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So I'm considering buying a first house but looking at this thread it seems everyone is against it unless you can put 20% down... I live in the Denver/Boulder area as a first time home buyer, I'm hard pressed to find anything under 200k, PMI is tax deductible if you're under 100k, why else does only this thread think it's a bad idea to take an FHA loan etc? How do you get into a house? I've been talking to a roommate (older gentlemen) who owned a real estate company for many years etc, and thinks I should buy, including most other people I've talked to, so just trying to hear all sides of the story. Also since I'm posting, can anyone recommend a good real estate agent for the area? I work in Louisville.
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Dec 21, 2015 20:22
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The answer is, generally, if you don't have 20% down, how are you going to deal with a roof suddenly needing fixing, your water heater breaking, etc? Why should you buy a house and face the risk that comes along with it? If your answer is "it's cheaper than renting", then you should not buy.
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Dec 21, 2015 20:26
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Mr. Crow posted:So I'm considering buying a first house You get into a house by saving up enough money to minimize the risk of encountering financial hardship when normal house poo poo happens. Most people who haven't owned a house neglect a bunch of the poo poo possibilities at first glance because they haven't lived through it before. Everybody thinks you should buy a house but you'll notice they will never actually run the numbers for you or consider your actual circumstances. Why do you want to buy a house and why can't you wait a few years until you have the money saved up? A house is a bunch of complicated interacting systems all stuck together. Any one of them could get hosed up tomorrow, and the price tag will be somewhere between 3 figures and 5 figures. You won't know 'til it happens! The insurance on FHA loans has gotten pretty expensive, I didn't find them attractive before the changes and I definitely don't now. slap me silly fucked around with this message at 20:42 on Dec 21, 2015 |
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Dec 21, 2015 20:39
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To be clear, though, having the money for a decent down payment is separate from having the money to afford sudden major maintenance and repair projects. The reason you need a decent down payment: -PMI/MIP still costs money. Tax deductible doesn't mean free, especially when you subtract what your total itemized deduction would be from what your standard deduction would be, and get a positive number. -Worse, FHA mortage insurance is difficult to get rid of. It no longer automatically goes away when you hit 78% loan-to-value. You may have to refinance in order to get rid of it. -Plus there's a large up-front premium -Also you can't rent out a home you bought with an FHA loan, and there are other restrictions -Your monthly payments go to interest and principal. The less down payment you make, the more your payments in the early years of your mortgage will be interest. With like 5% down, the amount of actual principal you're paying each month is miniscule. Which means -Your exposure to the real estate market is dangerous. If you have a reasonable amount of equity (say, 20%), you can afford to sell your house even if it goes down 10% in price. If you only put a 3.5% down payment, you're underwater from day one, because it costs around 6% to 10% of the house's value just to sell it. A drop in price of 10% means if you have to sell for any reason within the first few years, you'll have to bring many thousands of dollars to closing, just to walk away free and clear with nothing. -Your inability to save a reasonable down payment suggests you are not good at saving money. If you are going to own a home, you need to be good at saving money. Everyone who owns a home needs to have the savings, after paying their down payment, to handle the sudden costly repairs that a home can require. Being so cash-poor that you can't manage a down payment strongly implies you're also too cash-poor to handle a major home repair, though, and having almost zero equity in your home means you don't have the option of paying for a major repair using a home equity line-of-credit either.
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Dec 21, 2015 21:09
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Mr. Crow posted:I've been talking to a roommate (older gentlemen) who owned a real estate company for many years etc, and thinks I should buy, including most other people I've talked to, so just trying to hear all sides of the story. Ask a bunch of your friends and family if you need to lose twenty pounds. They all say no, you're fine, you're not fat. Then post a picture of your gut on YLLS and they tell you you're a fatass who needs to hit the gym. Who do you really believe? Who do you want to believe? Right now, you need to hit the financial gym. How can you not save up $40k and expect to be able to buy a house? Seriously, even if that's one year's salary for you, you can easily save that in less than 5 years with some scrimping and saving. Why is it the default that you should be able to buy a house when you haven't made any reasonable sacrifices yet to afford one? Why do you want to jump into an expensive-rear end purchase without any wiggle room for problems that are definitely going to come up?
