Think I could qualify for a 310k new construction home?

[Mondavi]

Hello. I am currently still working on my credit scores. My TU 98 from here is now 715 and my EQ is 702. So not sure how much off my TU04 will be from my 98 here.

If I averaged out my salary from the last two years I would be making 61k. Same job for last eight years.

I have about 180k invested in the market. So it can go up or down a few thousand each day. Though in the last two years the lowest it has gone is 172k. So putting down 20% will not be an issue. My only concern on putting more than 20% down is having to pay out for Capital Gains Tax. I also have another 55k invested in my retirement. Really do not want to touch that.

I have 3 CC's with a balance of $55 dollars on one. No other payments of any sort. My significant other " not married" is poor from all her student loans. Plus two 30 day lates in the last year. So her low income and DTI would not be in our favor. So this would be all on me.

I really do not want to be home broke. I would like to keep a house payment max around 1,400 including insurance and all that other good stuff.

I see people getting these massive homes for like 200k. Living in California is rough for home prices. The new construction homes I am looking at have went up 10,000 in the last month!!

One other thing is I only want to go with a conventional loan. I am trying to avoid having to pay a MPI. Feel like that is a waste of money if you can avoid it.

Thanks for your time and input!

[MovingForward_2012]

So first off, I don't think you will qualify for $310K with an income of $61K. You will be house broke and worse with a house that is $310K as principal, taxes, interest, and home owners ins and PMI (assumes less than 20% down), your monthly mortgage payment will likely be $1800-$2000. Lenders usually will qualify you for no more than 4x your salary. So if you put $70,000 down (it sounds like from your investments that doable...it is about the 20% down you said you had), then a $310,000 home is likely to get approved and your mortgage payment will be considerably less...more towards the $1400 range you were estimating you could afford.

If you take a loan out, you won't have to pay capital gains tax. Is it possible to take a loan out rather than withdraw?

Your credit scores are fine for a conventional loan. It is just that you will need at least 20% down to qualify as they will likely approve you for something around $250K and you'll have to make up the difference with your downpayment.

[Mondavi]

Maybe I should have been more clear. The home I am looking at is 310k. I can and will put 20% down so I can avoid MIP insurance. So if I put 70,000 down that would be more like 23% down. Leaving me with a loan amount of 240,000. So from what you are saying it would be close.

The 20% down would be from selling stocks. I would be taxed on that. I do not think there is a way to avoid that. Uncle Sam wants his share for his good investment advice he gave me. NOT!

Without selling stock for the 20% down I would not be able to afford 20% down at this time. I currently have around 15,000 in savings to pay for closing costs, taxes and whatever else comes along during the process.

Thanks for your time.

[StartingOver10]

Mondavi, talk with a mortgage broker or mortgage banker.  You have excellent savings and investments plus decent income. The mortgage broker (or mortgage banker) will not use the "4x's" rule, they will use your actual DTI ratios to determine your maximum loan amount. For a conventional loan are typically 28%/36% but can vary tremendously by lender. (this would be 28% front end and 36% back end ratios)

From your post it sounds like you have really no unsecured debt (cc's). Do you have a car payment or student loan debt? If so, those payments are included in your back end ratio.

One of the factors that affects your front end ratio is your taxes and insurance, so have an idea of what they will run for the type of home you are considering in your area.

You sound like you are in great shape financially. It's just a matter of determining your maximum and then figuring out how much less you want to spend in order to get into your comfort level for a payment.

[Mondavi]

I have no other payments. Both cars are paid off and have no student loans.

I would like to have my property tax not included in my payment. Normally my fiance gets around 5,000 back each year from taxes. So she wants to help out by paying at least half of the property tax. Around here it will be about 3,000 or so a year. Home owners insurance from friends in the area with newer homes pay around $90 a month.

I will start the process in June. I just wanted to get an idea if I have a chance or not before I start this process. Last thing I want is to really get my hopes up on one of these homes then get denied.

Thanks for your reply once again.

