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Old 09-23-2010, 12:09 PM
 
214 posts, read 443,932 times
Reputation: 71

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Hi all,

I would really appreciate some advice on our situation. I am a SAHM; my DH was unemployed for a little less than a year. He has been employed since May. (Prior to his unemployment, he worked in a professional job since grad school for 11 years straight--he was just in an hard-hit industry). His salary now is around 120k and his credit scores ranged from 680 to 720 the last time I did the free score check. We have no debt.

We want to buy a house in the 450-500k range (we are in an expensive area--these are older townhouses in the suburbs that would be in our price range). We are renting right now and want to shop and make sure we find the right place.

1. Could we be approved for a mortgage at all given DH's year of unemployment? If not, how long does he need to be employed before we would qualify?

2. What kind of interest rates would we qualify for given his credit scores?

3. Can you "buy down" the interest rate by having a larger-than-20% down payment? We have about 200k we could use as a down payment.

4. Once you are pre-approved, how long does the pre-approval last? We may find something right away but we may take 6 months to find something.

Thanks in advance for any advice or thoughts!
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Old 09-23-2010, 12:25 PM
 
Location: SF Bay Area
1,290 posts, read 1,866,055 times
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1. Usually banks require 2 years of employment history.

2. If 720 is the credit score, he should be able to get a pretty low rate. Anything lower might bump the rate a bit.

3. You can buy points if you have the money to do so. Do the math and see if it's worth it for you.

4. Pre-approval does not guarantee a loan. It just gives the bank and the customer a general idea what you could afford. What you need is a commitment letter. The approval is determined by an underwriter after you submit all required documents. The entire approval may take anywhere from 2 weeks to 60 days (or even longer) depending if there are any issues with the loan file.

5. I am not an loan expert or guru. This is information from my own loan experience. Hope this helps. Good luck.
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Old 09-23-2010, 12:44 PM
 
Location: Plano, Texas
1,675 posts, read 6,645,856 times
Reputation: 694
Yes, the lender will require a 2 year work history but just because he was unemployed for a year is not grounds for an automatic denial.

If you have 20% to put down and a score of around 700, you should have no problem qualifying for a mortgage. This assumes he is a salaried W2 worker and not self employed or commission income.
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Old 09-23-2010, 12:49 PM
 
139 posts, read 765,899 times
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1) Most likely. You need to have 2 years of tax reported income. If he was not self employed and there is reason to believe his current job is permanent, then probably.

2) They take the mid-score. If it is over 700 - you're looking at probably about 3.875 - 4.5% depending on a LOT of factors.

3) You can do multiple things... you can "buy down" the interest rate... but it doesnt work how you said. If you want to pay a 3.5% interest rate, for example, then you're going to have to pay for that (again, depending on a lot of factors). But, the more you put down, the more likely you are to get a lower rate anyway. Putting 20% down will get you best rates.. especially if you dont have an impound account (like the 3.875). If you plan on living in house for more than a certain amount of years, depending on cost to "buy down" to a lower rate, then you need to do some calculations. Your broker will do it. but with tax deductibility, etc etc, it may not be the best decision to buy it down.

4) Pre-approval is basically crap. Do what your realtor says, though. A pre-approval doesnt really last.. because once you find a lender, theyre going to do it again anyway (multiple times). I would get a pre-qual and go from there. Pre-approval once youve decided on a place youre going to be serious about.

Quote:
Originally Posted by NYmama2dallas View Post
Hi all,

I would really appreciate some advice on our situation. I am a SAHM; my DH was unemployed for a little less than a year. He has been employed since May. (Prior to his unemployment, he worked in a professional job since grad school for 11 years straight--he was just in an hard-hit industry). His salary now is around 120k and his credit scores ranged from 680 to 720 the last time I did the free score check. We have no debt.

We want to buy a house in the 450-500k range (we are in an expensive area--these are older townhouses in the suburbs that would be in our price range). We are renting right now and want to shop and make sure we find the right place.

1. Could we be approved for a mortgage at all given DH's year of unemployment? If not, how long does he need to be employed before we would qualify?

2. What kind of interest rates would we qualify for given his credit scores?

3. Can you "buy down" the interest rate by having a larger-than-20% down payment? We have about 200k we could use as a down payment.

4. Once you are pre-approved, how long does the pre-approval last? We may find something right away but we may take 6 months to find something.

Thanks in advance for any advice or thoughts!
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Old 09-23-2010, 01:02 PM
 
28,461 posts, read 76,043,485 times
Reputation: 18533
Default To elaborate on a few points...

While you are out of work it is pretty much pointless to apply for a loan or attempt to refi an existing loan.

Once you are back to full time work, with a standard W2, and 'several' months of paystubs (some lenders are ok with two months others want almost a whole year...) at or above your old salary IN THE SAME GENERAL field as your were prior to the unemployment, yiu are back in the lendable land.


Having 20% down is basically going to get you as good a rate the lender will offer BASED ON DOWN PAYMENT. If you decide to "buy down" the rate the lender is effectively using that a "make uo for lost profit from the rate" BUT it is spent money, not treated the same as regular interest / tax advantaged interest. For many people this really does not make much sense...