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Dec 21, 2015 21:50
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I guess my line of thinking is/was that (very... Very generally) most people get on the house train with a cheap house, take care of it, use the money you make selling your house to get a better house and down payment on the next one etc. I didn't think people actually put 40k+ into savings because that seems really stupid, it would be better to invest that? I mean I can probably save that up in cash in a year or three quickly but most of my savings I have been putting into investments. I have enough in savings for most repairs I would need I think and the rest seems better to invest? I guess I'm using the existence of the FHA/VA loans and other low down payment loans to justify that logic; though maybe it's not ideal. Like I said right now I'm just trying to collect all the information to make the best decision for me.
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Dec 21, 2015 22:56
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Savings doesn't have to mean "savings account", the point is to amass liquid assets that you could spend but don't because you prefer to save. That can reasonably mean a combination of cash savings and liquid post-tax investments. Most people go to casinos and play casino games willingly, it doesn't mean it's a good idea. Buying a house without a large buffer is gambling just the same. It kind of depends on if your question is "I don't have 20% down in assets, why shouldn't I buy a house with only 5%" or "I have 20% down but why should I pay it now instead of keeping it liquid with a smaller down payment", since those are pretty different questions. Are your investments ones that you could reasonably cash out to pay for repairs? Repairs is also a broad category and can be really expensive, as you can see examples of throughout this thread. A random 5-figure repair bill isn't that unlikely to happen some time in your home-owning life, could you weather that with savings while not also having 20% for a down payment?
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Dec 21, 2015 23:10
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Mr. Crow posted:I guess my line of thinking is/was that (very... Very generally) most people get on the house train with a cheap house, take care of it, use the money you make selling your house to get a better house and down payment on the next one etc. I'm highlighting one big assumption here. It's true that over the 60 year period after WWII, a lot of people were fortunate to see their home's value rise significantly, which helped them to build wealth and be able to afford a bigger nicer house later, especially when combined with their rising salary over the course of a career. However, it's not a given that a house's value must rise, and a lot of people experienced the opposite over the last decade. It is true that with a significant down payment, a portion of what you're paying for your monthly housing cost can go to equity, which you can later draw on. But the early years of a 30-year mortgage don't add much equity, so if you only put 3.5% down and then sell in 8 years, you won't see much of that kind of effect. You're instead counting entirely on the house value going up. A lot of people don't think about it that way. A lot of people are financed to the gills, buy new cars they can't really afford on 72-month payment plans, and otherwise live well beyond their means. A frightening proportion of Americans have nothing or nearly nothing saved for retirement. Countless families bring in two good incomes and yet barely make ends meet. One of the ways people validate their own choices is by recommending the same choices to their families and friends, because an echo-chamber of bad advice is indistinguishable from "common sense" and conventional wisdom. In this thread we try to give good advice based on actual experience, doing all of the math, and historical evidence. Some of us fail to follow that advice and it turns out OK, and some of us follow the advice very well and it doesn't turn out great, but that's life, there's risk and luck involved regardless. But I think broadly we're doing a decent job in here of countering the misinformation and conventional wisdom that gets a ridiculously large number of Americans into deep financial trouble when they get in over their heads in real estate.
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Dec 21, 2015 23:22
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The twenty percent down thing is a great rule of thumb but house prices would be like half what they are if it was followed. For example a 400k house in a major metro is modest, and monthly payments about the same as a 300k condo with assessments. 400*.2=80 Another 5k for closing 6 month emergency savings another 20k or more Add in a little more buffer for repairs but I won't even count that That's 105k you need saved up to meet this thread's standard. Something like half of Americans don't even have 1k in the bank. The other alternative is to buy something small to leverage and leave in 5-7 years, pray you time the market, and pay a bunch more in closing costs for the extra transactions. Pmi sucks but it'll cost me 170/mo. Worst case that's about 20k over 10 years. To avoid it I'd have needed to pay another 60k up front. Better choice fiscally, of course, but it didn't happen. I actually know one person with the financial discipline to save up 6 figures, and that person isn't interested in living anywhere but the dumpiest small apartment possible so the advice isn't even useful. mastershakeman fucked around with this message at 00:54 on Dec 22, 2015 |
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Dec 22, 2015 00:50
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We were looking to move earlier this year and any time I asked anyone if they had heard of anything coming up for rent in the area we were looking at the advice I got from 99% of people was BUY BUY BUY even though we weren't planning on staying in the area for more than 3 years max and it would've been a really dumb financial move. Someone even suggested we build a custom home when we couldn't find much for rent  Basically most people are idiots and you should not take their advice on anything unless they have proof they know what they're talking about.We ended up getting a long term lease on a house that was on the market but not selling and the owners gave us carte blanche to do whatever we wanted to it as long as it didn't decrease their ability to sell when we left; but there's still a management company who'll foot the bill if poo poo breaks. It's like home ownership without the financial commitment, it's pretty great.
