My husband & I are buying our 1st home and prequalify for 200K, is there a creative way to borrow 350K?

Question

We have been renting a house and paying $1900 a month and feel that we can continue to handle this amount in housing. However our income limits us to prequalify for 200K. The prequalification is based on standard formulas on real estate sites. We are looking for a house in the $300 to $360 range. Would a lender give us a second loan to cover the difference? We'll have about $15k in cash to work with as a downpayment / closing costs. If it makes a difference we are moving to New Orleans, LA. Any recommendations or assistance is appreciated.

Our monthly income is $4166, our debt is $325 (car loan).

Thanks for the great answers.

Answer 1

Okay, first, never do the "second lender" thing. That doesn't make any sense-- you get astronomical rates ont he second mortgage.

Second, the online sites often do the 30% benchmark, when in reality lenders often do more like 40 and sometimes even 50% debt to income.

Third, 350K IS NOT 1900 a month. YOu're missing taxes and insurance, is my guess. 1900 a month is more like 250K. 350K runs you into the $2500 a month range.

the 15K is great....put about 10K towards your down and 5K in closing costs...however, here's a helpful hint: If you have a car payments, using that 10K to pay off the cars can often qualify you for much more than putting that 10K down. For instance, if you have a 300$ car payment and its got 10K or less left, pay it off and then you'll qualify for as much as 60K more in a house.

But wait to pay it off becuase it could effect your credit score. You can even have it paid out of closing to guarenteen it wont effect that score.


Allthat said, if you have over 700 in your credit scores, you can get a "no income verification loan" which means they dont ask how much you make, and you can qualify for as much as you want-- but it will be .5% - 1% higher in interest.

Answer 2

You have caviar tastes, but unfortunately you don't have the wealth to match it.

The prequalification is not based on what you "feel" that you can handle. It is based on experience and formulas that dictate how much you can afford.

It's time to pull out your bank book and write yourself a "reality check".

When you start to look for "creative" ways to pimp the system, you are setting yourself up for a personal tragedy.

If you are going to be in New Orleans, you are probably going to need to keep a little "maintenance" money on the side. And furthermore, you need to give yourself a little "breathing room" when you have a mortgage because maintaining a house is SERIOUS business.

If you qualify for $200,000 -- that's what you should be looking for and trust me, you will be breathing a sigh of collective relief when the storm comes and you were able to save more with a smaller mortgage payment.

This is not about what you deserve or what you "feel" you deserve -- this is about what you can afford.

Pay attention to the red flags before you stall out before the finish line.

Answer 3

On your monthly income, do NOT buy a home for $350,000 That is way more than you can afford. Your mortgage payment, plus property taxes (high) and insurance on this price of home will be way more than you can afford.
Plus housing prices are dropping. You could get stuck with an overpriced home you can't sell.

Take a hint - buy a home you prequalified for. Trust me, when you buy your own home, there is so much you will want to do to it. You'll be able to find some nice houses to consider in your price range.
I recommend books by Robert Irwin...

Answer 4

Aaahhh, beer budget and fine wine tastes. This will get you in trouble fast. Go back to beer.

The federal government (that is to say me and the rest of the public) bailed out savings and loans companies and banks in the late 1980's to the mid 1990's because of bad loans, some from fradulent appraisals, many because of loans gone bad that were just like what you propose: people got in over their heads. The rules are there for a reason: to protect you, and to protect me from people living beyond their means and having to bail lenders out. Heard of the FDIC? If you commit fraudul to get approval to buy a property you can, will and deserve to serve jail time if caught. Is it worth the risk? Ratios are used to determine how much home to buy for a reason. They want you to be able to make the payments. Foreclosures cost all of us money in the form of higher interest rates- the lender has to cover it somehow. If you qualify for a $200K mortgage stay in that range. Going beyond that flirts with disaster. You do not want to be house poor or broke and bankrupt.

New Orleans should be a bargain at this time. Good luck in getting a dry place to live- mold free, and remember that you need flood insurance. I was just north of there last October with a diaster relief crew. N.O. lies 5 ft below sea level; it can and will flood again.

A smarter thing to do is buy BELOW what you can afford and hammer the balance to or near zero over a couple years. Then sell that home and buy that pie in the sky home. You will then have enough funds to safely buy what you want. That builds your wealth safely and reduces odds that your home will be foreclosed on. Living above your means is not wise. I've seen too many people do it, they later could not even afford go out to dinner. If you need B-C lenders to do this deal, you do not need this deal.

I'm actually disappointed in the lenders who suggest ways to buy this house using your current income. They are offering to help you get the deal done because they will make money on the loan with the origination fee, discount fee (if charged) and other fees that actually increase their yield. Then they sell the loan to a servicing company like Countrywide or Washington Mutual which, after 1 year they are off scot-free and will not have to buy it back if it goes bad. Odds are that you will make the first yr, then began to struggle beyond that, as the car breaks down, you need clothes, want a vacation, or what ever it may be. Or you divorce. Neither can afford teh home then, and if it does not sell quickly (possible at a loss) then you may loose the home if payments can n o tbe kept up.

I've seen a variety of failed loans like this, it happens to good intended people every day. The lender was making money rather than servicing the client. I've walked away from several deals because my conscious would not allow me to participate in such and assist in setting people up for a major potential fall. I do like money, and do well in real estate but doing what is right by the client is most important. And advising against diaster is always right.

