Do I qualify?

[becontent]

Hello,

We’re looking to buy a home sometime next year in 2017.  I’ve completed the “Do I qualify for a mortgage template” to see where my wife and I would possibly stand both currently and in the future.  Please let me know if additional information is needed.

1.Mortgage Credit Scores:

From myfico mortgage versions tab:

EQ: 784 (Score 5) | TU: 736 (Score 4) | EXP: 730 (Score 2)

What are your fico MORTGAGE credit scores for each mortgage applicant?

Spouse – TU: 741 | EXP: 753 – sorry no EQ.

2. Credit Negatives:

N/A.

3. Gross Income.

Combined income: 100k

4. Source of income. Where is the income coming from? List each source.

Both Employed

5. Monthly debt payments.

Currently -

Car Loan: $407/month (16k balance)

Student Loans: Just me - Deferred 75k owed. No monthly payments, as I’m in Grad School paid for by my company.

CC debt: 10k on wife’s card, I’m an AU.

This debt may be paid by next year, please see # 7.

6. Employment (for those who are employed).

Type of employment: full-time

How long have you been on the job: Me: 3 years, Spouse: 5 years

How long have you been in the industry/career field: Me: 5 years, Spouse: 5yrs

7.Assets/Reserves. This is to determine how much you could potentially have as a down payment and also as reserves to help qualify (for example if your debt to income ratio is high this could help qualify you anyway).

Savings – 3k

Checking – 2k

401k – Spouse: 10k

IRA – me: 10k

403b – 2k

Gift – MIL is ready to gift us about $150k – 200k in the next couple months.  We’re planning to use this to pay off my student, CC, and car loan, leaving us with about a $50k balance for a down payment.  Or, we can pay off one of the loans and use the majority of money for a down payment, etc., I'm still thinking through on how we want to use this money... 

8. Location

State: California

County(s): Contra Costa County or Alameda County

9. Property Description:

Single Family Homes or Condo/Townhomes is what we’re looking into.  We know HOA will kick in if we purchase the latter, so average HOA around our area is about $300-$500 a month.

10. Property Value.

Anywhere between 450k to 600k

11. Occupancy.

Primary residence.

How many people living there, incomes even if not applicant, elderly, disabled. (Needed to determine eligibility for some programs): 2 adults, 1 maybe 2 children.

Are all mortgage applicants going to be living in the house? Yes

12. Transaction Type

Purchase

Some last things to consider, I have about 11 Experian inquiries on my report, 2 are falling off this year, and 4 next July, which would leave me with about 5 inquiries from April 2016.  Not sure if this would affect anything.  My wife has 2 from this year and has a pretty clean report from there.  I’ve read that inquiries don’t matter after 6 months or less, but any advice would be helpful. 

Thanks!

[Anonymous]

Hi there, neighbor - I am in Benicia. The only potential issue I see is your debt-to-income (DTI) ratio. $100k/year equals $8333/mo. Typically you want to keep all debts, including your mortgage, under 45% of your gross monthly income. 45% of $8333 is $3750. Let's subtract your monthly debts and see how much it leaves you for a monthly mortgage payment.

$3750

-$407 car payment

-$750 student loan payment (must count 1% of the balance unless you can prove what the future payment will be)

-$100 credit card payment (est.)

=$2493

Let's assume your gift will be $150,000. If you choose to use the entire $150,000 gift towards the home, you will be able to afford a $2493 mortgage. Subtract the $400 HOA and that leaves you with $2093 remaining for principal, interest, taxes, and insurance. This is right on the money for a $500,000 purchase price with $150,000 down, leaving you with a $350,000 loan amount (no mortgage insurance since you are putting 20+% down).

Now, let's suppose you will pay off debt with the gift money instead. Paying off the car, student loans, and credit card will take about $100,000 of the $150,000 leaving you with $50,000 for the down payment. This will leave you with zero debt other than your mortgage, and sometimes it is difficult to push your housing payment alone to 45% of your DTI if you have no other debt, so let's take it down to 42%, or $3500. If you pay off all of your other debt, you should easily qualify for a $3500 mortage payment (principal, interest, taxes, insurance, mortgage insurance, and HOAs). Let's assume you go 10% on a $525,000 home. A $525,000 purchase price with 10% down will give you a loan amount of $472,500 and a monthly mortgage payment of $3500 including the $400 HOAs.

To summarize, if you pay off all of your debts, you will qualify for a purchase price of around $525,000 with 10% down. If you choose to not pay off any debts and put all $150,000 towards a down payment, you will qualify for a purchase price of $500,000 with 30% down.

[Anonymous]

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