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Dec 22, 2015 00:58
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mastershakeman posted:For example a 400k house in a major metro is modest, and monthly payments about the same as a 300k condo with assessments. That is not modest at all, your perceptions might be skewed badly. Or maybe you meant "modest" as, modest for a major metro area: but most people don't buy $400k homes even if they live in a major metro area, they spend a lot less and then commute. The Current national average home price is $182,800. So "Most people" are buying houses around $200k or less. So a homebuying family generally should be saving up around $40k to $50k before buying, but can reasonably squeeze by on $30k if they're buying below the median, or have no other significant debt. e. You can also look here for average listing prices by state. Most states are well below $300k, and there are 14 states below $200k. e2. Or you can look at it this way: you probably shouldn't buy a house costing more than around 3 to 3.5 times your household income. So let's say you're buying a $400k house; your household income should be around $133k. In order to save up 100k in five years, you only need to be saving (not counting interest) about $20k a year, which is just 15% of your gross income. If you can't save 15% of your gross income for five years, you might not have the right financial habits for the expenses and risk of home ownership. Leperflesh fucked around with this message at 01:35 on Dec 22, 2015 |
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Dec 22, 2015 01:27
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mastershakeman posted:That's 105k you need saved up to meet this thread's standard. Something like half of Americans don't even have 1k in the bank.
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Dec 22, 2015 01:33
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Leperflesh posted:e. You can also look here for average listing prices by state. Most states are well below $300k, and there are 14 states below $200k. It's so bizarre to me that New Mexico has prices that high, considering that basically 90% of the state is super rural. I guess we can blame Santa Fe.
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Dec 22, 2015 02:00
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Olothreutes posted:It's so bizarre to me that New Mexico has prices that high, considering that basically 90% of the state is super rural. I guess we can blame Santa Fe. That's the thing about an average, though. Total up all the houses in those super-rural areas and they amount to the same number of houses as just one of your smallish towns. Most Americans live in or quite near a city.
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Dec 22, 2015 02:02
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Leperflesh posted:That's the thing about an average, though. Total up all the houses in those super-rural areas and they amount to the same number of houses as just one of your smallish towns. That's true. I also forgot that Los Alamos exists, and that place is not cheap. Something about being the place with the highest per capita number of millionaires and PhDs in the country.
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Dec 22, 2015 02:10
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Leperflesh posted:
Wow... there's a huge discrepancy between listing prices and closed prices, even in hot markets like SF. Error in the data? It's comparing data from Sept-Dec to just the last week so it's not quite apples-to-apples but I don't see why the week of December 9th should be so pricey for listings.
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Dec 22, 2015 03:17
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Median price is probably the more sensible one to compare, since you can talk about 50% of people being on either side.
