Do I Qualify

[jenrn123]

Do I qualify for a mortgage?

I have a somewhat unique situation in that I am planning on purchasing my mom's home (or 1/2) as she is giving me the other 1/2 as my early inheritance. She is selling her part-time home in Wisconsin and giving my sister the equity from that home as her inheritance for fixing up and adding onto her current home. The home I will be purchasing is appraised at $400,000 and I am purchasing it for $175,000. In addition, I will be selling my current home (100+-year-old farmhouse, in some disrepair due to its age) to my neighbors for its tax value of $60,000. My plan is to use $10000 to pay off some debt and to give $25000 to my mom so that I only need to qualify for a $150000 mortgage.

1. Mortgage Credit Scores:  

• Currently, my FICO middle score is 648. I expect this will improve to around 700 as I pay down some debt and age some inquiries and new accounts beyond 6 months. I had expected to begin the mortgage process in the Spring of 2020, but my neighbors are in a hurry to purchase my current home, so now it looks like I'm about 8 months out from trying to finance.

2. Credit Negatives: 

• I have 1 30-day late payment nearly 5 years ago
• My credit age is fairly short, with the average age at 2 yrs, 2 months, and longest account at 6 yrs, 8 months. 

3. Gross Income. 

• Between $66000 and $67,000. I am an hourly employee with minimal OT.
• I will also be renting the basement apartment in the new house back to my mom for $400/month, but I don't know if this can be included in income.

4. Source of income.  

• Full-time, hourly employment with minimal OT 

5. Monthly debt payments. 

• Currently, my monthly debt is $1370 and includes a car and motorcycle payment, and my installment/revolving accounts. The motorcycle will be paid off along with a few other accounts with the sale of my current home, reducing my monthly debt to around $900.
• I do have student loans which will be at $31500 when I apply for the mortgage. I am currently in grad school and all of my loans are in deferment until Nov. 2020. I do pay between $150-200 a month to cover the interest and pay a little off. This is not included in my monthly debt as it is not a required payment right now.

6. Employment (for those who are employed). 

• Type of employment: full-time, hourly with min OT
• How long have you been on the job: 15 years with company and 5 years in current position
• How long have you been in the industry/career field: 25 years.
• My graduate degree will allow me to increase my income by $20,000 per year minimum.
• 7. Assets/Reserves
• Savings: $3500
• Will have $50000 after selling my current home, $25,000 of which will be used to pay down on home to reduce the mortgage.

8. Location:  Rural NC. I qualify based on income for USDA guaranteed loan, but because I am getting the home at such a reduced rate based on its assessed value I don't know if the house will still qualify.

9. Property Description: 

• 15-year-old single family home in rural NC. 8 acres with a pond, 5 bedrooms, 3.5 baths which includes a finished basement apartment. 2-car attached garage, large tractor shed, and detached 3 car garage/shop.
• Currently occupied by my mom.

10. Property Value. 

• Property currently valued at $400000+, was appraised within the past year.

11. Occupancy. 

• Primary residence
• 2-3 people will live here full-time, me and my elderly mom, possibly one of my kids. I will be the only person on the mortgage unless I don't qualify with my income, then my mom would be co-applicant. She currently holds a $150,000 mortgage on this home on her own.

12. Transaction Type.  Purchase. 

So my biggest concerns are:

Do I qualify for a $150000 mortgage with my current income?

What impact will my student loans have on obtaining a mortgage, even though they are in deferment until late 2020?

Can I consider rent from my mom as additional income during the mortgage application process? 

Which mortgage type would best fit my situation?

Does anyone have any idea of the impact the "gift" of the other half of the house will have on this transaction? (Maybe not an appropriate question for this board, but just thought I'd throw it out there for consideration.)

On the plus side, I can sell my current home and move into the new home, pay off some debt and let it be reflected on my credit reports before applying.

I am a member of our local savings and loan, Navy Federal CU, and PenFed CU. My son is the veteran.

Thanks everyone on this forum for your help! I have learned a ton over the past few years!

[jenrn123]

I have a somewhat unique situation in that I am planning on purchasing my mom's home (or 1/2) as she is giving me the other 1/2 as my early inheritance. She is selling her part-time home in Wisconsin and giving my sister the equity from that home as her inheritance for fixing up and adding onto her current home. The home I will be purchasing is appraised at $400,000 and I am purchasing it for $175,000. In addition, I will be selling my current home (100+-year-old farmhouse, in some disrepair due to its age) to my neighbors for its tax value of $60,000. My plan is to use $10000 to pay off some debt and to give $25000 to my mom so that I only need to qualify for a $150000 mortgage.

