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We would like to purchase a new home before selling the current one but we're worried that we might have problems qualifying for the new mortgage. Right now we still owe about $200k on a 15 year loan at 3.2% and we're looking for homes around the $1 million mark. Income is around $160k plus bonus $20k. We have around $350k cash but we could potentially get more by liquidating stocks.
We would like to get the cheapest loan possible and possibly refi after we sell our existing home. The question is, should we pay off the current mortgage or keep the cash for downpayment? We also have some funds coming in from parents that could help out. Are there rules to be followed if we get the funds before the loan is approved?
We would like to purchase a new home before selling the current one but we're worried that we might have problems qualifying for the new mortgage. Right now we still owe about $200k on a 15 year loan at 3.2% and we're looking for homes around the $1 million mark. Income is around $160k plus bonus $20k. We have around $350k cash but we could potentially get more by liquidating stocks.
We would like to get the cheapest loan possible and possibly refi after we sell our existing home. The question is, should we pay off the current mortgage or keep the cash for downpayment? We also have some funds coming in from parents that could help out. Are there rules to be followed if we get the funds before the loan is approved?
First, gift funds are ok, nothing needs to happen there until you know you need (want) them. I can't tell how much the payment is on the house you currently own, PITI/HOA/ancillary monthly debts would help.
If you want to walk in ugly, and know your current home would sell in a few months, you can do something as extreme as Hard Money/Alt Financing (think Points) with little/no vetting of income. BUT you can also do a traditional 10% down/No MI loan, Fixed: middle 4%s, ARM: as low as mid-to-upper 3%s.
How consistent is the bonus? If it is consistent, all credit report bills, PITI on both houses and HOA cannot exceed $6450, so we'd reverse-engineer your down payment (or credit card tradeline / existing house payoff) accordingly.
Please describe existing house payment and minimum monthly bills on your credit report and the zip code/property tax base in which you want to buy. thanks.
Gift funds are coming but we're just not sure of the timing so I'm wondering whether we need to get them in our account prior to loan approval. Current mortgage is $2000, no HOA. We have no other debts, pay off credit card usage monthly.
Wouldn't loans with no vetting of income be the most expensive? Our home should sell fast but we don't want to be in a rush to sell, especially since the market is red hot at the moment. Our priority is to get approved for a sufficient amount and if possible, at the lowest cost possible since we would refi anyway. We're thinking at least 20% down, would ARM be the cheapest?
Bonus should be more this year but that figure is the average from past 2 years. We have no credit card debts and minimum payment varies depending on our usage. Zip code of our target area is 98052 in king county, Washington.
I would recommend a 10/1 year or 7/1 year ARM with your idea of refinancing, or, possibly 2 loans.
Let's say you have 200K in equity you wish to use in the future after the sale of your home. And let's say you are putting 200K down from your pocket with 1M sales price. So instead of getting an 800K 1st, get a 600K 1st and a 200K heloc (unless you are in Texas). That way, when you sell, you can pay off the heloc (don't close it, because you can access those funds in the future in an emergency). This helps you avoid the unnecessary expense of a refinance.
First, gift funds are ok, nothing needs to happen there until you know you need (want) them. I can't tell how much the payment is on the house you currently own, PITI/HOA/ancillary monthly debts would help.
If you want to walk in ugly, and know your current home would sell in a few months, you can do something as extreme as Hard Money/Alt Financing (think Points) with little/no vetting of income. BUT you can also do a traditional 10% down/No MI loan, Fixed: middle 4%s, ARM: as low as mid-to-upper 3%s.
How consistent is the bonus? If it is consistent, all credit report bills, PITI on both houses and HOA cannot exceed $6450, so we'd reverse-engineer your down payment (or credit card tradeline / existing house payoff) accordingly.
Please describe existing house payment and minimum monthly bills on your credit report and the zip code/property tax base in which you want to buy. thanks.
Could they get income credit based on potential rent of their existing home?
Gift funds are coming but we're just not sure of the timing so I'm wondering whether we need to get them in our account prior to loan approval. Current mortgage is $2000, no HOA. We have no other debts, pay off credit card usage monthly.
Wouldn't loans with no vetting of income be the most expensive? Yes. Our home should sell fast but we don't want to be in a rush to sell, especially since the market is red hot at the moment. Our priority is to get approved for a sufficient amount and if possible, at the lowest cost possible since we would refi anyway. We're thinking at least 20% down, would ARM be the cheapest? In what way? Lowest rate, yes. Fees, about the same unless you buy down with points. Cost of refinancing out of the ARM and into a Fixed down the road? There's the rub, as you will see significant fees and who knows where the market will be at that time.
