Mortgage questions

[disneymagicgirl]

We are about to start house hunting here in Nashville and I have a few questions regarding mortgage qualification. If no one here knows, I will find a random loan officer to consult, but since you guys know everything, I figured I would start here. We plan to do build new construction, so we will go with the preferred lender, which makes it hard to ask them since we haven't decided on a neighborhood yet.

They always want the last two years income info. What do they do with this info? My husband made $30k more in 2011 than in 2010. This year he has already made as much as 2011, so he will easily surpass his 2011 income by a big chunk. Will they see his income from last year and how much he has already made this year and go by that? He has been with the same company for 5 years, but got a new position in 2011, thus why we moved here and the income increase. Would we be better off to wait until the end of 2012 to prequalify so we have 2 years of the new incomes reporting? It will take 6 months to build, so we were hoping to get started in the next few months. Our lease is up 3/31/13.

We are in the same situation for my income. I am a nurse and work PRN. 2010 I had 6 mths of maternity leave, so didn't make much that year. 2011 we moved and had to get settled and find me a job, so not much that year either with me being odd 6 months. This year I will easily double last years's income.

We don't carry credit card debt and we paid off our cars on New Years eve. We have my student loan, which we plan to pay off by the end of the year or earlier. We have two other mortgages for properties that we rent out. I have already researched how that income/debt is computed.

Would it be better to leave me off the loan altogether since the student loan is in my name and I don't have much income for 2010 and 2011? Or should we wait til Jan to preamp rove so this years income is complete and the student loan is gone?

Thanks for any input. As much as we would like to move ASAP, I want to make sure we get the perfect house for our long term needs.

 

[cornflake]

I'm not sure how it is now with the tightening of lending but with the increase in your husband's salary, I'd think a simple letter from the company just stating he holds this title at this salary since X date, to explain and like, basically guarantee (nothing is guaranteed, but you know, to show it wasn't a flukey year and that it's the salary not based on something fluctuating like commission) that that's his income, would be fine to stave off any portential questions. I know people who've had to do that in the past to show that a new income is for real. Like I said dunno if currently that's not good enough or whatever, but used to be done.

Same for you, letter from HR or wherever stating you're employed full time at X salary.

As there's not weirdness - like it's all commonly explicable, with the mat leave and moving for the better position - and you have jobs that are known to be steady, well-paying jobs, I'd think you'll be fine on that front. I'd definitely check with a broker in the area to be sure though.

 

[disneymagicgirl]

Thanks Cornflake!

 

[kymom99]

If I were you I would find a mortgage company and have them tell you how to procede. I bought a house last year and the broker looked at our particular situation, suggesting that I apply on my own since my husband's credit score wasn't nearly as high as mine was. He said we would get a better rate that way. We qualified for the loan based on my salary alone. Also, I used money that I had coming to me from my mother's estate as a downpayment and he worked with my brother, who was the administrator of the estate, to get the necessary documentation. We had to have a gift of equity letter submitted to prove we weren't indebted to someone for the downpayment. It was pretty simple to do. It just takes documentation to explain your situation. Good luck to you in your new home!

 

[disneymagicgirl]

If I were you I would find a mortgage company and have them tell you how to procede. I bought a house last year and the broker looked at our particular situation, suggesting that I apply on my own since my husband's credit score wasn't nearly as high as mine was. He said we would get a better rate that way. We qualified for the loan based on my salary alone. Also, I used money that I had coming to me from my mother's estate as a downpayment and he worked with my brother, who was the administrator of the estate, to get the necessary documentation. We had to have a gift of equity letter submitted to prove we weren't indebted to someone for the downpayment. It was pretty simple to do. It just takes documentation to explain your situation. Good luck to you in your new home!

Thanks
I just hate to waste someone's time, knowing that we will use whatever preferred lender that goes with whichever neighborhood we choose. I may have to just waste someone's time though, in order to get the answers I need.

 

[Shelly F - Ohio]

As far as the 3 years of documentation of wages... they use it as proof that you have a steady income and that you are worthy of lending too.

 

[sookie]

I'm not sure how it is now with the tightening of lending but with the increase in your husband's salary, I'd think a simple letter from the company just stating he holds this title at this salary since X date, to explain and like, basically guarantee (nothing is guaranteed, but you know, to show it wasn't a flukey year and that it's the salary not based on something fluctuating like commission) that that's his income, would be fine to stave off any portential questions. I know people who've had to do that in the past to show that a new income is for real. Like I said dunno if currently that's not good enough or whatever, but used to be done.

Same for you, letter from HR or wherever stating you're employed full time at X salary.

As there's not weirdness - like it's all commonly explicable, with the mat leave and moving for the better position - and you have jobs that are known to be steady, well-paying jobs, I'd think you'll be fine on that front. I'd definitely check with a broker in the area to be sure though.

You need this, along with letters from your current mortgage holders showing you have always been on time making those payments; as well as something showing how long you have tenants in those homes that are rented out. For instance, if those homes are rented and they both have 2 year leases taken out, you need to provide those.
The economy is different and even though we had a great income to debt ratio, and credit scores that are awesome and good income.... we went through the wringer when it came to the rental property we owned - even though we had a renter in there that paid. So many questions!!!! I got very irritated - I wanted to kick a kitten! Thankfully we got the mortgage we needed, and then we SOLD that other house two months later! Wooohooo!