[StartingOver10]

Then chat with a mortgage banker to get their qualifying criteria. Don't let them pull your credit just yet because you aren't planning to buy until summer.

As to paying the property taxes and insurance outside of lender held escrow: ask the LO what criteria is required. Some will want to charge you an "escrow waiver fee" at closing if you don't have the lender hold escrows.

Since you have no debt, you probably can go to a higher ratio for your loan, but this is lender specific. I have heard that the maximum ratio for a fannie mae conventional loan is 41%, but the lender can impose their own guidelines on this so check it out with several lenders to see what would apply to you in your specific situation.

If 41% is accurate, then your maximum allowed payment would be $2084/mth - which is substantially more than what you want to pay.

You have some compensating factors (your investment account). But your score is on the low end of what a conventional loan requires. Do you have anything on your reports that is holding back your score?

[Mondavi]

Oh ya I have some baddies still. 35k CO that my attorney is currently working on. I was unfortunate enough to be apart of a fraud. This CO is over five years old and past the SOL in California. I know the bank wants to settle this matter. My attorney is confident that this matter will be taken care of in a few months.

So that leaves me with a Med bill for 1,000. It will fall off in September of this year. The CA already said they would do a PFD for $800. I said I will think about it. I may wait till May/June then go in for a lower amount.

Then last but not least two paid CO's. Both with same DoFD. So November of this year will be past seven years. 

So you may ask why not wait till next year when I have a clean report. I thought about doing this. My problem is with home prices already going up. Spring of 2014 they could be up as much as 15% where I live. Plus my family seems to keep growing!

So June of this year I should only be left with the two paid CO's from 6 1/2 years ago. I have had no late payments or negatives since 2007.

Not really sure what my score will end up being by then. Hopefully with the removal of two more negatives and my two CO's being so long ago, I will get a small boost. I doubt I will be able to hit 720.  Though I am not all that far off now. Knowing my luck I will get a rebucket and drop in score.

[StartingOver10]

Sounds like you have a handle on it. Definitely don't let a mtg co pull your report. The inq alone will get the attention of the creditors (they look for stuff like this).

You might consider taking the CA up on the $800 med bill to have one less CA especially since they will do a PFD.

Good luck with the fraud situation. Hopefully as part of your settlement they will remove the TL entirely for you.

[Mondavi]

Well last year around this time I had a bank pull for a mortgage loan. I did this just to see where I was at and to find any bottom feeders that were out there. I had no intent on buying at that time.  No feeders came out. Since then I opted out just to make sure. 

With the fraud situation I told me attorney the only way I would agree to taking care of this matter was for complete removal of the TL.

Thanks again for the information.

[MovingForward_2012]

+1, glad you had a mortgage broker pull your credit to see where you stand. I highly recommend this as the estimates I got from brokers were not nearly as accurate as them running my app through desktop underwriting. Someone can always overestimate if you can buy and the DU can deny you so if you are serious about buying, you need a serious and accurate answer. Through DU you can find out specifically what issues there are versus a lot of speculation. Brokers love to speculate and many times they speculate on the optimistic side to push you to apply for the loan. So for a definitive answer, always do a pre-qual check as I call it.

Like I said previously, you are good to go credit score wise. Your old charge offs and collections shouldn't be a big deal but I would take care of as many as you can to avoid letters of explanation for those.

As I stated earlier and as another member stated, your upper limit in house price is $250K. Your Capital Gains can be used as additional investment income to raise the max home price a little bit and then the difference will be your downpayment amount. Lenders don't like to exclude property taxes from escrow as it often gets homeowners in trouble as they can't pay the lump sum when it's due but with the amount of assets you have, it shouldn't be a problem. And you won't have PMI if you put at least 20% down, which you said you have 23%, so no worries there.

Your preapproval typically lasts 120 days. Some only last 90 days, so be sure to ask.

Since you are looking at a new construction, I would get preapproval as soon as your ready so that you can pick out a lot, colors, carpet, and upgrades. It is not uncommon for your contract to expire and have to renew when building a new home.