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Established Member
nvme
Posts: 35
Registered: ‎09-25-2011

Forgive me for the long post. Need help! First time buyer....

My fiancé and I decided to buy our first home in December and were referred to a mortgage broker by a friend. We submitted our docs and were preapproved for a $400k fha loan.  we live in New York and what you get your your money isn't much. you have to commute 2 hours away and pay staggering property taxes (10k and up) or stay in the city and pay more for home and less taxes. We finally found a home in the city and on a good block and put in offer right away.  we later found out the house is an estate Sale. 10 people are on the will and all have to agree to have the offer Accepted. There were also 2 offers on the house! After waiting for 4 days. All 10 sellers accepted our offer! After much excitement we scheduled an inspection for the weekend to later have it cancelled at the last minute due to the water not being on. Meanwhile, our broker is beginning our application and things begin to get crazy...

 

Quick Stats:

  • Credit - My middle scores: 659. fiances middle score: 741
  • Income- My salary is 66K And fiances is 40k. we both worked for our employers for 6 1/2 years each.
  • Source of income - FT Employment.
  • Monthly debt payments - $598 car/insurance payment, $100 in student loans, $1300 rent. $850 gets deducted a month from my pay to repay a 401k personal loan (not hardship) and gets paid off in July 2013. i opted for the higher payment to pay it off in 12 months.  $1500 in combined cc debt from Xmas which i intend to pay off in February. no past due debt payments. No kids or pets lol
  • Assets/Reserves.  About $5K saved . 44k in 401k combined
  • Location.  NY 
  • Property- Single family house, semi attached we put offer 2 weeks ago
  • Occupancy.  Primary residence
  • Transaction Type. Purchase

 

we resubmitted our financials to our broker to begin the application. 3 days later he tells me the underwriter wants to speak to me about my earnings. She calls and asks why I make good money but there's a discrepancy in the money from my check being deposited in the bank. I tell her the truth about my 401 k loan and let her know it will be paid off in July this year.  I also submitted my payroll contributions showing the interest earned and that I have access to the funds. After hanging up with her I felt so sick i figured we were denied. Honestly she really confused me and ended up baffled by the conversation. Lol. 20 min later, the broker tells me we were approved! We are to expect a commitment letter (?) with conditions I have to submit. He also told me I have to provide him with the realtors info to order an appraisal. He also said the loan processer (?) will help me gather the docs needed for the conditions.

 

my questions are:

 

can the bank order an appraisal before an inspection?

 

can I be denied a mortgage because I'm repaying my self back on a general 401k loan?

 

we don't have a signed contract because there's no inspection, so technically the house is still on the market. Can the sellers attorneys accept other offers after they accepted ours? The hold up is on their end since we need the water on to conduct the inspection...

 

I want to pay off the 1500 but that will reduce my savings and was planning to withdraw from my 401 for down payment. Should I withdraw or just cancel my loan payment of 450 and have it Back on my check And prolong the loan repayment?

 

what are the Conditions? do they vary? If so what do you think they will be?

 

I'm so confused, nervous, and in limbo. 

 

I know this is a lot but any info would be greatly appreciated!

 

Thanks!
NvMe
Valued Contributor
JM-AM
Posts: 3,303
Registered: ‎06-09-2010

Re: Forgive me for the long post. Need help! First time buyer....

New York New York.

What type of loan are you applying for?

Do you plan to use your 401k for down payments and such?

You having an inspection is for your benefit it has nothing to do with your loan process. Certain types of loans may request an inspection to make sure the home falls under their guidelines. Which is also for your benefit.

Yes they can have an appraisal done. With-out the appraisal you may pay for an inspection and the home is under appraised and wasted your money if the sellers do not come down in price. Unless you are going to pay Cash to make up the difference in price.

I do know the realities of a home and taxes in NY. I have a home in South Hampton. But on a personal note I believe because of the added expense with taxes you are putting yourself in a real tight situation if you are offering 400k for home purchase.

With a minimum down payment only being applied to your purchase price, you will end up paying 3/4 of your take home pay monthly or there abouts on a 400k loan. Just tack on your CC payment on top of that and you will be wondering what you were thinking when you bought that much home.

You really need to figure out the total expense involved.

House payment
Taxes
Insurance
General house expense, electric, water, gas, cell phone, etc etc.
Gas for cars to travel back and forth to work.
And anything else you have CC debt etc etc

Once you have that put together then you shop for how much you can afford and purchase accordingly.

In all reality it is you who has to make that decision, but personally if I was your Broker I would definetly go over the numbers with you. The sad reality of this is that many LO and Brokers dont really care. What they care about is there bottom line and how much they are making. Its why we have the crisis we have now in the industry.

Good luck with your decisions and I really do hope things will work out for you.
Good Luck
May all your dreams and wishes become a reality!
Established Member
nvme
Posts: 35
Registered: ‎09-25-2011

Re: Forgive me for the long post. Need help! First time buyer....

Thank you so much for your reply. We actually got an accepted offer for 40k below asking because its an estate sale. We're not purchasing the home for 400k, we were approved for 400k. The taxes are 3300 a year, we don't drive to work but take mass transit. Those costs are already deducted from our checks from a pre tax benefit we have at work. As far as the monthly expenses are concerned, we've already accounted for them and actually over esitmated and included additional life insurance on top of the regular insurance into our budget. My concerns are with the conditions in the commitment letter and the amount I'm currently allocating to my 401k. Should I keep the deduction of 425 a check to pay back the loan sooner, or just pay the minimum to have the more money back on my check? I actually budgeted the home expenses from the amount I get after the 850 a month is deducted.