Bonus should be more this year but that figure is the average from past 2 years. We have no credit card debts and minimum payment varies depending on our usage. Zip code of our target area is 98052 in king county, Washington. Ahhh, King County, I moved from there, last year, down to Lake Oswego.
Thanks for your reply Pfhtex!
If you are putting 20% down, we can look at options that allow for a total debt ratio of 45%. $180k/12x45% = $6750 (total monthly bills cannot exceed this)
So, is $2k + [new house payment] < $6750? Let's figure $80/month for homeowners insurance and go crazy and say property taxes are $8400/yr or $700/mo.
So $2k+$80+$700 = $2,780. 6750-2780= $3,970 left for the new house payment and any HOA.
Now, the Conforming loan limit in King is $592,250, so you could do a First mortgage at that amount, low-to-middle 4%s, and a second mortgage for, say, $207,250. These loans total 80% of $1M.
1st Mortgage payment = $3,000. 2nd would be a HELOC with a calculated payment of about $1,100. Total $4,100 is within $200 of our Debt Ratio limit, so it would take a minimal gift to reduce that 2nd mortgage down to a level where the numbers work. I'd personally buy the first mortgage rate down to 4.25% or lower (30-fixed), then do the HELOC 2nd for $150k-ish, and just attack that 2nd until it's paid.
These numbers are all padded a little bit (property taxes should be lower). But I think you can buy with 20% down on $1M, and depending on actual taxes, you might not need more than the $200k Down Payment + closing costs (unless seller pays those).
***I'd shy away from getting an "Executed Lease" on a property that might concurrently be going up for sale. That's happening left and right up here and I just sense that scrutiny is on the way.
BTW, if you want to look at ONE loan on this, a jumbo at $800k, you're looking middle to upper 4%s with a tighter debt ratio. I personally prefer utilizing the higher-than-most-everywhere-else Maximum Conforming Loan Limit that is offered in King County.
We're within the higher conforming loan limit but the higher amount doesn't help much considering how much more expensive homes are in the area.
So jumbo loan is more expensive than conforming? I tried searching on Zillow and the first few rates for jumbo are between 4% to 4.125% while as conforming is 4.009% to 4.018%.
If we get two loans, would the HELOC be on our existing home? Isn't HELOC rates higher than regular mortgage rates? Would the closing costs be much higher with two loans? Not sure about buying points because the last time we did that we ended up doing a refi 3 years after so it didn't seem worth it.
We are considering doing ARM to qualify for more loan because we want to be approved for a higher amount to have more wiggle room. When we get preapproved, are we approved for the loan amount or purchase amount? Can we buy a more expensive home if we could get more funds in for downpayment subsequent to preapproval?
Thanks Pfhtex for helping! Believe it or not, I've tried asking two mortgage brokers before coming here and none of them actually address our concerns like you did.
We're within the higher conforming loan limit but the higher amount doesn't help much considering how much more expensive homes are in the area.
So jumbo loan is more expensive than conforming? I tried searching on Zillow and the first few rates for jumbo are between 4% to 4.125% while as conforming is 4.009% to 4.018%. Zillow Lies - - OR those are ARMS.
If we get two loans, would the HELOC be on our existing home? No, you'd do a piggyback purchase. Isn't HELOC rates higher than regular mortgage rates? You could get a Fixed Second. Would the closing costs be much higher with two loans? No, seconds are very cheap, use the same Title policy as the main mortgage, processing fee of a few hundred bucks. Not sure about buying points because the last time we did that we ended up doing a refi 3 years after so it didn't seem worth it. Same concept in play here, I hardly ever recommend or charge points, but do you see rates improving 3 years from now? Your experience on the prior home lends itself to a Jumbo ARM which I will explore below.
We are considering doing ARM to qualify for more loan because we want to be approved for a higher amount to have more wiggle room. When we get preapproved, are we approved for the loan amount or purchase amount? Both, as LTV is a factor (Loan amount as a percentage of price) Can we buy a more expensive home if we could get more funds in for downpayment subsequent to preapproval? Of course.
Thanks Pfhtex for helping! Believe it or not, I've tried asking two mortgage brokers before coming here and none of them actually address our concerns like you did.This is actually a nice distraction from work.
One-loan Jumbo ARM based on a $1M price and $200k down:
Due to market volatility, let's say a 10/1 ARM comes in at 4.000%. (This is an illustration, not an offer)
$800k @ 4.000% = $3,819 + 770 escrows = $4,589.
***Jumbo will hold you to a 43% debt ratio instead of the Conforming 45%.
And you could likely get into a 10/1 under 4%, but I like to go worst-case scenario so the numbers actually improve over time.
Also, you can do a 10% down, no-MI Jumbo as well, so there's lots of ways to cut this. You're in good shape. And yes, Seattle is insane per-Sq-ft.
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