the monthly payment would be 1700?
I'm so confused.
So this loan officer is trying to convince you to put down less and take a worse loan? find a new one.. but it seems your income is going to be a huge issue and probably not allow you to qualify.
Yeah, what you declare to the IRS (W2 or not) is what the lenders use for income. The only way I can see you getting out of this spot is to go FHA w/ a non-occupant cosigner. No, wait, w/ 20%, you should be able to go conventional w/ a non-occupant co-signer if the lender can get it thru DU
Wow that's a very low salary for a $204K loan after the down payment! I personally would be scared to take on those payments with that low a salary. I would much rather take out a mortgage around $90K but that's just my opinion. Why do you want to buy now?
And in answer to your questions, loan underwriters must look at how much you reported to the IRS as your income esp. if you're self employed. That's how they base their answer as a yes or no to the borrower. Good luck.
Wow that's a very low salary for a $204K loan after the down payment! I personally would be scared to take on those payments with that low a salary. I would much rather take out a mortgage around $90K but that's just my opinion. Why do you want to buy now?
And in answer to your questions, loan underwriters must look at how much you reported to the IRS as your income esp. if you're self employed. That's how they base their answer as a yes or no to the borrower. Good luck.
Several reasons. 1. Being a transplant from somewhere else, I've decided to make Bakersfield my permanent home for at least 5 more years. 2. Cost of rent is going up, which is overpriced in this town. A one bedroom apartment in a decent, safe neighborhood averages anywhere from 850 to 950 a month. 3. My family's business is just a drive down the road. Although my salary seems low on paper, I do get income in other ways. I expect to get a salary increase as the economy improves. As the son of the family business owner, I often help my folks make easier sacrifices. We expect to stay in the family hotel business for at least 5 more years.
A friend of the family is my real estate agent and she is having her friend (a loan broker for a smaller bank in Los Angeles) to help me find financing for the house. If worse comes to worse, my folks will help me put in a larger down payment or I'll just abandon the new house altogether and find something cheaper.
So it may seem like I'm putting myself in a difficult situation, but I'm not doing purely for investment opportunities. It is more of saving money in the long term to avoid paying soaring rent prices in the next 5 years.
Yeah, what you declare to the IRS (W2 or not) is what the lenders use for income. The only way I can see you getting out of this spot is to go FHA w/ a non-occupant cosigner. No, wait, w/ 20%, you should be able to go conventional w/ a non-occupant co-signer if the lender can get it thru DU
Thanks for the suggestion! It is nice to know that this option is available. My dad would probably be available as a co-signer. I believe I can be financially stable through the next year -- I've done my budgeting based on the loan scenarios I described above.
Escrow is due to close by June 30th, just in time to for the 8000 tax credit. That tax credit will be used as my emergency funds. Not counting the 20% for the down payment, I'll have 12K in reserves. Once I've made the house "homely", I'll rent out a room or two to students from my alma mater or working professionals.
So this loan officer is trying to convince you to put down less and take a worse loan? find a new one.. but it seems your income is going to be a huge issue and probably not allow you to qualify.
The first loan scenario he offered me was the 30 year fixed FHA with 3.5% down payment. Neither my agent or I told him we wanted to put down 20% of the purchase price. He based this loan scenario off of my bank statements, paycheck stubs, Federal tax returns, etc.
At the meeting, we revealed we wanted two loan scenarios with the 20% down payment for both FHA and Conventional at 4.75% interest rate. Obviously, the conventional loan was cheaper because it lacked PMI. In addition, my real estate agent thought it was a red flag to pay an extra 5000 dollars in fees for the FHA loan.
And I always thought FHA loan programs were aimed to make homes a bit more affordable...
Didn't bother reading through everything but he's keeping FHA because the allowable DTI is typically much higher than with conventional. So regardless of your increased costs/pmt he had a better chance of getting you approved and him making more money on the loan from higher loan amount and higher costs.
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