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Dec 22, 2015 04:11
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mastershakeman posted:The twenty percent down thing is a great rule of thumb but house prices would be like half what they are if it was followed. You say that like it's a bad thing. More reasonably-priced homes means less rent-seeking, less debt, more people able to afford homes, etc. The pros way outweigh the cons. More sane price growth probably would have prevented the insane real estate bubble that sent the entire world into a major financial catastrophe. quote:For example a 400k house in a major metro is modest, and monthly payments about the same as a 300k condo with assessments. Almost half of Americans also make less than $50k/year, before taxes. Buying a 400k house on that kind of income would be a really dumbshit thing to do, even with 20% down that'd be almost all of your net income going into your home. quote:The other alternative is to buy something small to leverage and leave in 5-7 years, pray you time the market, and pay a bunch more in closing costs for the extra transactions. Prayer is not a good investment strategy quote:Pmi sucks but it'll cost me 170/mo. Worst case that's about 20k over 10 years. To avoid it I'd have needed to pay another 60k up front. Better choice fiscally, of course, but it didn't happen. I actually know one person with the financial discipline to save up 6 figures, and that person isn't interested in living anywhere but the dumpiest small apartment possible so the advice isn't even useful. "Most people don't have the financial discipline to save $100k" is not a good reason to tell people that they should jump into 3.5% FHA loans.
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Dec 22, 2015 08:21
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Mr. Crow posted:I guess my line of thinking is/was that (very... Very generally) most people get on the house train with a cheap house, take care of it, use the money you make selling your house to get a better house and down payment on the next one etc. Put your money into mutual funds. I think that most people in the thread count that as "saving"; money in a mutual fund is technically money that you can lose on a market downswing, but on average over time it's basically a high yield savings account. FHA/VA loans are kind of nice in a big picture sense, they exist so that people in high-rent low-value areas can afford to buy a house without having a ton of saved money and that's cool. That said, getting an FHA loan is often a terrible idea from a financial perspective, for reasons that others have already explained. Also, you probably don't even need to think about an FHA loan; you can do as little as 5% down on a traditional mortgage (you'll pay PMI, but it'll be both cheaper and easier than FHA). How long ago did your room mate own his real estate company, before the bubble popped I'm assuming? Does your room mate have access to your financial information for some reason? The only person qualified to tell you whether or not you can afford to buy a house is you, or maybe your financial planner if you have one of those. The mantra of this thread is to get your finances figured out first, then figure out how much extra you'd be comfortable losing each month, then figure out whether homeownership is even a reasonable choice for your area, then look at houses. For some reason people usually skip the first 2-3 steps in that process, which is crazy. If you really find a dream house at some killer price then it's okay to buy with less than 20% down, but committing yourself to paying less than 20% down when you don't already have a house picked out is just lol QuarkJets fucked around with this message at 08:46 on Dec 22, 2015 |
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Dec 22, 2015 08:43
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It took a year and a half and looking at probably 100 houses but my wife and I managed to close on a house at the beginning of this month. Very established area, hits the exact school I've been wanting our son to go to and a traditional style house that is very well built. Has some flaws, some cracks here and there, but is damned solid for a 50 year home. Bonus is the house is built like a tank... true brick and block walls that we found out during inspections. Ran into our first joys of homeownership this week. Old tile bathroom to metal bathtub surround is leaky, causing some water to drip into the wall in family room downstairs. Being this oddly warm winter we aren't doing much for exterior work until it gets solidly warmer in spring, but we are making a big list of deferred maintenance items to sort out one by one. Its been stressful worrying about certain things, although most of that is calming down at this stage. The ole find a crack or something else that's weird, but then telling yourself the place is 52 years old and has fewer squeaks and creaks than anything else we've seen, and its not a problem. We have our second child due in March, so having more than the two bedrooms in our old apartment is a huge stress-reliever. As crazy as it sounds, I can't wait for the baby to be born so I can start focusing and worrying on him than the house! Overall by biggest advice looking back is knowing exactly what your budget limits are going in (factor in worst case scenarios) and do plenty of walkthroughs or open houses before thinking of making any offer. As a side note, below is how our budget changed through the past 18 months: First week: Started looking at 220-270 Second week: Bumped up to 300k First contract: 365k Second contract: 335k Third contract: 324k Almost fourth