1. Mortgage Credit Scores:  

• Currently, my FICO middle score is 648. I expect this will improve to around 700 as I pay down some debt and age some inquiries and new accounts beyond 6 months. I had expected to begin the mortgage process in the Spring of 2020, but my neighbors are in a hurry to purchase my current home, so now it looks like I'm about 8 months out from trying to finance.

2. Credit Negatives: 

• I have 1 30-day late payment nearly 5 years ago
• My credit age is fairly short, with the average age at 2 yrs, 2 months, and longest account at 6 yrs, 8 months. 

3. Gross Income. 

• Between $66000 and $67,000. I am an hourly employee with minimal OT.
• I will also be renting the basement apartment in the new house back to my mom for $400/month, but I don't know if this can be included in income.

4. Source of income.  

• Full-time, hourly employment with minimal OT 

5. Monthly debt payments. 

• Currently, my monthly debt is $1370 and includes a car and motorcycle payment, and my installment/revolving accounts. The motorcycle will be paid off along with a few other accounts with the sale of my current home, reducing my monthly debt to around $900.
• I do have student loans which will be at $31500 when I apply for the mortgage. I am currently in grad school and all of my loans are in deferment until Nov. 2020. I do pay between $150-200 a month to cover the interest and pay a little off. This is not included in my monthly debt as it is not a required payment right now.

6. Employment (for those who are employed). 

• Type of employment: full-time, hourly with min OT
• How long have you been on the job: 15 years with company and 5 years in current position
• How long have you been in the industry/career field: 25 years.
• My graduate degree will allow me to increase my income by $20,000 per year minimum.
• 7. Assets/Reserves
• Savings: $3500
• Will have $50000 after selling my current home, $25,000 of which will be used to pay down on home to reduce the mortgage.

8. Location:  Rural NC. I qualify based on income for USDA guaranteed loan, but because I am getting the home at such a reduced rate based on its assessed value I don't know if the house will still qualify.

9. Property Description: 

• 15-year-old single family home in rural NC. 8 acres with a pond, 5 bedrooms, 3.5 baths which includes a finished basement apartment. 2-car attached garage, large tractor shed, and detached 3 car garage/shop.
• Currently occupied by my mom.

10. Property Value. 

• Property currently valued at $400000+, was appraised within the past year.

11. Occupancy. 

• Primary residence
• 2-3 people will live here full-time, me and my elderly mom, possibly one of my kids. I will be the only person on the mortgage unless I don't qualify with my income, then my mom would be co-applicant. She currently holds a $150,000 mortgage on this home on her own.

12. Transaction Type.  Purchase. 

So my biggest concerns are:

Do I qualify for a $150000 mortgage with my current income?

What impact will my student loans have on obtaining a mortgage, even though they are in deferment until late 2020?

Can I consider rent from my mom as additional income during the mortgage application process? 

Which mortgage type would best fit my situation?

Does anyone have any idea of the impact the "gift" of the other half of the house will have on this transaction? (Maybe not an appropriate question for this board, but just thought I'd throw it out there for consideration.)

On the plus side, I can sell my current home and move into the new home, pay off some debt and let it be reflected on my credit reports before applying.

I am a member of our local savings and loan, Navy Federal CU, and PenFed CU. My son is the veteran.

Thanks everyone on this forum for your help! I have learned a ton over the past few years!

[jenrn123]

1. Mortgage Credit Scores:  

• Currently, my FICO middle score is 648. I expect this will improve to around 700 as I pay down some debt and age some inquiries and new accounts beyond 6 months. I had expected to begin the mortgage process in the Spring of 2020, but my neighbors are in a hurry to purchase my current home, so now it looks like I'm about 8 months out from trying to finance.

2. Credit Negatives: 

• I have 1 30-day late payment nearly 5 years ago
• My credit age is fairly short, with the average age at 2 yrs, 2 months, and longest account at 6 yrs, 8 months. 

3. Gross Income. 

• Between $66000 and $67,000. I am an hourly employee with minimal OT.
• I will also be renting the basement apartment in the new house back to my mom for $400/month, but I don't know if this can be included in income.

4. Source of income.  

• Full-time, hourly employment with minimal OT 

5. Monthly debt payments. 

• Currently, my monthly debt is $1370 and includes a car and motorcycle payment, and my installment/revolving accounts. The motorcycle will be paid off along with a few other accounts with the sale of my current home, reducing my monthly debt to around $900.
• I do have student loans which will be at $31500 when I apply for the mortgage. I am currently in grad school and all of my loans are in deferment until Nov. 2020. I do pay between $150-200 a month to cover the interest and pay a little off. This is not included in my monthly debt as it is not a required payment right now.

