Questions regarding upcoming mortgage app

[dursty87]

Hey all,

I was planning on waiting til the end of the year to apply for a mortgage (and may have to depending) but things have changed and I really would like to purchase now rather than rent for another year.  Hopefully some of you can help me out and point me in the right direction regarding some things.

I am looking at purchasing a house around $140k with 10% down so the max I guess I would finanace would be around $125k.  The year has been a little hectic in the fact that I had to take a personal leave of absence from my current employer that I have been with for almost 7 years due to some family medical problems in another state.  I left in March 2014, started working for a new company April 1st 2014, left Nov 2014 and moved back across country and came back to the same position with my current employer.  Between relocating 3,000 miles away each time I lost about a month worth of work/pay.  Luckily for me my income was roughly the same for both 2013 and 2014.  Is the gap in employment (2 weeks there, 2 weeks back going to be a problem?

Another question I have is regarding bonus pay in regards to counting towards income.  In 2013 I bonused $12k and in 2014 between both jobs I bonused a little over $8k.  How will this be calculated towards income?  Is it based on an average?

Last but not least - when I came back to my current employer once my family was better, I moved back to a different state than where I was previously living.  I was given a $3000 raise to basically off-set state tax I would be having to pay.  Now I am moving back to where I originally was located and I am going to be losing that $3k.  So my base salary is going from $48-$45k.  Is that a bad thing?  Will I be OK to apply for a conventional loan?  My current mortgage mid score is 689 per this site.

Other info-
Looking to purchase in Orange county, FL(I hear it's a buyer's market!)
2013 income was $58k, 2014 was $57k(both including bonus)  My 2015 income should be roughly the same
Current monthly debt obligations is $870

Thank you in advance!

[StartingOver10]

Well, whoever told you Orange County Florida is a buyer's market isn't up to date.  It is most definitely a seller's market - properties are selling fast and for full price and for much more than they were selling a year ago.

I stay on top of that market because I am south of there about 2 hours and it is common for people to move from my area (Palm Beach) to the Orlando area.

As to your income, since you are w-2 type income they will use your base salary ($45k) to qualify plus the average of your bonuses for the past two years.

Your debt is high relative to your income ($870) Is that all credit card and installment type debt? Or are you including payments in that debt that don't show on your credit report? (cell phone as an example).  With your current debt it looks like you qualify for a max payment in the neighborhood of $1420/month (principal, interest, real estate taxes, homeowners insurance, mortgage insurance and HOA/condo fee if applicable).  That is assuming you go FHA and have a max back end ratio of 50% and also assuming they average your bonus income over the past two years bringing your gross income to $55k and not just allow your base of $45k. 

$1420 is tough with our insurance rates here. Doable, but not easy.

[dursty87]

Thanks for the response!

I called NFCU and asked them the same questions I asked here. Since I plan on trying to get a mortgage with them I figured it was the best course of action.

They confirmed they will average the last 2 years for bonuses. Also, I'm looking at a 30 Yr conventional loan not FHA. I really don't want the PMI. The max I would borrow is 125k so I think I will meet the DTI requirements for conventional right?

Once again thank you for responding.

[StartingOver10]

Ok, then the back end ratio would not go to 50%. Did NFCU tell you what the max payment would be? Conventional ratios are lower than FHA. With your proposed purchase price it should be fine. If the max back ratio is 43% then the max payment would be approx $1100/month. Naturally your LO would be able to give you figures based on their guidelines.

The only thing I see that could hurt a bit is our HOI rates here. Check out Florida's Wind Mitigation reports and what will help lower your premium so you can fit within that payment. Do some research on what items in your home will reduce the insurance premium (roof shape, roof age after 2002, hurricane shutters etc). This way when you are looking for the right place you can keep those factors in mind. Here is one link to help you get started on your research http://www.floridadisaster.org/mitigation/documents/wind%20mitigation%20booklet%20.pdf

[dursty87]

Thanks again for the reply.

According to NFCU they prequalified me for a loan up to $16xxxx based on my income and DTI which I know means absolutely nothing. However, today I went ahead and applied and was pre approved for what I asked for - purchase price of $145k with loan amount of $130k. I have $25k in cash to put towards down payment and closing costs. Weird thing is they didn't ask for any documents (pay stubs, etc) but they did pull my credit because I immediately received alerts from CK and CS. Is that normal for them to issue a pre approval without any documents? I mean everything I gave the person on the phone is what my tax returns and pay stubs show so I'm not worried there.

[frugalQ]

What they actually gave you was a pre-qualification. Meaning you meet their requirements based your credit score and the info you provided to them.

A pre-approval will happen once you submit documents and they are verified.

Congrats!!

[dursty87]

Thanks!  I am already confused - So this is not an actual pre-approval letter?  

MORTGAGE LOAN PRE-APPROVAL
Dear XXXXXXXXX,
Navy Federal Credit Union (NFCU) is pleased to advise that based upon the information provided and a review
of your credit, you have been pre-approved for a mortgage loan subject to the following terms and conditions:

Sales Price: $150,000     Loan Amount: $142,500

Type of Loan: Conventional Fixed Rate

1. Final underwriting approval
2. Receipt of satisfactory appraisal and fully ratified sales contract with all attachments/addendums
3. Standard settlement conditions

This pre-approval is valid until 08/14/2015  Any change in the information provided may require a re-evaluation of your loan request.

Please note that loans that require private mortgage insurance are subject to independent approval by the
mortgage insurance company.

Navy Federal Credit Union is pleased to provide this service to you. Upon ratification of a sales contract, notify
your Loan Officer in order to complete your loan application and make arrangements for settlement.

[dursty87]

So it's been about two weeks since I was issued my pre-approval.  I have tried contacting my LO multiple times and still get no response(well I did once but it took 5 days).  I am only calling to ask some basic questions - is that not OK???   I am not impressed with the level of communication at this point.  Also, looking at the closing costs/interest rate they seem to be really high - would it be a good decision to try getting a pre approval with another lender?  I do all of my banking with NFCU which is why I wanted to go with them.  But I am already starting to second guess my decision and I don't want to wait until it's too late....

[StartingOver10]

Yes, get an pre-approval from another lender. If you can't get in touch with him at this point of the process it will be a nightmare as the purchase progresses. Your LO is a very important part of your purchase.