contract where we missed a great house with offer too low: 260k (280k sold) Almost fourth contract where we almost boned ourselves on max price: 370k Fourth contract: 315k Started trying for 2nd baby, got pregnant, planned our costs for 2 kids in daycare Final contract: 275k We started off in the price range that was most comfortable, kept bumping it up to chase cool properties, missed out on a house that was in our original budget, almost blew apart our budget on one house, then settled in on a house right where we started. At the 275k pricerange we can just scrape by with the 1900 added for daycare for two kids. If we had purchased higher we would have priced ourselves out of having a second child. EDIT House was 275k, no repairs from inspection, sellers covered 3k in closing costs, plus an additional 300 to cover owners title insurance. Went for a conventional 30y loan, 5% down with a 4% interest rate. Taxes in this area are close to 2.2% (fantastic schools). Our yearly homeowners insurance was around 1200. Gas/Electric average is 150-160 a month, water is about 30 bucks, trash is around 20 bucks. dietcokefiend fucked around with this message at 15:21 on Dec 22, 2015 |
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Dec 22, 2015 15:17
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QuarkJets posted:Put your money into mutual funds. I think that most people in the thread count that as "saving"; money in a mutual fund is technically money that you can lose on a market downswing, but on average over time it's basically a high yield savings account. Maybe you are confusing mutual funds with something else but mutual funds can and do lose money in a much more than technical sense, and they are an extremely diverse group of risk investments nothing at all like a high yield savings account
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Dec 22, 2015 16:36
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Bought my house in March 2014 for about $240K and put 5% down. Currently owe $220K and it's worth about $280K so I can hopefully get my $98 a month PMI removed in about 3 more months (2 years of payments required) 
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Dec 22, 2015 17:14
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How much do income variations from year to year matter for getting a good mortgage (e.g. for full amount and with a good interest rate) when they are voluntary? I would be putting 20% down. I have one of the stablest jobs imaginable, but every 3-4 years I am eligible to (and intend to) take a salary reduction of between 20-50% in order to free up time from teaching to pursue my research (which, in turn, actually helps with annual pay raises for several years afterwards, though that isn't the main reason I do it). I can also opt to do some extra teaching to make 10-20k extra basically any time I feel like it (though that interferes with my research and, likely, my annual raises). My wife's part-time work varies quite a bit from year to year as well, though it is less stable than mine (e.g. the work isn't always there when she wants it, though she can usually get something). In short, is there anything we should be aware of when planning to get a mortgage a few years down the road? Would it be a very bad idea to do it in a year when I was on, say, 60% salary? The year after being on 60% salary? Will they care about/understand the circumstances?
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Dec 22, 2015 17:54
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BEHOLD: MY CAPE posted:Maybe you are confusing mutual funds with something else but mutual funds can and do lose money in a much more than technical sense, and they are an extremely diverse group of risk investments nothing at all like a high yield savings account No, I'm not confused; that's why I even stated that you can lose money with a mutual fund. But an often-winning strategy is to not worry about any downswings, because you're so diversified that you'll very likely come out ahead. striking-wolf posted:How much do income variations from year to year matter for getting a good mortgage (e.g. for full amount and with a good interest rate) when they are voluntary? I would be putting 20% down. It will probably freak out your underwriter, so you probably should try to not be on a reduced salary while applying for a mortgage (unless your reduced salary is way more than you'd need for mortgage payments anyway)
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Dec 22, 2015 19:10
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striking-wolf posted:In short, is there anything we should be aware of when planning to get a mortgage a few years down the road? Would it be a very bad idea to do it in a year when I was on, say, 60% salary? The year after being on 60% salary? Will they care about/understand the circumstances? This all depends on what 60% salary is and what size of mortgage you're going for. They will probably treat your salary as being the worst case scenario, i.e. if you do it in a 60% salary year they'll consider that salary for whether you can make payments. If 60% salary is $70,000 and you're trying to get a $140,000 mortgage, that's probably not a problem. If 60% salary is $40,000 and you're trying to get a $250,000 home, it probably will be.
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Dec 22, 2015 19:37
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I think they just look at your last two pay stubs if you have been at the same job, unless you are self employed then they want two years tax returns. Not that you should try to qualify for more then you can afford but it is very easy to do.
