Need Your Thoughts on My Situation

[aceofspades25]

Hey All, 

I'm thinking (nervously, cold feet) about buying a house in the next 6-9 months but I know I have some hiccups to overcome and was hoping for some of your thoughts.  I am meeting with a real estate agent I know through a friend next week to talk over things with her but figured it couldn't hurt to get some opinions on where I may stand.

1. Credit - Clean, except for thinner file & new accounts in the past year year.  23% util, which I will sure to keep at 0% now that this is a thought.  No baddies, no collections, nothing of that sort.  Credit is about 730 across the board - I expect this to rise a bit once everything hits zero and my accounts continue to age.

2.  Income - this is the tricky part.  I'm a hair stylist, I get a W2 which includes (some) of the tips.  But when I say some, I mean very small amount.  Please save the lecture about my employer not reporting all tips.  Annually on a W2 my gross income is roughly 25k - I walk home every year with about another 25K in cash from tips/weddings/bonuses.  Most of this cash never makes it into a bank account, I use it for everyday spending, pay the dog walker with it, save the rest in a safe etc.  My mom, who has fantastic credit over 820 and grosses over 200K a year, is willing to be a co-signer for me on a mortage because of this - and I suspect I'll need her too.  

3. Salary is commision based, from my employer.  I switched from a hourly based pay to commision based pay in October, which has increased my gross income overrall.

4. Monthly debts: $485 car loan, 14 months in with PenFed PIF every month.  $71 a month in college student loans.  My DTI is low.

5.  Employment:  I have been employed by my current employer for almost 3 years total, but over that time I took 10 months off to finish school.  So I was there for 1.5 year, took 10 months off to finish school, have been back for 14 months.  

6.  I currenly have about 25K in savings to use towards a down payment, and will have about 10K more in the next 6-9 months (living with my mom so I am able to heavily save).  I do not want to use all of that money as a down payment if not needed.  I would like to (ideally) but 18k so I don't completely drain myself.  It is possible I may also be able to gift some money from my stepmom, probably 5K.

7.Fairfax County, VA.  Specifically want to be buying in Reston/Herndon area.

8. Two bedroom Condo or two bedroom townhome - one of which I plan to be renting out to a friend.

9.  Here's where I get lost, I'm not sure what I'm eligible for.  

10. Occupancy: primary residence, rent out one bedroom

11.  First time home-buyer

Thanks so much everyone, I look forward to reading your input!  Let me know if you need more information!

[BrianB_The_Loan_Professor]

Not much you can do now about the income - using your mother may be your only choice - 

#3 is the biggest re flag on here

Are you still w2? If not you may need to wait for a while until you can document two years worth of  commission based pay through your taxes

It is always easier to go from 1099 to w2 than the other way around -

Everything else looks fine - please elaborate on the current way you are being paid

Brian

[aceofspades25]

Still W2, always have been W2.  Even have a small W2 from the year I was in school - so I have three consecutive W2's from the same company.  Does that help?  Thanks!

[BrianB_The_Loan_Professor]

It should - when you say commissioned based it can get sticky -how does your employer report your income - how did they report it before - is there a difference

it may not matter much since you plan on having a co signer - it will impact how much income you can claim

B

[sr383]

Not sure why only some of us are obliged to pay taxes on our full income.

[aceofspades25]

I'm 99% positive is makes no difference in terms of gov't reporting.  The switch from hourly to commission based only mattered within the business (small privately owned) for their accounting.  I'm paid bi-weekly - each paycheck I pay the max amount of withholdings based on my "income", reported tips, and my retail commission.  I get a standard W2 with all withholdings claimed.  I'm wondering how much a bank will give out on a mortage loan.  This is all very new to me.   My mom owns her current home in Fairfax County, is about 10 years from payoff.

[BrianB_The_Loan_Professor]

This is a good thing - the issue is when you say commissions it can change how much of the income can be counted - 

for a person paid commission we can show the base pay but need a two year history of the commisions to average them out.

If they arent reporting any different it wont matter

as far as how much we would need all of the numbers 225k income but what are the debts etc....

if Mom is sitting on a smal amount of debt you will liely qualify for way more than you can afford on your own

You may want to look at it from a budget perspective - how much can you afford every month for housing - kep in mind this is Principal Interest taxes and Insurance and possibly MIP if you do not put 20% down - 

Hope this helps

Brian