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First Time homebuying questions re: approval, current debt, etc.

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Anonymous
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First Time homebuying questions re: approval, current debt, etc.

My husband and I have been married 7 years. We are a US military family currently living overseas, due to move back to the States January 25th-ish. My husband will have 30 days of leave before he reports to his new command. We are moving back to Virginia where we lived before this tour.
 
1) I am curious at how long this process is going to take. I hope to be prequalified in January and fly home around January 7th to begin shopping, and then figuring out my top five favorite houses. Then, when DH comes home he can take a look at them and give me his input. I would like to be completely closed by February 25th if possible....
*******how soon will I realistically need to start the process to make it happen "in time"?********
 
It would just be best if everything is settled before he reports to his new command. Folks back in VA have told me there are tons of houses on the market right now and prics are continuing to drop, so we should have lots to choose from.
 
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2) We already spoke with Navy Federal Credit Union and they pre-qualified us for $310,000 or so. We know we can't afford that much, we're not really sure how much we can afford. It seems like $250,000 is the minimum to get anything decent.
 
********How long does the pre-APPROVAL process take?********* I know the letter is only good for 60 days so I want to get the timing right.
 
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3) Our financial picture: We have paid off a significant amount of debt in the last couple of years, but we are down to 2 credit cards/loans each.
 
-DH: 1 CC for $7K, and 1 for $1K (which will be paid off before we apply), FICO scores are 688, 662, 676 (pulled today, but expecting a small increase after the last round of dispute letters). Makes $28,000 gross with an additional untaxed $1,200/month or 14,500 in housing allowance.
 
-ME: 1 CC for $6K and 1 student loan for $19K. FICOS around 725, 719, and 678. (again waiting for some dispute letters to clear before pulling again, there are still a few errors on mine as well). I gross about 35K a year BUT I am getting ready to leave my job when we move and attempt to find another otherone, but who knows how long that will take or what my next income will be.
 
*********So, all together we pull in about 77K a year (no kids). Are we in a good enough financial situation debt-wise that a bank will approve us for a loan? For how much do you think? Will the bank still take my income and credit reports into consideration if I am not currently employed when we apply/sign the papers? Would we be better off to apply and buy in December if/when I go back to the States and pick something out by myself (which I don't really want to do, I'd much rather prefer my husband there too), just so we can get the paperwork in while I am still legitimately employed?********
 
Thank you for reading this far, I am sure I have a bunch more questions but these are the biggest ones on my mind right now, I can't wait to hear your expert opinions!


Message Edited by Monarch81505 on 10-29-2007 11:26 AM
Message 1 of 5
4 REPLIES 4
ShanetheMortgageMan
Super Contributor

Re: First Time homebuying questions re: approval, current debt, etc.

Welcome to myFICO.com forums.
 
#1  It takes anywhere from 3-6 weeks to close on home, from the time you've made an offer to the date you walk into the attorney's office and sign the final paperwork, with most closings taking about 4 weeks.  Depending on what you are looking for in a home and what homes are available, it could take as little as a couple weeks to find the home you want to make an offer on, up to several months.  For my wife and I it took 4 months to finally decide on the home we wanted, there wasn't a ton of inventory like there is today, but there was still plenty of homes for someone less picky than us to find the home they would like in a much shorter period of time.  These days you can find the home you want over the internet, Realtor.com has a very wide selection of homes to choose from... but ultimately I recommend you contact a real estate agent before you consider making offers or finalize your list.
 
#2 The pre-approval process shouldn't take much longer than 2-4 days, with most lenders doing it closer to the 2 day mark.  Navy FCU is about the middle of the road, I've heard some people say they take awhile, whereas others say it's been really quick, it all depends on the level of volume they are going through at the time.  The pre-approval process should just be filling out a complete loan application (which you've probably already done, or partially done, to get the pre-qualification), and supplying income/asset/down payment verification... then an underwriter at Navy FCU (or wherever) would review everything and then issue a pre-approval.  I really suggest doing this as soon as possible, the pre-qual doesn't use much logic (like in the situation where you are changing jobs and might/might not have one by the time you are ready to buy), and usually is just reviewing the information you submitted online.  Most pre-approvals are good for 120 days, although each lender will have it's own time limit on them.  Being pre-approved essentially makes you a cash buyer in the eyes of the seller, so making offers on a home with a pre-approval letter in hand is definitely recommended.
 