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Dec 22, 2015 19:45
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QuarkJets posted:No, I'm not confused; that's why I even stated that you can lose money with a mutual fund. But an often-winning strategy is to not worry about any downswings, because you're so diversified that you'll very likely come out ahead. This is dangerously incomplete advice. Investing for retirement with a multi-decadal time frame, a diversified portfolio of passively managed index-based mutual funds is diversified and likely to come out ahead, based on how well such a portfolio has tended to perform over most 40-year periods of the past century. Any given mutual fund can have any risk profile, fees, etc. and the large majority of funds are poo poo. And over the five or so year timeframe someone is looking at for saving a down payment, mutual funds are way too risky. Savings over that period should be in CDs, money market accounts, high-interest savings accounts, or inflation-proof bonds. Not the stock or bond markets.
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Dec 22, 2015 20:55
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Ehh I think pulling money out of your index funds to save them specifically for a down payment is a little much. Personally I'd rather compromise on when I buy property than leave money out of investment accounts for that purpose, but I get that that's atypical.
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Dec 22, 2015 23:05
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Historically there have been periods of 10+ years when the market was down. Unless your housebuying flexibility extends beyond a decade or more, you are risking not having enough for your down payment / having to sell while down, if you're taking that level of risk with the money. In any case the most important thing here is "just buy a mutual fund" is crazy. Which mutual fund? For how long? Do you think you can time the market, and are you advising someone to do that? 
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Dec 22, 2015 23:09
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Leperflesh posted:Historically there have been periods of 10+ years when the market was down. Unless your housebuying flexibility extends beyond a decade or more, you are risking not having enough for your down payment / having to sell while down, if you're taking that level of risk with the money. You are definitely right about "just buy a mutual fund" being weird/vague advice, it's somewhat better if you replace "mutual" with "index" but that's outside the scope of this thread.
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Dec 22, 2015 23:29
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no idea how i doubleposted, sorry
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Dec 22, 2015 23:29
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Jeffrey of YOSPOS posted:Is selling while you're down really different from selling before the market goes up? They're quite analogous. Taking money out is a prediction things will go down and you pay opportunity cost if you're wrong. It's only if you are buying a house with most of your post-tax net worth *and* it's a life goal with a deadline that you need to worry about time frames like that. Time value of money factors in. Taking money out now (and using it for something) is different from taking the same amount of money out later. But ultimately what matters is your intent; if you're saving for a house, you exchange the opportunity cost of (on average, over a 40+ year timeline) earnings, for the security of a low-risk investment option that assures you can buy when you planned to buy. This actually goes directly to another piece of advice we generally toss around in this thread: you shouldn't be buying a house if you think you're likely to need to sell it in just a few years. You're gambling that appreciation will counterbalance all the costs, and in the early years of a 30 year mortgage, you're not accumulating equity fast enough to mitigate that risk. They're really similar pieces of advice... when it comes to your house, you're already taking on lots of risk (from all the unknown factors inherent in purchasing a big complicated expensive structure subject to natural disasters, economic forces, legal regulation, etc.) - so you should envelop that high risk with strategies for low-risk wherever you can. We discuss the vagaries of long-term investing in this thread, which is where advice about mutual funds belongs, of course; for the large majority of people, though, saving for a down payment is not a long-term investment. It's a short to medium term one, and ought to be treated accordingly.
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Dec 22, 2015 23:36
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Thesaurus posted:Abandon all hope... Federal employee that's top 3% or so of single income earners/top 15% or so of households. Not rich but doing just fine as far as income goes. Brigdh posted:Yes its still crazy, and yes, it extends to Longmont as well. The rental market isn't much better. I doubt I'd be looking to buy right away, but in my cursory searches, prices don't seem to be that bad. They're obviously not as low as KC, but I've found plenty of decent looking places for under $300k. Also obviously not quite what I can get here in KC for the same kind of money. To be fair, a lot of what I'm seeing are hideous houses from the late 60's/70's that haven't been updated at all. Is there the same issue with all cash offers that there is in other places? That's the kind of poo poo that would absolutely keep me out of a house.