If you are just using the pre- approval to help you determine a realistic price range to shop, I would not worry too much about the details. Of course if your situation with debt or income changes so does the amount that lenders will allow you to borrow.

I would recommend making a serious effort to interview several diffent kinds of lenders. The large banks have their place, but so do credit unions, mid / regional banks, mortage brokers, independent mortage lenders. Ideally you will choose someone that is trusty worth, responsive, and detail oriented. If you need to get things moved uo or pushed back the 800 number and email only outfits are not going to make things easy...


Given that you have a fairly high income, large amount of cash and no particular hurry I would give serious consideration to shopping REOs/foreclosures and short sales. Your cash mit come in handy for places that need some fixing up, your high income will allow you to borrow enough to shop some pretty high end areas, where the REOs tend to be in pretty good shape, and not being in a hurry means that you won't freak out when the lender / seller keeps dragging their feet...
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Old 09-23-2010, 01:58 PM
 
214 posts, read 443,932 times
Reputation: 71
Hi everyone. Thanks so much for your thoughtful and thorough replies. Our income is on the low end for a family in our area, but I am confident re: what we can afford, budget-wise. (Since we are lucky enough to have no monthly debt payments, our finances are pretty uncomplicated). Our price range is also low for our area so that is why I anticipate it taking awhile to find a place.

DH is employed right now. His work history is like this: graduated from masters program--->uninterrupted work history for 11 years--->about a year of unemployment--->employed since May in the same field (albeit at a lower salary than his previous position.)

So if I am understanding the gist of what you all are saying, having more than a 20% down payment doesn't do you any favors in terms of interest rates unless you want to pay points?
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Old 09-23-2010, 02:23 PM
 
28,461 posts, read 76,043,485 times
Reputation: 18533
Default Yep, the rate for 20% down and 80% down is still the same...

...and right now it is pretty terrifically low,around 4% for a 30 yr fixed. If you feel pretty good about things I would be shopping NOW, as supply is also good. I think that some sectors of employment will remain weak, but with an 11 year track I would not feet too much about future issues.

I can sympathize with the feelings of having a "low income for the area" but the actual numbers that lenders use are going to cover a much bigger swath of the nation, and you will look like you are under spending, which is a good thing.

Make sure that your cash is in accounts that will not raise any suspicions,the last thing you want is some goofy underwriter asking for eleventh hour affadavits that the funds are not borrowed or otherwise obligated...
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Old 09-23-2010, 02:40 PM
 
Location: SF Bay Area
1,290 posts, read 1,866,055 times
Reputation: 816
I think underwriters use to flag any deposits over $5k in your accounts (other than payroll deposit) and you would need to write a letter of explanation. That was when everyone and their mother could get a loan.

With the strict gov't intervention and housing bust, most banks are flagging anything over $1k deposit into your accounts now. So be careful with your account activities. Avoid pitfalls.
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Old 09-23-2010, 02:55 PM
 
214 posts, read 443,932 times
Reputation: 71
Thanks for the replies and the heads-up. Our down payment money is savings from pre-kids, when we both worked, so its been sitting in our credit union account for years (earning barely any interest, but that's a sad story for another day!). I'm hoping mortgage rates are going to go anywhere but you all are right, 4% is insanely low.
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Old 09-23-2010, 06:50 PM
 
Location: MID ATLANTIC
8,206 posts, read 20,325,546 times
Reputation: 9472
May I make a suggestion? Go get a preapproval from a local lender that does their own underwriting and doesn't send out to the investor for prior approval. (The would most likely call themselves a "portfolio lender" or a "correspondent lender"). Most loan officers can run your file thru Desktop Underwriting with a "to be determined" address. If they can obtain an approval, the loan officer can review the file with the underwriter face to face for greater confidence. There are many investors that do not have any conditions beyond the the DU approval. Also, ask the lender if they have Fannie Mae Direct or Fannie Retained. This mean the loan is sold directly to Fannie, but is serviced by the originating lender. Of course there are no additional requirements for these loans and they are priced very competitively.

A side note, pay particular attention for everything on your loan application being correct. DU is a computer approval, which means, garbage in garbage out. As long as the application is accurate at the time the DU was obtained, you should be fine.

This is how I would present a loan such as yours. First, with the parameters you list, you would be eligible the best rate offered as employment is not a factor in those calculations (which are driven by down payment and credit score). I don't believe the employment will be a major issue, but if you can dress it up, it won't get a second glance. By dress it up, I mean write a "to whom it may concern" letter that you did not incur additional debt during his unemployment, you were able to meet the family budget, and at no time were you even close to worrying about making the mortgage payment (must be the case if you have up to 200K to use). Then I would ask your husband if I could contact his immediate supervisor. When I contact the supervisor, I tell them I am taking this upon myself that <husband's name> is not aware I am even asking for a letter addressing his future at the company. Guarantees aren't needed, but a warm and fuzzy. Between the two items, supported with strong cash reserves, high credit score, no one is going to give that time off a second glance.

Packaging a loan is an art. When shopping for a lender look for signs of someone practicing the craft. (example, if they say, "no, we don't need any letters, it's overkill") And these days we have to practice defensive processing. Cutting off the question before it happens. Closing your eyes and hoping they miss it will only bring trouble, because they will find it.

Good luck and try not to worry!
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