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Is there anything I'm not considering/thinking of?

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ccsauer
Contributor

Is there anything I'm not considering/thinking of?

  1. Credit.  On this site, I'm showing a 825 equifax, my wife is showing up as 849 experian
  2. Income.  Wife: 50K tenured classroom teacher, 9 years in the same position. Me: 71K Engineer. Had 4 years with the same company, but hit with layoffs in 2010, struggled with no experience in what i wanted to do with my career, had a couple short-tenured stints with 2 other jobs, but in May of 2013 found footing with a consulting Engineering company. Since then, have gotten my P.E. License and a significant raise up to 71K. This does not count overtime or bonus potential with this job.
  3. Source of income.   Employment
  4. Monthly debt payments.  2 car loans, one at $393, one at $363. We also have out current mortgage, but before we buy, this will be knocked off.
  5. Assets/Reserves.  $0. After the unemployment, we have since paid off all revolving debts and are hittign our stride into the black. The house is worth about $12K less than what we still owe on it; we bought at the peak in 2007 for $295K and we still owe $252K and it's worth around $240K.
  6. Location.  Chicagoland suburbs
  7. Property.  Single family house.
  8. Value. 400k-600k?
  9. Occupancy.  Primary residence
  10. Transaction Type.  purchase
  11. Extra info: We have 2 kids, so we have daycare payments, too

We live in an acceptable area of the suburbs, with acceptable schools, but to get to an amazing area that my wife and i both grew up in, safe, with amazing schools, we'd have to spend between $400-600K. I would PREFER to go higher rather than lower, only because at a constant property value % increase, a higher cost equals higher returns in the long run. I also have a hard time believing we can upgrade the house we live in by much at only $400K for where we're looking.

 

So, here's the plan I've had: In 4 years from now, the cars will be paid off anf the daycare will go down to $0. In that time, my wife has a schedule of salaries, so i know she'll be making about $400 more per month, and at 3% raises, I'll have $600 more, up to around $80K/year. That is assuming I don't take a job closer to home with another consulting engineering firm, some of which have been calling me recently, which could put my salary closer to 90K, but I certainly don't want to plan based on that information. We will have, according to my calculations, about $65K saved, and assuming a moderate 3% increase in the value of our home up until then, including the principal paydown on our monthly mortgage payment, we should have about $25K equity in our house, taking out the cost to sell the house.

 

Now, in 4 years, with the higher salary, and assets, but lower APR and higher housing prices, my wife and I have, sadly, accepted our fate that our buying power will be significantly lower than it is today, since we have no assets.

 

However, after a conversation with the in-laws, they mentioned they might be able to help. (aka, an early-inheritance-type gift)

 

So, considering the $12K hit on the current house, the (what, maybe) $16K it takes to sell a house, $25K average downpayment for the houses we're lookign at, and the $7K? closing costs, Anything less than $60K doesn't really help us...which kinda sucks.

 

So...what am i not taking into consideration that might ease the total that we'd have to "ask" for from the in-laws? I could refinance the car and get $4K out of it and reduce the monthly payment by almost $100/mo freeing up some loan space and some cash. I could actually work some extra hours at work for some overtime, but it wouldn't show up on the paperwork for a while.

 

What am I missing? are my estimates for cost to sell/closing costs too high? just right?

 

Thanks!

Message 1 of 6
5 REPLIES 5
ShanetheMortgageMan
Super Contributor

Re: Is there anything I'm not considering/thinking of?

Right now if you could sell your home + put 10% down on a new home, $465k sales price with conventional financing should be doable... your loan amount caps out at $417k since Chicago isn't a high-cost area according to Fannie Mae/Freddie Mac.  You can go above a $417k loan amount but usually 20% down would be needed.

 

So it's really going to be your down payment which limits what you can qualify for.  Because if you had 20% down then even a $550k sales price should be possible.  Most non-conforming jumbo (over $417k loan amount) programs usually don't permit gift funds though.. so you may be stuck at the $417k loan amount for a little while, and getting gift funds or your own funds to bridge the difference between that and the sales price you'd be buying.

