Should I Consider a Mortgage?

[kwoods1]

Hi!

My original plan with my husband was to start looking for a home at the end of this year and maybe purchase by mid-2012.  A short sale opportunity has come up that might be hard to pass up.  Can anyone advise whether it would be okay for me to start the process if we decide to move forward?  My situation is.....

Income: $130k

Credit scores:  EQ (FICO) - 690, EX (FAKO) - 739, and TU (FAKO) - 881

My biggest concern is that I recently applied for and was approved for several credit cards in the last few months (starting in August 2010 and the most recent in December 2010) so I have a number of inquiries on my credit report. 

The house we're looking to purchase, we'd likely make an offer of $250k - $275k.  I am currently paying a mortgage of $118k, which would continue even when we move to our new mortgage.

Any advice would be greatly appreciated.  Please let me know if there's anything else that I can add.

Thanks!

Krishna

[Anonymous]

Hi Krishna,

Deal that are too good to pass up shouldn't be passed up. 

We don't look at your number of inquiries.  Those are already factored in score.  Do you have significant other monthly debt?  Otherwise I can't see how DTI would be a problem. Were you concerned about anything in particular or was it solely the inquiries?

[kwoods1]

Hi!  Thanks for your reply.  I have student loan debt which is probably $60k all in.  I make payments of about $659 each month.  No credit card debt (PIF every month).  If it's easier, I can PM you any information that you'd like and you can give me an idea of what I'm in for   I really appreciate your help.

[kwoods1]

Hello again,

So I think we're going to make an offer on the house.  Since it's a short sale, I was told that this could be a 6-9 month process.  Does this mean that the mortgage process wouldnt' have to start for 6-9 months as well?  This would actually work in our favor as we were hoping to delay until early - mid 2012.  Thanks in advance for any advice given!

Krishna

[ShanetheMortgageMan]

In the past year or so short sales have gone much quicker, but it all depends on the logistics of the transaction, how many lenders are involved approving the short sale, if they can agree to the same figures, etc.  Average time is about 3-6 months if no previous short sale offer has been approved by the lenders, if it has then it may only take 1-2 months for the short sale lender approval.  You would likely need to get pre-approved now, and then once the short sale lenders approve (which could be months down the road) update your information with the lender/refresh the approval and then things will kick into high gear at that point.

[kwoods1]

Thanks so much for the advice, Shane!  I've read many of your posts and you always offer great advice.  The only reason I was wondering if I should wait a month or two for preapproval is that my EQ FICO score is 690 (I think mainly due to recent new accounts opened).  I also have one baddie that should fall off in March, which would make my EQ report squeeky clean.  However, if I can get good rates right now with my current scores, I would go ahead and get the pre-approval now.  I'd hate to miss out on this house by waiting, but at the same time, the boost in score if the baddie falls off poses my dilemma. 

My second question would be are piggyback loans still available and do you think I would qualify with my scores?  As we were anticipating waiting to purchase a house, most of the downpayment has been saved, but I'm not sure what closing costs, inspection, etc. might be.  We would be able to swing it, but I would prefer to have some reserves left over just in case there are any unexpected costs associated with the short sale.  Our real estate agent has advised that we hire a lawyer specializing in short sales to assist in the process, which is one item I hadn't counted on.

Again, thank you for all your help.  I don't know what I would do without this forum!

[ShanetheMortgageMan]

If your score increases/credit report changes and it'd result in better terms then the lender should be willing to re-pull.  You wouldn't lock an interest rate in until you have short sale approval anyway, so you'd just have to float with the market, and by that time your initial credit report pull would be nearing expiration and another credit check would be needed anyways.

Piggyback loan availability will depend where you are located.  For the most part 2nd mortgage lenders are still afraid of the real estate market, so they limit the maximum combined-loan-to-value (CLTV) anywhere from 65-80%.  If you are in a state that had big price drops (CA, AZ, NV, FL, MI, OH, & similar) then it'll be less likely that you'll find 2nd mortgages going to higher CLTV's.  Over the past few months I've found 2nd mortgages going to 90% in TX, VA, DC, KS, NE and OK... mostly areas that didn't have big price drops (other than DC/VA, can't figure that one out).

As far as figuring out what your costs will be, if you are getting the recommendation for an attorney then your state probably uses attorneys to handle drawing up the purchase contract.  There is a cost for their representation, but it's worth it unless you know what you are doing.  However your loan officer who helps you get pre-approved should be able to let you know what type of closing costs to expect, and the other costs would be that attorney, a home inspection (usually about $300-400), the appraisal ($400-500), and then anything that is related to the short sale, so it is probably good to estimate around a few thousand for the random stuff to give yourself a cushion.

[kwoods1]

Thanks so much.  I'm looking in NJ.  If they will allow it, the plan would be to do a piggyback loan and then pay it off within a few months.  Since were hoping to buy early mid-2012, by then I will have saved the downpayment and expenses we have needed, so I would just continue saving as if we were going to make the purchase then and then pay off the piggyback portion early.

I appreciate the advice on the mortgage costs.  It seems as though these days purchasing a house is like having a part time job!  Thank you again and I'll keep you posted on our progress.

[kwoods1]

Hi, just as an update.  I found out that the house we are looking at is eligible for something called the HomePath mortgage, which entitles us to put 3% down and no PMI (I think it's embedded in the interest rate).  I've read a few posts about this type of mortgage, but does anyone have any recent experience?

[kwoods1]

Hi,

Just to update.  We made an offer on a short sale that was accepted by the seller at $230k.  Now it has to be accepted by the seller.  We are currently in Attorney Review and then the offer will be submitted to the bank.  My understanding is that there is one loan with Wells Fargo and the short sale was previously approved for another buyer who's financing fell through at the last minute.  I was not told the exact amount, only that it was higher than ours.  The lawyer feels fairly good about it.  Does anyone have an idea on how long the process might take and the chances the bank might approve our offer even though it is lower?

Thanks!