Odd ball scenario - looking for advice/ideas

[Anonymous]

We are looking to purchase the house that we are currently renting -- my father in law owns the house and also lives there along with us.  He lost his job and is on disability at this point, so from a taxation perspective, me owning the house is the best case. 

The home price is $210,000. Alone, I can't afford it but he'll be paying rent to help with the monthly mortgage.  My monthly income is approximately $4160 regular + $700 overtime.   Our monthly debt is currently $600 in credit card minimums, $300 in car loans.  I have $45k in outstanding student loans that are currently in deferment and will be paid off completely within 3 months of going active. 

Part of the problem I'm having is that banks and some other lenders have included the student loans in my DTI which has caused a problem.  The DTI ratio ranges between 43 and 58% depending on who you talk to about what. 

My credit score is stellar (780), so I'm not concerned about that side of things.

Does anyone have advice on the best way to handle this? I'm trying to figure out how to handle this in the most effective manner.

[annah]

If you can show them a signed lease agreement with you FIL, showing how much rent he will be paying, then they should include that amount as part of your income, thereby reducing your DTI some. Not sure how much though.

[Anonymous]

I was thinking the same -- then I spoke to Wells Fargo and they said that rental agreements for people in the primary house do NOT count towards DTI although they make your "life easier" (that was his quote). I don't know if that's the case or not, but it sounded odd to me.

[annah]

Hmm.. I had a friend that did that a few years ago. She owned 2 houses at 23 years old because of rental agreements.. She had 3 roommates under lease, and they counted that towards her income, and she only made minimum wage at the time.

Her mortgage was through Suntrust though, I have no idea if different banks are differnt that way.

[Anonymous]

Ah! That might be the difference. You can use rental income from a different house on the mortgage, according to the lenders that I've spoken to (two now, not just WF) .. just not the one that you're trying to live in as well.

[ShanetheMortgageMan]

Sorry I'm so late coming into this, was busy the past few days. 

Pmesritz, how much is owed on the home?  If it's substantially less than the purchase price of $210k, would your FIL be OK in just having the mortgage paid off, or is he looking to get a profit on the sale (difference between $210k and what is owed)?  You can use a "gift of equity" as the down payment if your FIL isn't looking to profit from the sale, the "gift of equity" would approximately be the difference between the sales price/appraised value and what is owed on the existing mortgage.  I can explain more if you'd like, including the logistics, but I would need to know the answers to those questions I just asked.

Is the goal to remove the debt from your FIL's ownership (because I know there is some disability that is diminished if someone owns a home), or are you trying to reap the tax benefits of having a mortgage?

Student loans will count in your debt to income ratio unless you are going for an FHA loan program, and they will only be excluded from your debt to income ratio on FHA if they are deferred for 12 months or more from the day you are closing on the home/mortgage.  When are the student loans deferred until?  And out of curiousity, how will the student loans be paid off within 3 months of them going into repayment?

You also said "we are looking to purchase", does that mean you are talking about your spouse as well?  Does he/she make income?  You only referenced your income is why I ask.

Edited to add:  When you receive income from someone who is living in the same unit as you (which would be the same house if it's a single family residence or condo, or the same unit if it's a multi-family home such as a duplex, triplex, 4-plex) it is called "boarder income".  Boarder income can be used if there has been history of getting it in the past, and it can be documented (with cancelled checks), a boarder income agreement isn't usually required.  If you haven't received the boarder income in the past, then it can't be used to qualify for the new mortgage.

Message Edited by ShanetheMortgageMan on 01-09-2008 07:49 PM

[ShanetheMortgageMan]

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annah wrote:

Hmm.. I had a friend that did that a few years ago. She owned 2 houses at 23 years old because of rental agreements.. She had 3 roommates under lease, and they counted that towards her income, and she only made minimum wage at the time.

Her mortgage was through Suntrust though, I have no idea if different banks are differnt that way.

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It might've been a stated income loan where the income was just grouped together in order to qualify (not kosher but has happened).

[annah]

No, I meant that she had 3 people living in the house that she was in- I was renting the other. Even what I paid her for rent didnt make enough $ to qualify her for 2 mortgages w/o the extra roommates