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Old 11-01-2009, 09:33 PM
 
34 posts, read 110,292 times
Reputation: 15

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Hello again everyone,

I was talking to a friend of mine who was a real estate agent a few years ago, but is no longer in the market. I wrote in another post that by mid-year 2010 I will have $20,000 strictly for a down payment on my first home, and possibly have $10,000 saved in the bank. My income before taxes (with tips) will probably be around $2500-$2700/month. My credit is excellent 720+ and I have little debt. Now, I'm still in college, but plan on buying a 3bed/3bath home, and renting out the extra rooms while continuing my education to pay the mortgage or at least some of it. I was explaining my plan to my friend and she said that I will most likely not get a loan, unless I have a co signer. I will be starting work at City Center in December, so that's where my income would be coming from, but is she right? Will I not be able to buy a home with a $20,000 down payment without a cosigner? I'm looking in the SW area, Jones/Robindale, Rainbow/Robindale and close surrounding area. She's just got me a bit worried, that I'm somewhat getting my hopes up to buy my first home and will be unable to. I'm looking for a newer home, 3bed/3bath and hopefully below $130,000, but as she said I may not even qualify for that.

Any advice for me? Should I prepare myself to buy just a condo or not even buy at all?
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Old 11-01-2009, 10:15 PM
 
Location: Kailua Kona, HI
3,199 posts, read 13,341,529 times
Reputation: 3420
With the usual 2.5 times annual income calculation, at your rate of gross salary at $2700/mo you would qualify roughly for a mortgage of about $81,000. You cannot possibly consider buying a home that you alone can't pay for. Do not count on having roommates or any other type of income that isn't legitimate and verifiable.

You should plan on putting 20% down and learn what closing costs will run. There are also first time homebuyer loans available with much less down. Talk to a few reputable mortgage brokers and see what they advise now, then start planning accordingly. You're on the right track to be so ambitious to own your own home but you need a little more information so that know better what you're getting into. For instance if you were continuing your education, does that mean you will have student loan debt to consider?

Let me repeat: DO NOT even think of buying anything you can't afford.
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Old 11-01-2009, 10:22 PM
 
Location: Orlando, FL
317 posts, read 1,086,183 times
Reputation: 154
Quote:
Originally Posted by Lost_Lady View Post
Hello again everyone,

Now, I'm still in college, but plan on buying a 3bed/3bath home, and renting out the extra rooms while continuing my education to pay the mortgage or at least some of it.

Any advice for me? Should I prepare myself to buy just a condo or not even buy at all?
Are the roommates solid renters? I know a lot of people in college that have bought a house and rented it out. If you have a signed contract from the people that plan on renting rooms, I don't see why the right bank would not provide you a loan for your house.

The risk is that the roommates might stop paying you, might drop out of college, or you might need to evict them because of too much partying, etc.

I would encourage you to think about easily you can replace the roommates should the need arise and how easy it would be to evict them should you need to. Assuming the roommates are replacable (usually easy in college) and they are reliable (with signed contracts), I wouldn't hesitate using them as income source for your loan. The right bank should be able to provide a loan for you.
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Old 11-01-2009, 10:39 PM
 
Location: Kailua Kona, HI
3,199 posts, read 13,341,529 times
Reputation: 3420
With all due respect, to my recollection most income must be able to be counted on for 3 years in order to be included with loan application. Additionally, they like to see that you have been working 3 years in the same industry. There may be loans out there still for people who have problems qualifying for good prime mortgages with lowest possible interest rate but that's what got a lot of people into trouble the last few years. College roommates to me, is not a very reliable source of income.

Here's a site that explains a lot about the mortgage process for the OP, but you're still better off talking in person to various brokers in your area. Mortgage Underwriting Guidelines & Mortgage Loan Qualification
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Old 11-02-2009, 12:21 PM
 
762 posts, read 1,555,722 times
Reputation: 530
I put 20k down on my home it was 65k, My payments on a 30 yr are 420.00 per mt. I would not even think of doing this without my income of 3-6k per mt.
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Old 11-02-2009, 12:34 PM
 
Location: central, between Pepe's Tacos and Roberto's
2,086 posts, read 6,825,161 times
Reputation: 958
Quote:
Originally Posted by Lost_Lady View Post
Hello again everyone,

