Low income, big bank balance

[axxy]

What if your bank balance is three times your annual income, but your annual income isn't enough to qualify for much of a mortgage?

Does it make sense to get a mortgage to buy a house that costs 50% more than your bank balance?  Or is it better to find some other way to get that 50%?  Such as, to use 0%-for-1-year balance-transfer checks, and pay them back when you sell your previous house?  This is with credit scores around 800.

[tooleman694]

If my Bank balance was 3 times my income I would pay cash for my house.

[drkaje]

I'm guessing an odd situation like that wouldn't match up with DTI guidelines to make underwriting happy. Most places would need proof that one's income could support the mortgage.

[n0smirc]

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@axxy wrote:

What if your bank balance is three times your annual income, but your annual income isn't enough to qualify for much of a mortgage?

Does it make sense to get a mortgage to buy a house that costs 50% more than your bank balance?  Or is it better to find some other way to get that 50%?  Such as, to use 0%-for-1-year balance-transfer checks, and pay them back when you sell your previous house?  This is with credit scores around 800.

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I think we need to quantify this, as to make it a little clearer.

Say your income is $30K annually.  This means you have $90K in the bank. The house you want to buy is therefore $135K (since you said it was 50% more).

You currently own a house which you have some unstated equity value in (hoping that when you sell it you don't come out in the red). With the stated scenario, you have no MI, might be able to go for a 15-year mortgage and still come out of this transaction with a very comfortable cushion in the bank. There's a lot of ifs in this scenario and it depends on how fast the other house would sell. I would talk with a lender to go over the specifics but I don't see why you couldn't get a mortgage.

[axxy]

For the sake of discussion let's assume these figures:

Annual income, $24,000.

Bank balance, $72,000.

Present house worth around $70,000, with mortgage paid in full a long time ago.

Cost of house wanted, between $100,000 and $130,000.

And let's also assume the present house will take six months to sell after moving in to the new house.

Given the above figures, and lots of 0%-for-1-year credit card checks (having around 20 credit cards, with six-figure available credit, and Score Watch score of 808) would it make sense to use the credit card checks to make up the difference between the bank balance and house cost, then pay them back from selling the old house?  Or would it make more sense to apply for a mortgage?

The things that make me want to apply for a mortgage are that at any one time there are only a limited number of credit card check offers offering 0%, which might not be enough to cover the full cost, and that if I have a mortgage, inflation might help pay part of it.  But, in addition to 0% offers, I also get 1.99% offers, etc.  But even for the 0% offers, I have to pay a fee, such as 3% of the total amount.

[tooleman694]

Looks like you have the cash to pull it off after you sell your house.

[axxy]

Selling my house is not something I want to do before I close on the new one.  I don't want to take a risk that something will go wrong and I will end up without any house.

[tooleman694]

What could go wrong, if you have the cash in hand you just buy it.

[StartingOver10]

Don't do the cash advance for credit card offers to purchase your home.

When you put down a substantial down payment, your LTV naturally is much, much less than those that are borrowing >80% so you are much less of a risk to the lender

So your file will show that you have compensating factors: 1) substantial down payment that you can document 2) housing payment that you can show you have not only successfully paid but in fact have paid off 3) you have demonstrated an ability to accmulate savings (must show proof) and a conservative use of credit plus you can show substantial reserves

There are other factors, but the underwriting essentially gets much easier when you put down more than 35%.

Check with mortgage bankers and they should be able to get you financed even with your current residence. Make sure to let them know you plan to sell within X months.