Mortgage Questions

[GOOFY4DONALD]

My husband and I have decided to buy a house. Our first home was a contract for deed and we just paid it off. I have so many questions about mortgages but I really hate to bother "real" people like lenders since we are not looking to buy for about 12 months. I have been searching online but I am having difficulty finding some exact answers to my questions and I thought that maybe some of you would know. First when I use a mortgage calculator, just to get and idea, and the want gross income, credit cards, auto loans and other debt...are they just talking debt or are they wanting to know monthly bills like utilities and such. Also I am wondering if we would qualify as first time home buyers since our first home was seller financed. I am sure I will have more questions.

Thanks in advance.

 

[mrsklamc]

When a lender is asking, debt is DEBT, not utilities, but YOU should include utilities when trying to figure out what you can afford. If your name is now on the deed of your current house, I do not believe you would be considered first time home buyers.

 

[GOOFY4DONALD]

When a lender is asking, debt is DEBT, not utilities, but YOU should include utilities when trying to figure out what you can afford. If your name is now on the deed of your current house, I do not believe you would be considered first time home buyers.

Thank you for the reply. I was using all our bills to figure what our budget would be but only debt to figure out how much mortgage we would qualify for. We qualify for about 80,000 more than the absolute max we want to spend (we definately aren't the type that will bite off more than we can chew). Since we are saving up for a down payment and closing costs I guess it is not that big of a deal if we can't get the first time home buyer.

My other concern is the fact that we try to live mostly debt free. We have CC's but they are paid in full. We also have an auto loan. But that is it. I remember having more of a difficult time with the auto financing because we didn't have a track record of bigger loans. Do mortgage companies look at it the same way? The average home in my area is about 170,000 (we live in a low cost of living state...you can get a huge almost mansion of a house for under 400K). We are planning on building a home on our own land (that we now own free and clear) and spending about 200,000 max. Will a mtg company only want to lend us 50K because we don't have debt? My DH has a great job (especially for our area) and good credit. According to the mtg calculator we would qualify for 280K but we want to keep the house at 180-200K.

 

[mrsklamc]

Check with a credit union. Ask if they will do 'manual underwriting'- meaning looking at how you actually spend money responsibly rather than just a credit score #.

 

[GingerJay]

The credit requirements for a FHA loan are a little bit lower. You may want to obtain your credit score so you can get an idea of what you're looking at. I think you would qualify for a first time homebuyer loan- it really doesn't mean "first time homebuyer"..its more like "haven't bought a house in 6 years or so". You can talk to different lenders and let them know that you're just shopping, but being aware of your credit score, debt balances, and housing market in your area are perfect places to start. Good luck

 

[GOOFY4DONALD]

Check with a credit union. Ask if they will do 'manual underwriting'- meaning looking at how you actually spend money responsibly rather than just a credit score #.

I will do that. We actually have a pretty good credit score. We have good credit just not the right kind..well that was according to the bank that financed our auto loan. Now we have CC's and a moderate size auto loan (30K). I am hoping that the track record of the auto loan will help prove to a mtg company that we will pay a debt on time. But our debt compared with our income is ridiculously low.

 

[GOOFY4DONALD]

The credit requirements for a FHA loan are a little bit lower. You may want to obtain your credit score so you can get an idea of what you're looking at. I think you would qualify for a first time homebuyer loan- it really doesn't mean "first time homebuyer"..its more like "haven't bought a house in 6 years or so". You can talk to different lenders and let them know that you're just shopping, but being aware of your credit score, debt balances, and housing market in your area are perfect places to start. Good luck

Thanks. I know exactly what DH's credit score is. It is pretty high considering minimal debt. I have been watching it since we decided to buy a new truck. I am a SAHM and we didn't really think about my credit (mistake I know but the past is the past we are starting to build it up and I already am embarrassed). But DH doesn't really need me to purchase the home. He makes about 25K more that the average 2 income families in our area.

 

[minnie1928]

Thanks. I know exactly what DH's credit score is. It is pretty high considering minimal debt. I have been watching it since we decided to buy a new truck. I am a SAHM and we didn't really think about my credit (mistake I know but the past is the past). But DH doesn't really need me to purchase the home. He makes about 25K more that the average 2 income families in our area.

You might want to have your name on the loan even though you are a SAHM. It will help you establish your credit, so that if in the event that something happens you are not without some form of history. My MIL found that out the hard way when her husband passed away. She was in her 50's with no credit history which made things more difficult than they needed to be.

 

[GOOFY4DONALD]

You might want to have your name on the loan even though you are a SAHM. It will help you establish your credit, so that if in the event that something happens you are not without some form of history. My MIL found that out the hard way when her husband passed away. She was in her 50's with no credit history which made things more difficult than they needed to be.

I know but my own credit score is pretty low since I have no credit. I am slowly building it up but we would get a much better rate if we only use DH (trust me we've punched the numbers)

 

[surfgirl]

You might want to have your name on the loan even though you are a SAHM. It will help you establish your credit, so that if in the event that something happens you are not without some form of history. My MIL found that out the hard way when her husband passed away. She was in her 50's with no credit history which made things more difficult than they needed to be.

This happened to a friend of the family, also. I believe financial advisors recommend having a cc in your name ONLY... make sure you use it occasionally, and pay it off each month. It is a way to build "good" credit in your name only.

