topic Re: New Home Purchase Advice in Mortgage Loans

New Home Purchase Advice

tim2 — Wed, 22 Dec 2021 11:25:58 GMT

I am wanting to purchase a new home. The primary reason is to be closer to family. (Very important to me.)

The problem is that the area that they live in is very expensive so I have been working very hard to find a way to make this work. This area has a lot of older homes that would require renovations to get up to my expectations so therefore I am looking for new construction. This is VERY limited in this area and if something does open up they are $1M + . Which I don't want to spend.

I have recently found out that a builder is building a new subdivision that is less than 1/4 of a mile from my family's house. Great location. Perfect. This builder already has a similar subdivision that is about an hour away and this new subdivision will have the same houses/floor plans. Due to the housing market in this area right now I am trying to figure out how high I should be willing to go to for one of these homes once they are built - considering it is less than 1/4 mile from my family. They are going to start the building process in March 2022. Based on my current situation below does anyone have any recommendations on what my maximum target should be for the new home price?

Annual income: $170k + bonus
Monthly debts: $1k (car, credit card, etc)
Current home: Mortgage balance = $210k ; Home value: ~$500k (highly desired area confirmed by multiple realtors)
Credit score: high 700s - low 800s

Would like to get insight from the experts here. Thanks for your help!

Re: New Home Purchase Advice

AzCreditGuy — Wed, 22 Dec 2021 19:59:54 GMT

@tim2 wrote:
I am wanting to purchase a new home. The primary reason is to be closer to family. (Very important to me.)
The problem is that the area that they live in is very expensive so I have been working very hard to find a way to make this work. This area has a lot of older homes that would require renovations to get up to my expectations so therefore I am looking for new construction. This is VERY limited in this area and if something does open up they are $1M + . Which I don't want to spend.
I have recently found out that a builder is building a new subdivision that is less than 1/4 of a mile from my family's house. Great location. Perfect. This builder already has a similar subdivision that is about an hour away and this new subdivision will have the same houses/floor plans. Due to the housing market in this area right now I am trying to figure out how high I should be willing to go to for one of these homes once they are built - considering it is less than 1/4 mile from my family. They are going to start the building process in March 2022. Based on my current situation below does anyone have any recommendations on what my maximum target should be for the new home price?
Annual income: $170k + bonus
Monthly debts: $1k (car, credit card, etc)
Current home: Mortgage balance = $210k ; Home value: ~$500k (highly desired area confirmed by multiple realtors)
Credit score: high 700s - low 800s
Would like to get insight from the experts here. Thanks for your help!

You need that figure from a Mortgage Pro, they would let you what you would pre-qual at. I would also tackle your current debt and see if you can pay some if it off. I can already tell, you will be taking on more debt. If you sell your home, you need to pay off the current mortgage and leaves you with a good chunk for a down payment. But now instead of $500k Mortgage, will it be more?

Re: New Home Purchase Advice

tim2 — Wed, 22 Dec 2021 20:13:48 GMT

Yes - I have already been preapproved. She said that I can be approved for higher if needed.

My current mortage balance is $210k. So yes, the new house would be more.

Re: New Home Purchase Advice

Revelate — Thu, 23 Dec 2021 13:08:54 GMT

Real math would include how much that bonus is and how long you've had it. I actually need to go look at that rule because I have a comission based role for the first time ever and apparently they have loosened some rules around rental income, maybe they have with bonus income as well.

Ignoring the bonus, you're at roughly 5K / month DTI calc at a 43% backend underwrite (this is conservative now) plus you're styling with the downpayment assuming you're selling the current place.

We can't really suggest though whether this makes sense or not... you know the downside, you're going to be paying more than you do, is it worth it to you to be walking distance to family? I don't know, maybe... I'm buying a place down near a college campus where my life for the next 5+ years is probably going to play out and I can walk to everything I need so I get the attraction; however, I wouldn't break the bank for that personally.

I think a reasonable question is how often are you going to be seeing your family? If it's multiple times a week then the walking distance makes sense... if it's only on weekends anyway, not sure if that makes sense. Anyway, mortgages are restricted in size for a reason, with your income you're probably not going to get into too much trouble if it's stable but this is a value decision as well and we can't answer that for you.

ETA: I guess the variable comp rules have been updated a little by Fannie at least; maybe I get my commission after all not that it matters for me haha.

History of Receipt: Two or more years of receipt of a particular type of variable income is recommended; however, variable income that has been received for 12 to 24 months may be considered as acceptable income, as long as the borrower’s loan application demonstrates that there are positive factors that reasonably offset the shorter income history.

Re: New Home Purchase Advice

VALoanMaster — Mon, 27 Dec 2021 21:46:05 GMT

@tim2 wrote:
Yes - I have already been preapproved. She said that I can be approved for higher if needed.

My current mortage balance is $210k. So yes, the new house would be more.

Back of the napkin estimate looks like this.

$170,000/12 = $14,166.66.

$14,166.66 X 45% = $6,375.

$6,375 minus your current monthly debt of $1,000 = $5,375.00.

$5,375 is the estimated PITI mortgage payment you "can" afford.

That is somewhat dependent on the type of loan (ie: jumbo vs conventional) and how much you're putting down.