 

Closing costs will be higher than $7k... with the expensive Chicago property taxes, you could probably figure around $12k for total settlement costs including the escrow account that'd need to be set up.

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 6
ccsauer
Contributor

Re: Is there anything I'm not considering/thinking of?

Shane (or anyone else) -

 

BoA has a piggyback option I was looking into, for the first loan under the jumbo limit and the second loan to make-up the difference, up to 95% LTV. If that is possible, and the second rate isn't crazy, $500-550K should be doable, right? Also, that should take care of the gift funds situation, as long as it is well-documented, right?

 

As for the costs, I was tryiing to think about it as costs without the escrow situation. I figure (and correct me if I'm wrong) When I sell my house, there will be the costs of me setting up the escrow for the current liabilities before the closing on that property that will go to the buyer. When I, then, buy, hopefully the seller will also be setting up the escrow for the liabilities before I moved in, so maybe there won't be that huge chunck, and maybe that will actually exceed the amount of the selling transaction...thoughts? Obviously, amybe I shouldn't count on that, but I figured that's how it would probably go.

 

As I think I mentioned, I just want to try and minimize the gift amount fromt he in-laws, and maximize the risk on my family, not the extended family.

 

Anyway, thoughts on teh update?

 

Message 3 of 6
StartingOver10
Moderator Emerita

Re: Is there anything I'm not considering/thinking of?


@ccsauer wrote:

Shane (or anyone else) -

 

BoA has a piggyback option I was looking into, for the first loan under the jumbo limit and the second loan to make-up the difference, up to 95% LTV. If that is possible, and the second rate isn't crazy, $500-550K should be doable, right? Also, that should take care of the gift funds situation, as long as it is well-documented, right?

 

As for the costs, I was tryiing to think about it as costs without the escrow situation. I figure (and correct me if I'm wrong) When I sell my house, there will be the costs of me setting up the escrow for the current liabilities before the closing on that property that will go to the buyer. When I, then, buy, hopefully the seller will also be setting up the escrow for the liabilities before I moved in, so maybe there won't be that huge chunck, and maybe that will actually exceed the amount of the selling transaction...thoughts? Obviously, amybe I shouldn't count on that, but I figured that's how it would probably go.

 

As I think I mentioned, I just want to try and minimize the gift amount fromt he in-laws, and maximize the risk on my family, not the extended family.

 

Anyway, thoughts on teh update?

 


The escrow is set up simultaneously with the first loan on the new property. Depending upon the cost of your taxes and insurance and the month in which you close, you would have  several thousand dollars set aside for your escrow (also called impound).

 

The escrow (impound) account for the current property is returned to you 30 days after closing. So you have the right to those funds, but you don't have them in hand from a practical point of view if you are selling the current home and purchasing another one simultaneously.

 

As to the gift funds, you can work your figures and return an amount voluntarily to your in-laws after closing. Borrowing down payment or closing costs is prohibited, but a gift is not prohibited at all. Returning part of the gift is not prohibited either if you decided to do that after closing as it is a voluntary thing and not required.

Message 4 of 6
ShanetheMortgageMan
Super Contributor

Re: Is there anything I'm not considering/thinking of?

You'd have to inquire with BofA if their 2nd mortgage guidelines permit the down payment to come from gift funds.  2nd mortgage programs usually have different guidelines than 1st mortgages, and they aren't all uniform.  However if they do, then 95% financing could certainly be possible with the 1st mortgage up to $417k and the remaining financing on the 2nd mortgage.

 

As StartingOver10 mentioned, the escrow account follows the borrower and not the property.  If the first mortgage loan-to-value doesn't exceed 80%, then an escrow account isn't needed to be set up (unless for other compliance reasons it would, or the 2nd mortgage requires it to be set up for some reason).

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 5 of 6
ccsauer
Contributor

Re: Is there anything I'm not considering/thinking of?

Thank you for all your information...I hope to get more information out of BoA this week, and then finally sit down with the in-laws and see if any of this is possible!

Message 6 of 6
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