40% down payment to offset credit woes

[Anonymous]

my wife and myself earned close to 240k combined last year. 

we are listing our house within the next couple weeks and hopefully looking to start placing offers when we have our house under contract. 

i have been working casually with a lender who has run some numbers with me.  our income is fine.  we are well under the DTIs to secure the note we want but my wife has had some baddies come on her credit recently and i was told banks will use the lower persons middle score to base our rate.  **bleep**ty....

i was told that in order to offset the crappy credit score, the line of demarcation is close to 40%.  if we place 40% down, the LTV will be adjusted and our rate wont be as bad.  it makes sense that a larger down payment will offset the baggage that comes with rate hikes when your credit sucks. 

we are looking at homes around 400-430k.  taxes are around 10-12k annually (new jersey) and we have 1 kid in day.  we will most likely come  up with the 40% just so our monthly budget will be within a comfortable criteria. 

we are under a time crunch becasue my wife is pregnant and baby due before summer is over.  we are tying to move quickly though this process so we can be sell and buy and be settled before july 4th.  hopefully our house can sell quick

if we wait it out, rates can jump higher, the houses we want might not be available.

thoughts?

[H-B]

Why not one of you can come on loan application who has good credit if the DTI comfortable with that person income. You both will be on title any way. Otherwise lender will count lower middle FICO on application. Ask your lender to run numbers if that makes sense. 

[NC_Mtg_Loaner]

40% down on $400k home = $160k

20% down on $400k home = $80 k

Are you certain there's really no other way to "work" on your wife's "baddies" that will help you improve your credit score so you don't have to waste the extra $80k investment at a rate of 5% ? 

Assuming rates eventually "fly" to this height wouldn't you prefer to have $80k invested where you can generate a > ROR than 5%?

See if you can get your interest rate benefit at 75% LTV as there are some Loan Level pricing adjustments at that level that may benefit you there.  

Just my $.02 and congrats on the addition to your family!

[JVille]

Do you need your wife’s income to qualify? Is it possible to get the loan in just your name which will give you more options.

[Anonymous]

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@H-Bwrote:

Why not one of you can come on loan application who has good credit if the DTI comfortable with that person income. You both will be on title any way. Otherwise lender will count lower middle FICO on application. Ask your lender to run numbers if that makes sense. 

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OP, this^^^.  Instead of putting 40% down, why not just do it in your name?  Although you don't have alot of time, talk to other lenders also to see what they say.

[Anonymous]

thanks for all the input...

so my wife is in pharm sales.  she does very well.  we need her income to qualify.

my income is pretty good myself, but i have several rental properties in my name, which create DTI burdens itself.  my real estate business does profit but i dont think the numbers would work. 

for our primary home, real estate taxes are close to 12k annually in jersey where we are looking (good schools, close tothe city)

the idea of having an extra 80k to onvest at 5 percent makes sense, but im a fan of monthly budgets.  bills come per month.  food, daycare, car, mortgage, etc....having a low monthly payment gives piece of mind.  this is our forever move.  planning to stay there til i am on a stretcher. 

[kc0039]

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@Anonymouswrote:

thanks for all the input...

so my wife is in pharm sales.  she does very well.  we need her income to qualify.

my income is pretty good myself, but i have several rental properties in my name, which create DTI burdens itself.  my real estate business does profit but i dont think the numbers would work. 

for our primary home, real estate taxes are close to 12k annually in jersey where we are looking (good schools, close tothe city)

the idea of having an extra 80k to onvest at 5 percent makes sense, but im a fan of monthly budgets.  bills come per month.  food, daycare, car, mortgage, etc....having a low monthly payment gives piece of mind.  this is our forever move.  planning to stay there til i am on a stretcher. 

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If you're worried about DTI because of rental properties, try both these calculations out from your schedule E on your tax returns. Please note the 12 is IF you have had the rental property for at least 12 months.

Bottom line + depreciation / 12 = positive or (negative) income.

(Bottom line + depreciation + taxes + insurance + mortgage interest + amortization/casualty loss/hoa dues ) - current PITIA / 12 = positive or (negative) income.

If you have more income on the 1st equation - go conventional loan Freddie Mac. As long as both your credit scores are above 720, you can go up to 50% debt to income. Please note: This will depend on the lender overlays.