What kind of mortgage can I expect from...

[haulingthescoreup]

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@Anonymous wrote:
Hi Shane,

Thanks for your responses. Why is it that for the debt to income ratio they use the monthly Income Base salary ($6,666) instead of the take home income ($5,700) which is considerably less but actually what the buyer has to spend every month?

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I am certainly not Shane --I'm just another lowly home-owner with a mortgage --but one reason that gross income is used is because many of the expenses connected with home ownership are tax-deductible and would therefore change your take-home. Going with gross income gives a nice, easily-crunched number.

DH and I were always amused at what lenders told us we could afford, according to the percentage of gross income. We knew what we could afford from our take-home, and so that was the figure that we used. But others will go closer to that much higher figure. I'm guessing that they are much more financially self-disciplined than we!

[Anonymous]

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thomasil74 wrote:
Hi Shane,

Thanks for your responses. Why is it that for the debt to income ratio they use the monthly Income Base salary ($6,666) instead of the take home income ($5,700) which is considerably less but actually what the buyer has to spend every month?

I checked the taxes for the houses I am looking for and they vary from 4.5K to 5K a year depending on the school district. Insurance meanwhile varies from $560 to $600 a year.

Where does that put me in terms of my piti? Before you had: Liabilities Primary Housing Expense (principal, interest taxes, insurance) 1,692.88

Thanks for all your help.

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Your 80k stated gross was divided by 12. Lenders generally look at gross because there is no telling what is being taken out of take home pay.

Message Edited by Brammy on 12-26-2007 08:01 PM

[ShanetheMortgageMan]

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thomasil74 wrote:
Hi Shane,

Thanks for your responses. Why is it that for the debt to income ratio they use the monthly Income Base salary ($6,666) instead of the take home income ($5,700) which is considerably less but actually what the buyer has to spend every month?

I checked the taxes for the houses I am looking for and they vary from 4.5K to 5K a year depending on the school district. Insurance meanwhile varies from $560 to $600 a year.

Where does that put me in terms of my piti? Before you had: Liabilities Primary Housing Expense (principal, interest taxes, insurance) 1,692.88

Thanks for all your help.

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haulingthescoreup explained why they use gross instead of net income pretty well in my opinion.

Using $5k/year in taxes & $600/year in homeowners insurance, using a 6.25% rate on FHA (today they are lower, but trends are indicating rates are on their way up for the immediate future) you could expect a payment similar to:

First Mortgage (Principal & Interest) @ 6.25% $1,354.58

Hazard Insurance + $50.00

Taxes + $416.00

Mortgage Insurance + $91.67

Total Proposed Housing Expense = $1,912.25

[Anonymous]

How come you used 6.25% rate on FHA.  Is that what I would get for a conforming conventional 30yr fixed loan?

In order to avoid the PMI do you recommend taking two loans?  Some people have told me to do so but I don't know if it saves any money.

[ShanetheMortgageMan]

I'm just using interest rates that would be representative of what you could expect... it's not a quote, it's just to give you a general idea of where your payment could end up.  Just like online calculators, my estimates can be off... you'd really need to sit down (call up) a mortgage professional and go over the figures to determine exactly what type of payment there'd be and the good faith estimate that would accompany it.   Not many lenders are offering 80/20 combo loans anymore, but that is one way to avoid PMI... do realize that the rate on the 20% 2nd mortgage is quite a bit higher, usually in the upper 8's or low 9's.  Since PMI is tax deductible if your income fits within a certain range (which your income would) it's not as "evil" as it has been in the past.  It'd be worth it to compare an 80/20 combo option vs 1 loan at 100% LTV.  You can also avoid PMI by taking a slightly higher interest rate and having the mortgage lender pay the PMI for you - it's called LPMI (lender paid mortgage insurance).

[Anonymous]

I have a mortgage broker that I used for my first mortgage and he was ok. Do I go and talk to him or do I mail my info to a few lenders and find out who gives me the best deal and then I get pre-approved? What is the best way to do this?

[ShanetheMortgageMan]

If you got along well with your mortgage broker then I'd speak to them, also the bank you bank with, and at least 1 other source.  You can talk in hypotheticals, you don't need to have them check your credit in order to go over potential terms.  It'll give you a chance to feel them all out to see which one fits best with your personality.