 

[kathie859]

OP---retired loan officer for a major bank here. The secret to success for your application will be in the documentation. Since your incomes are increasing, that's a positive. The underwriter will take the most conservative number by either averaging last year (or 2) plus current YTD income and dividing it by the total number of months or may take the new salary--it depends whether there's any bonus or commission income in the higher number. If you don't have a history of being a landlord, that income from the rent of a cirrent home may not be considered either. This may depend on the type of mortgage you are getting (FHA/VA/Conventinal). The underwriting guidelines vary a tad between mortgage products.
Getting a mortgage used to be a simpler process than it can be now. Frankly, I am SO glad to have retired.

If I were you, I'd make an appointment to meet with a reputable mortgage originator to discuss your situation and to get the best advice. Your bank or credit union is a good place to start.

Good luck!

 

[esk]

We financed a new build last year also. My husband has some credit card debt but we had no other bills or loans. However, my income was smaller (I can choose to work part or full time). The underwriter took DH's income and my lowest possible income and used that. We also had 20% down payment cash.

We didn't want to go with the max possible loan either...new builds are money pits. Between the sprinkler system and the window treatments and landscaping and upgrades (outlets were $85 a piece!), we wanted to have a nice cushion between what we could afford and what they said we could afford.

One thing -- we were using my salary to build up the down payment and I was moving it into a special savings account, as well as selling some mutual funds, etc, for that down payment. I had to literally show that transaction trail -- any single in or out expenditure into the down payment savings account had to be shown point of origin (uh, salary), date transferred in, etc. No matter that the down payment was about 15% of our total assets in the bank but still had to prove, where did I get that money from?

Also, since you are building, I lurked big time on gardenweb.com -- it was a huge trove of information on building, and was incredibly helpful. Good luck! This being our first build, we already have some "Hmm, next time I don't think we'll do that" thoughts....like south facing exposure on the picture windows, island layout in the kitchen, reinforce the bathrooms so you don't hear every sound, etc....

 

[bdcp]

Lenders also want the two most recent paystubs which will show your income increase for the current year. We have owned 4 homes, 3 of which were new builds and we've refinanced at least once in each home. We're currently in the process of refinancing our current mortgage for the second time to get a 4% (or lower) rate. They needed our last couple of years income tax info, two most recent paystubs and other financial info. All standard info requested by mortgage co's.

We've found on new builds that we got the best overall deal using the preferred lender. The rates are usually competitive plus there's always cash incentives to do so. Our current home, we originally got 20K in free upgrades plus 10K in closing costs to use their lender and got a great rate. The refi we're currently doing, we're getting a lender credit that we'll use toward the VA funding fee. This will be only the second time we've used VA as it usually just isn't as competitive, but currently it is. We've had FA, FHA and conventional loans over the last 30 years. So, this is probably our 9th mortgage on 4 homes. The most painful one was about 2 years ago using our current lender (wells fargo). They are very difficult most of the time to deal with.

 

[disneymagicgirl]

OP---retired loan officer for a major bank here. The secret to success for your application will be in the documentation. Since your incomes are increasing, that's a positive. The underwriter will take the most conservative number by either averaging last year (or 2) plus current YTD income and dividing it by the total number of months or may take the new salary--it depends whether there's any bonus or commission income in the higher number. If you don't have a history of being a landlord, that income from the rent of a cirrent home may not be considered either. This may depend on the type of mortgage you are getting (FHA/VA/Conventinal). The underwriting guidelines vary a tad between mortgage products.
Getting a mortgage used to be a simpler process than it can be now. Frankly, I am SO glad to have retired.

If I were you, I'd make an appointment to meet with a reputable mortgage originator to discuss your situation and to get the best advice. Your bank or credit union is a good place to start.

Good luck!

Awesome! Thansk for your input. You answered my question in regards to income , just how I thought. I was thinking waiting til Jan would be beneficial b/c it would make the much lower income year of 2010 much less important, as they would average 2011 and 2012.

As far as the rentals props go, we have been landlords since 2008 so that's a non issue. We have all the required documentation and I understand how the rental income/debt is calculated. It would obviously be great if we didn't have those properties, but not much we can do about it. Hopefully they will be a good long term investment.

My RE agent sent me the names of 3 mortgage brokers, so I will prob shoot one of them our numbers and that will give us a better idea of what we can expect.

Are any of those online calculators pretty close to accurate?

 

[disneymagicgirl]

Lenders also want the two most recent paystubs which will show your income increase for the current year. We have owned 4 homes, 3 of which were new builds and we've refinanced at least once in each home. We're currently in the process of refinancing our current mortgage for the second time to get a 4% (or lower) rate. They needed our last couple of years income tax info, two most recent paystubs and other financial info. All standard info requested by mortgage co's.

We've found on new builds that we got the best overall deal using the preferred lender. The rates are usually competitive plus there's always cash incentives to do so. Our current home, we originally got 20K in free upgrades plus 10K in closing costs to use their lender and got a great rate. The refi we're currently doing, we're getting a lender credit that we'll use toward the VA funding fee. This will be only the second time we've used VA as it usually just isn't as competitive, but currently it is. We've had FA, FHA and conventional loans over the last 30 years. So, this is probably our 9th mortgage on 4 homes. The most painful one was about 2 years ago using our current lender (wells fargo). They are very difficult most of the time to deal with.

We used WF for a small car loan and it was like pulling teeth. Ridiculous! Never again!