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Old 01-02-2009, 09:53 AM
 
Location: Southwest Nebraska
1,297 posts, read 4,347,297 times
Reputation: 908

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I have noticed on the TV show My First House that what the person qualifies for and their downpayment ends up being the amount of house they can buy.

If house is 200,000 and they have 40,000 down that to me means they would finance 160,000 or so. But this show says they are looking for a house in the 240,000 range. I know they are qualified for 200 but would think bank would be happier with 160.
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Old 01-02-2009, 12:27 PM
 
Location: MID ATLANTIC
8,211 posts, read 20,409,418 times
Reputation: 9477
I think you just got turned around. My guess is they are looking at 240K homes and plan to put 40K down and a 200K loan.

The bank doesn't care as long as they are qualified. Afterall, if they underbuy, chances are they will be unhappy and that property could pay off early or it could be turned into a rental, but of which are undesirable to a bank.

Sometimes the obvious isn't necessarily the case.
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Old 01-02-2009, 06:02 PM
 
Location: Placer County, Ca
111 posts, read 430,222 times
Reputation: 51
Max Qualified Loan amount + down payment = Max Purchase Price
The shows tend to be very general in explaining what part of the down payment or loan amount is covering the closing costs.

Most of us don't want to stretch our budget to the max by purchasing at a max loan amount (except on TV, when everyone does it) You purchase at the payment (now and future!!) amount you are comfortable with.
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Old 01-02-2009, 06:18 PM
 
28,461 posts, read 76,299,213 times
Reputation: 18536
SmartMoney:

Banks LIKE to be paid off early. Not so much as they are willing to ask you to do this, but definitely enough to abide by the FICO scores that give BIG boosts to folks that pay off loans. Banks will be HAPPY to refinance you in to new loans, and if you examine their pricing on the new terms, rarely do they give rates unfavorable on shorter loans. They value flexibility and as long you don't pay back SO quickly that they are dealing with excessive turn over they will be pleased to accept your pay off on the terms most favorable to THEM and then turn around and give you a new loan on terms that are also favorable to them... If you underbuy and decide to get a new loan they will be pleased as much to take your new app fee and charge you all the same fees that they would as if you never did business with them before.

You can't turn an owner occupied into a rental, that is a different category of risk and banks DO NOT LIKE when something outside of their control changes their exposure to risk, worst case they can demand full repayment of loan in short order. That is bank talk for "you have made us VERY unhappy and we want our money back NOW"....
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Old 01-03-2009, 12:31 PM
 
Location: MID ATLANTIC
8,211 posts, read 20,409,418 times
Reputation: 9477
I work for a portfolio bank and I assure you, each month a report is issued that goes over the dollar volume of what is being paid off, the yield and the return. We don't like replacing proven investments.

In a normal environment, no, banks do not like to be paid off if they are maintaining a portfolio, especially if they are the vehicle for long-term mutual fund investments (we never took our loans to Wall Street thank God).

Right now, the thought is just evolving to not question payoff, because the alternative may be default. However, the portfolio we maintain has pretty high standards (never did subprime), so our default rate is low.

--------------------------------

as always, runnng late again, but correspondent and broker agreements can and do contain a buyback penalty if a loan is paid off in as long as one year. This could be due to refi, sale or influx of cash for the borrower. Under this circumstance a correspondent lending bank would loath to see a loan paid off in full early. (First Horizon)
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Old 01-03-2009, 04:45 PM
 
Location: Rockville,MD
22 posts, read 77,839 times
Reputation: 15
Hi all,
Do you think that a bank will give us (my hubby and I) a mortgage when:

- our current mortgage (the primary mortgage) is underwater, bought at 350K (0% down from our credit union last year) and the value now is 320K on Zillow. We can afford all the payments and still paying this.

- we are looking for a second house (single family) as our retirement house, probably will be our farm. Of course we will only look at where we can afford to pay, in addition to what we are paying now. Something that less than 100K on some acres of land and for handy people to work on. Summing all of saving and stocks at the current values could give us 15K for down payment and closing costs.

We have excellent credits (>740), stable jobs ($150K/year in total), some stock investments here in there even though they are all *underwater* just like our first house, no debt except the mortgage debt (341K I think). Do you think that we can or we should get a new mortgage?

(I think my question is .. very dummy) Thanks for reading and I hope to hear some opinions from you.

Happy New Year 2009.

Last edited by amylee134; 01-03-2009 at 04:59 PM..
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Old 01-03-2009, 06:54 PM
 
Location: MID ATLANTIC
8,211 posts, read 20,409,418 times
Reputation: 9477
If you can qualify for both homes, with good credit (you have) and can put down at least 10%, you probably have a good shot at a second home (provided you don't need rental income, second homes don't allow for rental income of either home).

If I were to predict your trouble spot(s): reserves, or assets should you hit tough times. Most will require you have 6 months reserves (PITI) on the 2nd home, and I would be willing to bet 6 on the primary may be required to get the approval to go through, too. (Not sure, this is off the top of my head).

The second possible trouble spot, the handy-dandy fixer upper. Based on the description of what you think you may be buying, be careful the land is not worth more than the dwelling.......in fact, the "ideal" improvement (house) should not exceed 25%-33% of the total value. It's not uncommon to see the land cross the 50% value mark in the metropolitan areas, where land is a commodity, but in more rural areas, use caution. Your purchase could be kicked because it's too close to a "land loan." Unfortunately, this is one of those things that you must have a specific property in mind, before an evalaution or opinion can be rendered.

Get with a loan officer, have them do a full pre-qual work up. If they can't get you into a loan, they certainly should be able to give you some goals to work towards - it sounds like you shouldn't be far off.



Quote:
Originally Posted by amylee134 View Post
Hi all,
Do you think that a bank will give us (my hubby and I) a mortgage when:

- our current mortgage (the primary mortgage) is underwater, bought at 350K (0% down from our credit union last year) and the value now is 320K on Zillow. We can afford all the payments and still paying this.

- we are looking for a second house (single family) as our retirement house, probably will be our farm. Of course we will only look at where we can afford to pay, in addition to what we are paying now. Something that less than 100K on some acres of land and for handy people to work on. Summing all of saving and stocks at the current values could give us 15K for down payment and closing costs.

We have excellent credits (>740), stable jobs ($150K/year in total), some stock investments here in there even though they are all *underwater* just like our first house, no debt except the mortgage debt (341K I think). Do you think that we can or we should get a new mortgage?

(I think my question is .. very dummy) Thanks for reading and I hope to hear some opinions from you.

Happy New Year 2009.
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Old 01-03-2009, 09:49 PM
 
Location: Rockville,MD
22 posts, read 77,839 times
Reputation: 15
Thank you very much SmartMoney, we do really appreciate your opinions!
We actually found some pieces of house/land that meet our criteria in VA, outside of Fredericksburg by looking at Remax website. We know that we can't buy land because we can't afford to put down 30% down payment.

Your opinions surely give us more serious thoughts about owning a second house.

Once again, thank you and Wish you a healthy and prosperous new year!
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