Mortgage Questions! Pre qualification, etc - help?

[BlueHusky]

Hey all, applying for a mortgage and hope I can get some help with a few questions:

1. Is pre qualification often way off? I did that at my credit union and feel it was a bit generous, seemed to be too high for my income and debt. I was quoted 800k loan with income of 160,000 and 1,000 monthly debt for student loan and car payment

2. How will they factor in a job with a definite end date? I'm doing a 2 year graduate research internship that will likely become a full job but isn't guaranteed after 2 years. Do I even have to tell them that or just show the income. SO has a permanent job.

3. Do I need to ensure my student loans are in repayment before I apply? I've heard they do 1% of loan balance otherwise, which is more than my payment actually is.

4. When should I apply for preapproval?

5. Will my mortgage scores be dramatically different from other FICO scores I get from my credit cards? My credit card FICO scores are all very high but I'm a first time home buyer. All on time payments, no bad accounts, 2 auto loans paid in Full previously and another currently in repayment.

Any other advice!

Thanks

[Revelate]

Long time no see!

Can't answer all of your questions but figure out how much house you're shopping for: Chase had an available mortgage size for me of 850k at 160k with my possible downpayment bringing it up to 1.1M if I wanted to stretch (I didn't) and I could've made it work but darned if I didn't have sticker shock... that was at 43% DTI so I'm not surprised by yours.  Walked away from an 800k place, wound up buying at 345k eventually thinking halfway house and future value personally but my life is sadly unpredictable so in retrospect it was a good idea.  The prequal / preapproval is probably pretty close to accurate as a result.

Just show the income, the presumption is you'll continue to work in the same field at or above your current salary... market is kinda predicated on that TBH.  If they ask you tell but it shouldn't be an issue, like at all, nobody is going to complain anywhere in the process.

Student loans: I know nothing about them but if you factor them into your DTI and you can still afford the house you want, do what makes sense financially.  If you can't, and they need to be in repayment, then sort that but ultimately it's a financial decision and treat it as such.

Preapproval: I wouldn't bother without being ready to seriously look if not outright buy.  Preapproval is sort of a declaration of intent for everyone in the process so I'd probably just do that when I was ready to get my RE off and running personally rather than waiting till wanting to make an offer where even a days delay might make a difference in a sellers market depending where you are.

Your scores are probably fine, mortgage scores are not the same but you've been doing this a while and there's nothing scary on your file; my file is worse in the absolute sense (old lates and a tax lien still) and I cleared 720 and when my tax lien disappeared for a week off EX I was at 742 on the one used for a trimerge which is gold standard territory for conventional base mortgages.  If you don't want surprises pay the $60 (well $120 for the both of you), but if you have optimized your balances already you can just go and take the pull and be something like 98% certain of being OK.  

Anyway congratulations on getting to this point!

[BlueHusky]

Revelate, thank you so much. Such helpful info, I really appreciate insightful posters like yourself. I am sure I will be back with more questions

[Anonymous]

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@BlueHusky wrote:
Hey all, applying for a mortgage and hope I can get some help with a few questions:

1. Is pre qualification often way off? I did that at my credit union and feel it was a bit generous, seemed to be too high for my income and debt. I was quoted 800k loan with income of 160,000 and 1,000 monthly debt for student loan and car payment

2. How will they factor in a job with a definite end date? I'm doing a 2 year graduate research internship that will likely become a full job but isn't guaranteed after 2 years. Do I even have to tell them that or just show the income. SO has a permanent job.

3. Do I need to ensure my student loans are in repayment before I apply? I've heard they do 1% of loan balance otherwise, which is more than my payment actually is.

4. When should I apply for preapproval?

5. Will my mortgage scores be dramatically different from other FICO scores I get from my credit cards? My credit card FICO scores are all very high but I'm a first time home buyer. All on time payments, no bad accounts, 2 auto loans paid in Full previously and another currently in repayment.

Any other advice!

Thanks

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1. It depends. A good lender will do a full documentation pre-approval and should give you a very accurate number. Sometimes a lazy lender or big box bank will just estimate.

2. If your Verification of Employment (VOE) comes back with a specific end date that is less than three years out, it can get sticky. If your VOE states continuance of employment is high/good/likely and they don't mention a specific end date, you may be fine. It depends on what your employer says and the underwriter's discretion. Here is the Fannie Mae guideline on continuity of income: 

"A key driver of successful homeownership is confidence that all income used in qualifying the borrower will continue to be received by the borrower for the foreseeable future. Unless the lender has knowledge to the contrary, if the income does not have a defined expiration date and the applicable history of receipt of the income is documented (per the specific income type), the lender may conclude that the income is stable, predictable, and likely to continue. The lender is not expected to request additional documentation from the borrower.

If the income source does have a defined expiration date or is dependent on the depletion of an asset account or other limited benefit, the lender must document the likelihood of continued receipt of the income for at least three years."

3. Student loans do not need to be in repayment, but if they are not 1% will be used. Most, but not all, loan programs will use the higher of 1% or the actual monthly payment.

4. Never hurts to apply now. A good lender will help you create a game plan and timeline based on your goals.

5. They may be similar, or they may be way off. Different scoring models use different algorithms, so there is no way of knowing which will be higher until you apply with a lender or purchase the 3B reports from this site.

Hope this was helpful!