Some answers please

[Anonymous]

I own my own business.  We've been at it for about 4 years now and, although we're doing okay, we haven't made a profit yet.  I've had some credit issues in the past.  Last late payment was about 5 or 6 years ago and there is a paid tax lein still recorded on my credit report.  My equifax score is 662 and going up.  Debts are high but going down.  I currently own a home in Louisiana in partnership with my business partner.  With the new mortgage protocols I know I can't get a mortgage right now for the second home I want to purchase in South Carolina.

Now, here's the questions.  My mother is 92 and in good health, both mind and body.  She has a credit score well over 700.  Haven't checked it recently but will do that soon.  Her assets are over $200,000 and her income is slightly over $39,000 per year.  What I'd like to know is what is an acceptable debt to income ratio and how much of a mortgage would she qualify for?  The home in question would cost between $175,000 and $180,000.

We're not doing anything right now but I expect we will want to make a decision within the next few months.  I'd just like to get all our ducks in a row before we shop in ernest.

Thanks so much for your help.

[DallasLoanGuy]

second home? as in vacation property?

[Anonymous]

Not exactly.  Although I own a home here, I own it with another person.  It's my plan to ultimately retire to another location and I wouldn't want to force a sale of this house.  I guess it will be a vacation home for a short while but after that it will be my primary residence.

[ShanetheMortgageMan]

The issue which Tom brought up will be the occupancy.  Sure your mom can co-sign with you, or even buy a home on her own, but the occupancy is going to be something that needs to be addressed first.  You didn't say where you are located, but since you did say you own a business, and also own home in Louisiana with your business partner, I assume you are in Louisiana.  Therefore if you are buying a home in South Carolina, and if you aren't going to occupy it nor will your mother, it'll need to be purchased as an investment property (not typical for 2 people to co-sign together to buy a 2nd home).  If it will be your eventual primary residence, you will need to relocate to South Carolina.

[Anonymous]

The plan would be for my mother to buy the house.  She would not be a cosigner.  My mother does not, currently, own a home so this would be her primary residence.  What I'm trying to determine is how much of a mortgage she would qualify for based on an annual income of $39,000 and what would be an acceptable debt to income ratio. 

Thanks so much for your response.

[ShanetheMortgageMan]

Assuming your mom has no debts, she should be fine to qualify for a $180k home with just 3.5% down using FHA.. or conventional, but I'd recommend at least 5% down with conventional to be eligible for those low rates.

[Anonymous]

We were thinking 20% down.  What would be an acceptable debt to income ratio?  Thanks for your response.

[ShanetheMortgageMan]

With conforming up to 64.99% can qualify, and with 20% down, good credit and some liquid reserves leftover a 64.99% debt to income ratio is pretty likely to qualify too.