 

[minnie1928]

I know but my own credit score is pretty low since I have no credit. I am slowly building it up but we would get a much better rate if we only use DH (trust me we've punched the numbers)

If by chance you end up using a local bank or credit union that is willing to do manual underwriting, I would ask the question if having you on the loan helps/hurts your situation. If it doesn't hurt, then put your name on the loan. If having you on the loan hurts, they obviously don't do it. Meanwhile, you should look into getting some credit (even a store card if nothing else) in your name. Unfortunately credit scores are used for a lot more than just borrowing these days and you don't want to be in a situation when you NEED a good score and find yourself starting from scratch.

 

[weluvjasmine]

I know but my own credit score is pretty low since I have no credit. I am slowly building it up but we would get a much better rate if we only use DH (trust me we've punched the numbers)

If your DH's credit score is higher than your's, then your DH should be the signer/owner and your name would be listed second as thr cosigner/coowner. The interest rate would be based upon the person with the highest credit score (which is why your DH would be listed on the mortgage first).

 

[bumbershoot]

We are planning on building a home on our own land (that we now own free and clear) and spending about 200,000 max.

Pointing this out to the experts out there...isn't a building loan different than a normal mortgage? Should the answers be geared a bit differently?

 

[asoko]

credit score used is the lowest median score no matter who is listed 1st on the mortgage or who is the primary wage earner for underwriting. So if you have 640/660/680 your median score is 660 if DH scores are 720/760/780 his is 760 and the overall score would be 660.

 

[seashoreCM]

It would be a good idea to have an attorney who knows real estate help you along befor eyou even sign the purchase Offer.

Not ehthe bank's attorney whom you also pay ofor in the closing costs.

The purchase agreement should specify the absolute numbers for interest rate youare willing to pay, length of mortgage, etc. Not vague words like "revailing".

The purchase agreement should say that if the mortgage does not go through at any time you are entitled to candel the deal and get your deposit back from the seller. If you get a commitment that is not good enough to say that you have financing and the seller can force you to buy,.

 

[barkley]

Pointing this out to the experts out there...isn't a building loan different than a normal mortgage? Should the answers be geared a bit differently?

not an expert, but yes-building loans are different than traditonal home loans, and it depends on how the home construction is being done (private party vs. using a contractor or company to build). from what i've seen with my neighbors when they've built on their properties most have to do some kind of 2 tiered loan process where they get one type of loan for the construction phase then transition into a traditional upon completion (and i recall some of them doing exhaustive research on locking in rates as they were getting into the home stretch).

 

[Carol NJMB]

Thank you for the reply. I was using all our bills to figure what our budget would be but only debt to figure out how much mortgage we would qualify for. We qualify for about 80,000 more than the absolute max we want to spend (we definately aren't the type that will bite off more than we can chew). Since we are saving up for a down payment and closing costs I guess it is not that big of a deal if we can't get the first time home buyer.

My other concern is the fact that we try to live mostly debt free. We have CC's but they are paid in full. We also have an auto loan. But that is it. I remember having more of a difficult time with the auto financing because we didn't have a track record of bigger loans. Do mortgage companies look at it the same way? The average home in my area is about 170,000 (we live in a low cost of living state...you can get a huge almost mansion of a house for under 400K). We are planning on building a home on our own land (that we now own free and clear) and spending about 200,000 max. Will a mtg company only want to lend us 50K because we don't have debt? My DH has a great job (especially for our area) and good credit. According to the mtg calculator we would qualify for 280K but we want to keep the house at 180-200K.

No, absolutely not. Mortgage companies realize that before you buy your 1st home, hardly anyone has a debt as large as a mortgage. I have had people buy homes with nothing more than a $5000 credit card on credit.

About calculating debt to income ratio, we only look at debt on your credit report to determine qualification. The exception to that is that some people have loans via their jobs or credit union that do not show on credit, but are deducted on their paycheck. We would add in these debts.

If your credit score is good, you should not worry at all about qualifying.

First time buyer only means something if you are trying to qualify for some special program. The tax credit is over, so first time buyer is almost irrelevant for anything else.

Good luck.

 

[neileaque]

Its a risky work.Firstly Knowing what lenders consider when qualifying you for a loan can help you pave the way to securing a lower rates.Your debt ratio also plays a major role in determining your rates. The higher your income to debt ratio is, the lower your investment property mortgage rate will be.
You will also receive lower rates if you go for a shorter loan term.



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[Darcy03231]

Since you plan to build you'll need a construction loan. Once the bank approves the construction loan the money will be doled out to your builder/contractors in increments based on work done/percent completed. Once the home is completely built and you have a certificate of occupancy the construction loan is converted to a mortgage.

 

[Cheshire Figment]

Since you indicated you already own the land this puts an entirely different picture on things.

You are looking for a combined construction loan and mortgage.

The construction loan involves payments to the General Contractor as the construction is in progress. This is considered a short-term loan.

When the construction is completed, and the GC is fully paid, you will then get a mortgage (long-term loan) to pay off the construction loan. And don't forget that the mortgage is on the property, not the building alone.

And since the amount of the mortgage will be low compared to the total value of the land and buildings, your credit numbers will not really make much of a difference. Let's say the land has a value of $200,000 and the house cost $200,000 to construct. Your mortgagre may be for $150,000 which is only for 37.5% of the value of the value of the entire property.