Looking for last piece of advice before I buy/rent

[jmoore87]

Hi everyone,

If you've seen any of my posts, you'll know that I've been dealing with an underwater home, but my wife and I have been looking at moving upwards and onwards. We listed our condo for $22k less than we owe (ouch). We've got the money to cover it, so we'll be writing a nice big check at closing. It's been on the market for one day, and already we had someone come for a showing, and they're bringing their parents for a second showing tomorrow morning. This place might sell faster than I anticipated (and also thinks we may be listing it under-valued). Anyways, if I assume that this place sells in about 30 days, I'll be wiping out my bank account writing that check for closing, essentially eliminating any down-payment for a new place. If selling/closing takes longer, I have more time to save.

Anyways, it looks like FHA would be out of the question for me what with the down-payment requirements. Plus, I kind of don't want to support the program anymore with its changes to PMI. I really think they're alienating a lot of potential buyers and stalling market recovery. I started looking into a USDA loan. For the area we want to move to, with our salaries that we make today, we are over the income limit by about $6k (including the deduction for child care expenses). The last time I applied for a conventional loan, however, they averaged my last 2 years of income to arrive at my gross monthly income. Is USDA the same? If I average our last 2 years' income, we squeeze just under that limit (due to raises and such over the last few years). This would potentially open some doors for us.

Otherwise, if they go by what my current paycheck says, we are unfortunately over the limit. In that case, we'll just rent for 6-12 months and rebuild our savings. That's not a huge deal, since nice houses go up for rent around here somewhat often. Anyone have experience with how USDA calculates income?

[jzsnow]

We are also going usda. They do average the last 2 years, but, they mainly go by your current salary. They did average ours, and then asked for a lox explaining why the average and current is so different. In our case, my husband took a new job last summer increasing pay substantially. W have 5 kids so the income cut off is higher for us.

[jmoore87]

Thanks! I found some wording in their loan guidelines that say income is based on expected income over the next 12 months for eligibility purposes, but based on the last 2 years' income for repayment ability (DTI calculation). So, it looks like it's a little bit of both.

At any rate, I found that the next town over, which is in a different county, has a $10k higher limit, so we might be able to get approved for something really nice there.