6. Employment (for those who are employed). 

• Type of employment: full-time, hourly with min OT
• How long have you been on the job: 15 years with company and 5 years in current position
• How long have you been in the industry/career field: 25 years.
• My graduate degree will allow me to increase my income by $20,000 per year minimum.
• 7. Assets/Reserves
• Savings: $3500
• Will have $50000 after selling my current home, $25,000 of which will be used to pay down on home to reduce the mortgage.

8. Location:  Rural NC. I qualify based on income for USDA guaranteed loan, but because I am getting the home at such a reduced rate based on its assessed value I don't know if the house will still qualify.

[jenrn123]

9. Property Description: 

[jenrn123]

• 15-year-old single family home in rural NC. 8 acres with a pond, 5 bedrooms, 3.5 baths which includes a finished basement apartment. 2-car attached garage, large tractor shed, and detached 3 car garage/shop.
• Currently occupied by my mom.

10. Property Value. 

• Property currently valued at $400000+, was appraised within the past year.

11. Occupancy. 

[jenrn123]

• Primary residence
• 2-3 people will live here full-time, me and my elderly mom, possibly one of my kids. I will be the only person on the mortgage unless I don't qualify with my income, then my mom would be co-applicant. She currently holds a $150,000 mortgage on this home on her own.

[jenrn123]

12. Transaction Type.  Purchase. 

[jenrn123]

So my biggest concerns are:

[jenrn123]

Do I qualify for a $150000 mortgage with my current income?

[jenrn123]

What impact will my student loans have on obtaining a mortgage, even though they are in deferment until late 2020?

[jenrn123]

Can I consider rent from my mom as additional income during the mortgage application process? 

[jenrn123]

Which mortgage type would best fit my situation?

[jenrn123]

Does anyone have any idea of the impact the "gift" of the other half of the house will have on this transaction? (Maybe not an appropriate question for this board, but just thought I'd throw it out there for consideration.)

[jenrn123]

On the plus side, I can sell my current home and move into the new home, pay off some debt and let it be reflected on my credit reports before applying.

[jenrn123]

I am a member of our local savings and loan, Navy Federal CU, and PenFed CU. My son is the veteran.

[jenrn123]

Thanks everyone on this forum for your help! I have learned a ton over the past few years!

[NC_Mtg_Loaner]

You should be able to qualify for a conventional loan while having your Mom provide you a "gift of equity" as your down payment so that you can save your "cash from the sale of the home" if you wish.  (and that's what I'd recommend given the home's value as you stated)

A lender is going to use your current student loan payment amount that reports to the bureaus unless they are deferred, but I'd recommend paying off or paying down that student debt as it 'lingers' until paid.

call or email me if you have additional questions as I too am in Rural NC area.

[jenrn123]

Thank you NC_Mtg_Loaner. I had to do a little research on gifts of equity and the impact on taxes. Seems as if it will be treated as a part of my mom's estate with the tax being deferred and due only if total lifetime gift exceeds a certain amount. 

I have a couple of questions about the impact of my student loans. Because I am in graduate school with an expected graduation date of May 2020 my student loans are currently deferred. I will be adding another $4500 next semester placing my total student debt at just under $32000. None of my loans have a payment listed, although I am paying enough to prevent accumulating interest and to make a very small dent in the principle. I have a couple of questions regarding how they apply to conventional mortgages. 

1. With my student loans being deferred for 15-18 months beyond my loan origination date, how will the mortgage issuer calculate them into my DTI? There is currently no payment associated with my student loans so is it $0 or would it be estimated at 1% as in other loans that I've read about in the forums?

2. My final student loan amount (the $4500 mentioned above) will be added to my credit profile in January. How will this impact my mortgage scores if I will be pursuing a mortgage in May? 

I also am somewhat confused when it comes to figuring usual DTI % allowed on a conventional loan. Is this something that most lenders will discuss with you up front prior to completing applications?  I'm concerned that my local banker is going to be more conservative due to being very small and that I won't be able to get my DTI low enough to qualify, especially if my student loans are calculated in. Would I be better off pursuing a loan with Navy Federal or Pen Fed CU or utilize the services of a mortgage broker? Does the fact that I am financing less than 1/2 the value of the house impact the qualifying  DTI percentage?

For additional data, my income is $67000 (hourly wage) I will be financing $150000 on a $400000+ property. The taxes and insurance are around $300/month...I'm rural, so low tax rate. My mortgage FICO scores should increase over the next 6 months, I hope significantly, but I'm not sure I'll be able to get them into the top tier during that time. (Are the lending tiers something that mortgage lenders will be open about, or does it just depend on the lender?)

Thank you all for your help with this process.