#3 From the numbers you've laid out, your husband would have about $60,500 in qualifying income, as non-taxable income (it must continue when he moves to the U.S.) can be grossed up by 125% when qualifying.  You will need to be employed in order to use your income, towards the end of the loan process the lender performs a verbal verification of employment to make sure you are still there.  As long as you are on the loan they will consider your credit, but if you aren't employed then you wouldn't be contributing much to qualifying (other than any assets you have in your name alone).  If that is something you are concerned about, not being employed when qualifying, then getting pre-approved & buying earlier might be the best route to take (you'd have to compare that to waiting for your husband).  Your husband might also be able to qualify for the home on his own as well, it depends what his debt to income (DTI) ratio would be... what is the minimum payment on the $7k credit card?  To determine the DTI you take the total monthly expenses (new housing payment + the minimum payment on the credit card) and divide it by the qualifying income ($60,500 in his case), you might need the help of Navy FCU or a lender/broker to determine what the anticipating housing payment would be.  Housing payment includes the principal & interest payment, property taxes, homeowners insurance, and any homeowners association fees the new home might have.
 
One client I helped in a similar situation (husband was working in Iraq for a contracting company while the wife was in the states) the wife took a video camera through each home, and then emailed a .mpeg file to the husband so he can review the homes online like he was actually walking through them.  You never know as well, you might find out that securing employment back in the states would be easy to do and then would be able to wait for your husband.  With websites such as monster.com, careerbuilder.com, and jobster.com you might be able to find employment before you even return to the states.
Free Mortgage Advice & Pre-Approvals (FHA, VA, USDA, Fannie, Freddie, Non-Prime, Construction, Renovation/Rehab, Commercial) since 2002
Located in Southern California and lending in all 50 states
Message 2 of 5
Anonymous
Not applicable

Re: First Time homebuying questions re: approval, current debt, etc.

To Blow Shane away - I've closed an FHA purchase in 11 days BUT the house was vacant and my buyer had his act together in getting everything to the mortgage company the next day.  If I remember correctly it took 2 days to find the house so 13 in all.  I had to call in a couple of favors on that one!
 
A mortgage lender can also add into the DTI mix 'trailing spouse' income...just don't quit your job unil the last possible minute and be looking on the net as SHane suggested.  .  If you can line up a job before PCSing - even better. Did that a few times and since I was staying in my field - no hit to the DTI with my contract/offer in hand.
 
Double check BAH - it should adjust in January.  BAH amounts are public info - so the lender can adjust as needed.  New pay rates should also kick in in January - if they are adjusting - so check that also.  I don't really keep track anymore since DH is retired - and we both still work.




Message Edited by Lady_Scarlet on 10-29-2007 07:54 PM
Message 3 of 5
Anonymous
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Re: First Time homebuying questions re: approval, current debt, etc.

very good info, especially on the timelines and how long I should expect things to take. Thank you!
 
Yes, I am currently looking for a job and hope to have something lined up.
 
My husband's monthly payment on his higher CC is a minimum of $210. My student loan payment is $236 a month and my CC payment is $150. No auto loans or any other payments.
 
Will $4,500 be enough on hand to cover 'incidentals' if the closing costs are rolled into the mortgage?
 
And yes, we should get an increase in BAH and both of us should get a small raise as well with the new year. If he'd just hurry up and make 1st class already there's some more money there too just waiting to be had....we're waiting for results and I'm antsy, but I know it takes forever to see the money anway Smiley Happy
Message 4 of 5
ShanetheMortgageMan
Super Contributor

Re: First Time homebuying questions re: approval, current debt, etc.

Your husbands debt to income ratio on a $250k home looks decent, not great, but low enough to qualify (estimated at around 45%)... the debts only in your name wouldn't be included in the calculation since you aren't buying in a community property state.  Closing costs can't be included in the loan amount, however you can ask the seller to pay for them by writing it out in your offer... just ask "seller to pay up to 3% of the sales price in settlement costs", there probably is a space in the normal Virginia purchase agreement for that.  If the seller balks (which in this market isn't as common as it was when it was a seller's market) then you can ask for an increase in the sales price to get them to contribute.  For example let's say the home is $250k and you want them to pay $7,500 (3% of $250k) in closing costs, you'd offer $257,500 so the seller woudln't feel like they are losing out.  I'd work with your real estate agent on that though, where you are buying in Virginia it might be very common & typical for sellers to pay buyers closing costs these days.
Free Mortgage Advice & Pre-Approvals (FHA, VA, USDA, Fannie, Freddie, Non-Prime, Construction, Renovation/Rehab, Commercial) since 2002
Located in Southern California and lending in all 50 states
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