I was talking to a friend of mine who was a real estate agent a few years ago, but is no longer in the market. I wrote in another post that by mid-year 2010 I will have $20,000 strictly for a down payment on my first home, and possibly have $10,000 saved in the bank. My income before taxes (with tips) will probably be around $2500-$2700/month. My credit is excellent 720+ and I have little debt. Now, I'm still in college, but plan on buying a 3bed/3bath home, and renting out the extra rooms while continuing my education to pay the mortgage or at least some of it. I was explaining my plan to my friend and she said that I will most likely not get a loan, unless I have a co signer. I will be starting work at City Center in December, so that's where my income would be coming from, but is she right? Will I not be able to buy a home with a $20,000 down payment without a cosigner? I'm looking in the SW area, Jones/Robindale, Rainbow/Robindale and close surrounding area. She's just got me a bit worried, that I'm somewhat getting my hopes up to buy my first home and will be unable to. I'm looking for a newer home, 3bed/3bath and hopefully below $130,000, but as she said I may not even qualify for that.

Any advice for me? Should I prepare myself to buy just a condo or not even buy at all?
I see on glaring issue that is very likely a deal killer, and that is the fact that you are a tipped employee. Even if you are on tip compliance, unless you are declaring every penny of every tip earned and have done so for the last 2 years with the tax returns to back it up, you will not be allowed to use the tips. What you would need is a non-occupant co-borrower that will allow you to use their income to help you qualify. It must be a family member or someone with a extremely close personal interest, and they will be liable for the mortgage as well. You will not be able to count use any rental income to offset the mortgage liability for qualification purposes either.

That said, if you can absolutely document $2500-$2700 a month you could likely qualify for a mortgage around $100,000. That puts you at about 38% debt to income ratio with regards to housing expense only. That is about the upper threshold unless you have some strong compensating factors. That would put you around $850-$950 ($950 is 38%) a month. I am aiming a little high for taxes and insurance, principal and interest would be around $570 a month at 5.5% which is also slightly high. The reason that I am shooting high on the tax and insurance numbers is that many homes are still being taxed at previous value, or the drop in value doesn't initiate the tax cap and it is always better to shoot high with the numbers so as to not be caught off guard.
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Old 11-02-2009, 01:17 PM
 
Location: Orlando, FL
317 posts, read 1,086,183 times
Reputation: 154
Quote:
Originally Posted by Daddys///M3 View Post
You will not be able to count use any rental income to offset the mortgage liability for qualification purposes either.
I don't see why you can't use rental income to count for qualification. Landlords almost always use rental income to qualify for a loan. Commerical projects also use projected income.

The loan wouldn't be an owner-occupied loan (Fannie Mae / Freddie Mac), and may be more difficult to get. However, there should be a lender that can count rental income is signed contracts are in place.
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Old 11-02-2009, 03:35 PM
 
Location: Alamo Heights, TX
395 posts, read 1,076,535 times
Reputation: 157
Quote:
Originally Posted by skisickie View Post
I put 20k down on my home it was 65k, My payments on a 30 yr are 420.00 per mt. I would not even think of doing this without my income of 3-6k per mt.
Why didn't you finance this loan over at least 15 years (or less)?
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Old 11-02-2009, 05:57 PM
 
Location: central, between Pepe's Tacos and Roberto's
2,086 posts, read 6,825,161 times
Reputation: 958
Quote:
Originally Posted by cedar_bluff_tree_farm View Post
I don't see why you can't use rental income to count for qualification. Landlords almost always use rental income to qualify for a loan. Commerical projects also use projected income.

The loan wouldn't be an owner-occupied loan (Fannie Mae / Freddie Mac), and may be more difficult to get. However, there should be a lender that can count rental income is signed contracts are in place.
An investment property purchased by someone with a couple of years experience as a landlord is a completely different animal than a first time investor or an owner occupant trying to use roomates to qualify. Lenders simply want to see that the borrower can foot the bill regardless of vacancy situations. Expect it the guidelines to get tighter as well. As far as non-Prime goes, forget about it. It is either agency paper or it is private investor money, which is very expensive. The only exception would be a lender that offers portfolio product, and not only are those becoming more difficult to find but you will find that the for every guideline that portfolio product is less stringent on, there are 5 underwriting guidelines that are more stringent than agency product to help mitigate the risk of the one looser guideline.
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Old 11-04-2009, 07:16 AM
 
762 posts, read 1,555,722 times
Reputation: 530
I did a 30 yr to allow me to shore up some assets for the trouble ahead. No way would I let it take me 30 yrs to pay it off. Just wanting to protect myself in worst case.
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