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Dec 22, 2015 23:41
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We ended up only putting 15% on our place, but we're also on a non-FHA loan and our PMI is only about $30/mo, and we can drop it if our home ends up re-appraising higher (which we hope will happen before we hit the 20% mark, as we're pouring money into this place ASAP). And different markets are different beasts. In the nicer areas of the South Side of Chicago you're looking in the $200-500k range, and you're looking at homes well over a century old. Same goes for a lot of the north side, but double that price range. Saying that $400k is the entry level for Chicago Metro is poppycock. At that range you're either narrowing your search to the North side/North Shore, stuff over 2000 sq ft, or both. If you're really daring $200k gets you a 16 bed/10 bath/2 kitchen abandoned nunnery in a really rough south side neighborhood.
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Dec 23, 2015 01:21
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striking-wolf posted:How much do income variations from year to year matter for getting a good mortgage (e.g. for full amount and with a good interest rate) when they are voluntary? I would be putting 20% down. To start, generally for most lenders/types of loans your debt to income ratio doesn't influence the rate offered to you as that can end up in weird situations where your high DTI causes you to get a higher interest rate and then maybe you don't qualify for the loan anymore. Factors like credit score, loan to value, loan amount, product type (fixed vs adjustable, terms thereof), loan purpose (purchase vs rate/term refinance vs cash out refinance), and type of property are the main factors that influence your available rates. That said, yeah that could be problematic depending on your specific circumstances and figures involved. As Nail Rat mentioned, if your income at 60% is enough to carry the mortgage anyway then it's less likely to be an issue - declining income is usually frowned upon but if your employer confirms the circumstances of the reduced current salary/YTD earnings being lower than historical years is due to this research role but that you'll be returning to your regular salary of $X in 5 months or whatever then the underwriter will probably be OK with just using the 60% figure and approving the loan. If you can't qualify at 60% (or whatever reduced figure), then things can get dicey. The typical documentation requirement for a wage earner is the current year to date pay stub along with at least the prior year W-2. Depending on your compensation structure (OT, bonus, commission usually), the product's guidelines, and some other factors they may require 2 years of W-2s. If you're currently in your research phase when you're doing your loan then it's more likely that you're going to have to use your current earnings even with the documented circumstances due to declining income + lenders aren't supposed to use projected future income (i.e. your regular non research based wages) to qualify. If you had come out of the research phase earlier in the year/year before/whatever and an explanation of the circumstances was provided by your employer as to why you're earning so much more now than the previous year or whatever would likely mean you can use your regular higher earnings. Every lender is different so YMMV of course, but that's generally how it's looked at by the industry as a whole these days. As for your wife's part time income - that one is also going to be somewhat situational. Generally, part time earnings require a 2 year history of receipt (average over the full 2 years unless declining in which case more likely to use current income) and the lender will want to see that said earnings are considered stable - worked ~10 hours per week on average for the school board for 2 years, does seasonal work as an accountant from January to April every year, that sort of thing. If she's constantly changing part time jobs/industries then that may be a concern for stability purposes as it suggests she's unable to keep a job.
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Dec 23, 2015 01:44
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Thanks for the advice Nail Rat and Captain Windex! 60% salary might not be enough to get a mortgage for the amount we want, so I'll try to be careful not to schedule my research year when we're trying to get a mortgage (or, if I can manage it, the year right before).
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Dec 23, 2015 02:46
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Now that I've been in my house for three months it feels like it is actually kind of mine! After I fixed some miswired switches.
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Dec 23, 2015 20:49
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Bozart posted:Now that I've been in my house for three months it feels like it is actually kind of mine! After I fixed some miswired switches. Well, partially yours, but still overwhelmingly your lenders' house.
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Dec 23, 2015 22:01
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OSU_Matthew posted:Well, partially yours, but still overwhelmingly your lenders' house. People like to say this but no, you're fully legally on the hook for whatever disasters befall your house, for all of the losses in value it takes, etc. Your lender just "owns" it if you stop paying. If you live in a recourse state, you can even still owe them whatever is leftover after they hock your house at auction and apply the proceeds to your debt. So the lender is, nominally, insulated from all the responsibilities and risks of home ownership; they're just the holders of a secured debt. Of course you probably knew that, I just think it generally bears repeating.
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Dec 24, 2015 03:10
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You do also get all the upside if it increases in value. It'd suck if your house going up 100k meant you just owed more money to buy out the bank's remaining portion.
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Dec 24, 2015 09:53
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