Best approach to buy a $550k house?

[man03999]

Hi everyone! Learned so much from the credit card thread and now im trying to learn the mortgage game!

My wife and I are interested in a home. The listed price is $550,000 and we haven't done much research nor contacted the agent mainly becuase we don't have enough cash and are trying to get a mortgage loan. 

My data points:

TU: 712 (2)

EQ: 696 (0)

EX: 714 (1)

Comments: Just recently apply and got approved on CSR card (4/10/17). Card just got reported to all 3 bureaus with balance of $3850 (it is now zeroed). Had to meet 4k spent to get bonus points and didnt know it will report that fast. 

Wife:

TU: 758 (2) from Discover

EQ:  Unknown 750~ (0)

EX 762 (0) from AMEX

Comments: She got a car loan from US Bank in 02/17. 27k loan, 2016 Honda Odyssey brand new.

We just got our joint tax return for 2016 and we make 42k/yr 

We also have properties, 1 house and 1 3 families apartment that we are currently living in. 

House is worth : $130k~ from Zillow 

Apartment is worth : $160k ~ from Zillow

We will be able to put a max down payment of $150k or 27.27% towards a loan and I was thinking about putting one or both of the properties as collateral if that helps.

What should we do from here?

Thanks in advance! 

[ShanetheMortgageMan]

$42k/year of income isn't going to be able to qualify for a $400k mortgage.  The principal & interest portion of the mortgage payment would be more than 50% of your gross monthly income, then you have to factor in property taxes & homeowners insurance, the monthly payment could come close to your monthly income.  That is before factoring in the car loan and any other debt payments (like a credit card minimum monthly payment).  So, you are going to need additional sources of income. 

You mentioned you own two properties, are you renting out the house and/or the other 2 units in the 3-family apartment?  If so, and if you owned and rented them out in 2016, are you claiming the rental income on your tax returns (if you purchased them this year then you don't need to report the income on the tax return to be able to use it)?  If so, then you should be able to use the income from those properties to assist you in qualifying.

Another way to add more income is with a co-signer, which will mix their income & payments in with your income & payments to determine if you'd qualify.  Are there any family/friends who'd be willing to co-sign?

[man03999]

Thanks for replying, Shane.

42/k year is what our personal income. i do own a restaurant business (INC) which has it own income. I'm not sure if that helps me in any way so I did not include this. 

As far as ult Im at <1% for credit card payments as we do not carry balances on any of our cards.

Car loans, Total of $1000 per month, which I can pay off one of the loan if needed (10k balance left)

We currently staying in one property and my parents are in the other. I was thinking of renting both of the properties out to help with the mortgage (total rent would be around 2800/month)

My families would be able to cosign if needed. Total income would be around 80k. 

My plan is to rent both properties out and get a net income of $2800 per month, putting $150k as down payment plus both properties as collateral. 

EDIT:

Just found a second listing we like. Price is $460k and tax is around $9k a year on the property. Better chance?

[H-B]

Is the mortgage payment is going out from your parents account? if yes that can compensate your DTI. Line up all your liabilities so someone can calculate right dti  for you. 

[man03999]

Hey. Not sure what you mean by that. I dont have any mortgage payment. Only 2 car loans about $1200 a month with insurance. DTI is about 25%.

[dragontears]

The mortgage payment that H-B is referring to is the one you will have on a new house. I am really confused by your numbers. 42k/year is 3,500/month, a DTI of 25% means you have $875 total monthly debt obligations but you state 1,200 for cars, does that mean you are paying 325 for insurance?
What everyone is trying to tell you is there are limits on DTI a lender will loan, making 3,500/month and expecting to get a loan that has a payment of 2,000/month is not realistic

[man03999]

Dragontears, thanks for replying.

DTI is about 25% becuase I like to give it a little room. (I can also pay off one of the loan to about $600/month) Obviously I know it's not realistic for a person making 3500/month to pay a $2000 monthly mortgage. What I am trying to say is that, are there anyway I can include the apartment building Im going to rent out as a income when applying for the mortgage? Basiclly the rent is going to cover majorily of the mortgage payment. $150k cash down should ease up some of there concerns?

I'm have a appointment when Mortage Officer at BMO Harris tomorrow to discuss things as I have a business relationship with them. Maybe they can clear some things up for me. 

[StartingOver10]

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@man03999 wrote:

Dragontears, thanks for replying.

DTI is about 25% becuase I like to give it a little room. (I can also pay off one of the loan to about $600/month) Obviously I know it's not realistic for a person making 3500/month to pay a $2000 monthly mortgage. What I am trying to say is that, are there anyway I can include the apartment building Im going to rent out as a income when applying for the mortgage? Basiclly the rent is going to cover majorily of the mortgage payment. $150k cash down should ease up some of there concerns?

I'm have a appointment when Mortage Officer at BMO Harris tomorrow to discuss things as I have a business relationship with them. Maybe they can clear some things up for me. 

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I have found BMO Harris overlays to be restrictive IME. So if you don't get a "yes" from them, find someone that isn't a big box bank. 

I have seen income included from an apartment building (that you are purchasing) if you have rental experience on your tax returns. There may be exceptions, I don't know. This is one of those tricky areas where you need a very good lender that has a varitety of programs.