 

Its an FHA loan, fixed 30 year. 3.5% down but we're putting 5% (not sure if that makes a difference). i was going to do a residential loan from 401k for dp, misc fees and am not penalized and have 20 years to pay it back.

 

The home we would like to purchase has income potential since the 1st floor can be rented at 1200.00 per the agent's assesment.

Its a semi attached townhouse. 1st floor has a bedroom kitchenette living room bathroom separate access. The upper two floors are 2 bedroom w 1 bath, kitchen lr, dr.

 

We're hoping that if we do get the home (fingers crossed) we can begin renting the first floor and have the tenant contribute to the mortgage and pay it down.

 

I'm just worried what the bank thinks of my repayment to the 401k

 

NvMe
Contributor
Blackhawks_girl30
Posts: 81
Registered: ‎05-18-2012

Re: Forgive me for the long post. Need help! First time buyer....

Are you sure you can change the loan amount?  I know when I borrowed against mine in the past that it said you could not change the monthly payment once you submitted.  I could send in extra money, but I was not able to actually change the monthly payment amount or terms.  If that was me I would keep paying that off and be done.  You don't want to put yourself too much in the hole of debt starting out.  The 401k should be used as a last resort loan, not as a savings account to draw against.  When I bought I had thought about using my 401k as a downpayment and had asked both lenders how this would be viewed.  One large bank said they would count this against my DTI ratio and the other one said they didn't since the funds were techincally mine so I believe this possibly varies by lender.  I ended up just cutting things out of my every day life to save my downpayment instead.  I wish you luck and I hope it all works out for you!  I know how nerve wrecking it can all be =)

Valued Contributor
JM-AM
Posts: 3,303
Registered: ‎06-09-2010

Re: Forgive me for the long post. Need help! First time buyer....

No worries I am glad you did your homework. :smileyhappy:

Your payments back to your 401k are fine. They re just included in your DTI.

You should be fine. When you get your conditions respond back as quick as your able to.

I see no real issues.

Good luck and enjoy your new home.
Good Luck
May all your dreams and wishes become a reality!
Established Member
nvme
Posts: 35
Registered: ‎09-25-2011

Re: Forgive me for the long post. Need help! First time buyer....

Wow I was unaware of the DTI issue. I really dont want to take a hardship. The guilt would kill me lol. We're both in our early 30s and really wanted to borrow as a residential loan to avoid the tax implications. Since we're using a mortgage broker I have no idea who the bank is. I did ask him if the utilizing my 401k would affect me and he said no since its considered reserves. I guess what I'm on the fence about is if the bank is viewing my current repayment to the 401k as a debt. From what I understand I could reduce the payment but it would extend the loan repayment for a longer period of time. Maybe I misunderstood the information that was given to me. Since the car and loan will be paid off in July I rather stick it out and be done with it too! Thank you for your reply.

NvMe
Established Member
nvme
Posts: 35
Registered: ‎09-25-2011

Re: Forgive me for the long post. Need help! First time buyer....

Thank you JM-AM. After past credit woes in my early 20s, I refuse to not stick to a budget and vowed to never ruin my credit again! I'm really nervous about it but if its meant to be it will be. Thank you all so much for your input. As soon as I receive the conditions I will submit them ASAP. Just wish us luck guys! Stay tuned...

 

 

NvMe
Regular Contributor
cclee
Posts: 223
Registered: ‎08-10-2012

Re: Forgive me for the long post. Need help! First time buyer....

I thought FHA didn't consider 401k repayments in the DTI?  Has that changed?  Or am I thinking of something else? lol



In The Garden Until 11/01/15 - Last App 11/03/13
Established Member
nvme
Posts: 35
Registered: ‎09-25-2011

Re: Forgive me for the long post. Need help! First time buyer....

I thought that too cclee. If so, I'm up ****'S creek! lol.:smileysurprised:

NvMe
Valued Contributor
MovingForward_2012
Posts: 3,406
Registered: ‎12-19-2012

Re: Forgive me for the long post. Need help! First time buyer....

Putting the extra 1.5% down is really not going to make a big difference in your monthly payment and you are still going to have to pay PMI. So I would save that extra money as reserves.

I'll tell you my story. I just took out a 20 year residential loan at 3.125% interest out of my 401K. The amount was for $5,300 and the weekly payment out of my paycheck is $7. I wanted the payment as low as possible so we could use those additional funds to get used to the additional expenses of owning a home. You have a lot of money coming out of your 401K that I couldn't do and I am buying with similar income and a similar home price. I make $96,000 a year and we are about to close on a $347,900 home. Our monthly payment will be $2460 a month, which includes property taxes, homeowner's insurance, PMI, and interest (4.125%). That payment amount is a little less than two full pay checks for me and I get paid weekly. What I plan to do is put 1/4 of the mortgage payment in a savings account every week to help ease the payment shock.

Your payment is going to be at least that amount if not more. And since your full income went into determining how much house you can afford, I would have your full income at your disposal to help you get adjusted to the higher monthly payment.

Once we are settled and the PMI begins to shrink, we plan to put the savings of that into a separate account and build it up to the remaining balance on the 401K loan and then pay it off in full as required. I am not allowed to overpay my loan by anything under 100% so I have save up the full balance to pay it off sooner, hopefully in 10 years.
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