Buy what you can afford, avoid potential bankruptcy and preserve your credit. Then buy when you are better positioned. A real estate slow down is coming, already in some areas with falling prices. New Orleans should have bargins available already. Choose wisely.

Answer 5

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Answer 6

well to keep it simple yes you could get a loan with that monthly and for over a $350,000 it just takes a little creativity like a stated program. If you need some help go ahead and give me an email [e-mail]

Answer 7

Just wait that 400k home will soon be 125k

this web site will tell why.
http://www.breakingbubble.com/index.htm

Answer 8

What is your credit score - and Income - Lenders look at your income, debit ratio, and the middle credit score of the 3 scores you get from the bureaus.

A 300,000 loan at 7 percent will run you $1995.90 over a 30 year period. There are now 40 year and 50 year payment options that will lower your monthly payment, do not recommend them, but have done them, to where you get into the home you are wanting, there are also interest only loans for the frist 5 years, than the payments goes up, unless you refinance at the end of the 5 yr period.

Lenders take into consideration your DTI - Debit to Income Ratio - on a Conforming Client, your DTI would be 45 percent, Sub-prime 55 Percent and on a FHA 43 Percent. The formula is this:

Income divided by 12 - debit (what is on your credit report) not what you pay for utilities, cell phone, car insurance, etc. - Taxes and Insurance for the home = workable income x 45 percent, 55 percent, or 43 percent.

Say you make 50,000 year divided by 12 = 4,166.67
Taxes and Insurance on the HOME - 2000.00 year divided by 12 = 166.67 mo.

Debit - auto and 3 charge cards = 600.00 mo
Subtract the above and you get $3,400.00 income x 45 percent = 1530.00 Conforming
3400.00 x 55 percent = 1870.00 Subprine
3400.00 x 43 percent = 1462.00 FHA

Conforming is better interest rates - with a higher credit score. Sub-Prime is 500 - 600 credit score, sometimes up to 630 middle score.

Do not mean to confuse you, just trying to give you an idea of what is out there. Ok!

Some things to consider:

Lenders look at the middle score to qualify a person - With a 580 or higher you can get a 100 percent loan. If your credit is low, than you will be going SUB-Prime, and any amount over 80 percent does not have MI - There are alot of companies I underwrite for that does NOT charge MI - normally the rate is slightly higher. Say you got qualified and your rate was 8.50 at par (Par, means that is what rate the lender quotes you, with no addon's to the rate for the lender to make pts on the back - some Lo"s add pts on the rate to make their money - instead of charging it up front). The 8.50 does not have MI included. This is a estimate only - ok -


If you go with a FHA loan, FHA has MI included. (With a 580 + you will be going sub-prime the rates are higher by about a 1 percent, but you have no MI. (MI is mortgage insurance in case you default on the loan, it is a way for lenders to have added insurance. It is not the same as Home Owners insurance, ok) VA loans do not have MI insurance.

Conforming A+ borrower's loans have MI included, but the rates are better starting in the mid to high 6's (with rates going up.) The more money you borrow - the higher the rate normally. There are a lot of factors involved.

With a government loan - collections and judgements will have to be paid (most ppl do not know that) but for FHA it is true....


Go to these websites

http://www.nehemiahcorp.org/

http://www.fanniemaefoundation.org/...
http://www.fha-home-loans.com/

http://www.freddiemac.com/

http://www.thewinproject.org/links.htm...

It greatly depends if you need help with closing cost, (The seller could do Seller Help toward your closing cost). If that is the case, I normally tell my clients NOT to hackle over the price, since you are asking for closing cost help - especially if the home is thru a realitor, and the seller has to pay the realitor their fee which runs from 3-6 percent of the selling price, and you ask for 3-5 percent toward closing cost -assistance) Follow me so far??

Talk with a broker, a broker underwrites for many company's (I underwrite for 150 companies) so I only have to pull credit 1 time, and they look at my credit. A single lender (not a broker) has programs available, but they may not be able to help you and your situation, so you go elsewhere, and than that person pulls your credit (see what I mean.) If you shop, your credit is pulled and that is considered a soft pull, for a 30 day period. Just like shopping for a auto, it is good for 30 days. If you apply for a credit card, that is considered a "hard" pull and it drags down your credit score. When looking for a home, please do not apply for a credit card, Department Charge Card, Gasoline Card or make any major purchases, like a auto, etc. This will pull your credit down.


Try to find someone (broker) that will pull your credit one time, and submit your loan application to company's that will go off his credit report. By the way, a loan application is called a 1003, and they will issue you a GFE (Good Faith estimate, with-in 3 days, that is per the RESPA laws, and the TIL (Truth in Lending). The GFE will tell you the up-front closing cost associated with your loan. The TIL will tell you the terms, rate associated with your loan. This is a estimate only - not the final - but it does help you figure things out.


Good Luck, and if I can help in any way check out my web site, for links to all the credit reporting agency's and other useful information. This is not an advertisement - just helpful information for you...


Decided on the type of program (loan ) you are wanting. A 30 yr fix is still roughly at a 6.5 rate right now - but if you are needing a 90 percent ltv the rate is around 7 percent and a 95 ltv is 7.375 and a 100 percent rate is 7.5 ( This is a estimate only, since I do not know what your credit score's are....There are also, interest only loans - adjustable loans, option arms (where you pick the payment, from 4 payments, including interest only). Interest only are lower payments, but nothing is being paid on your home. Some self-employed ppl like the payment options, in a lean month when money is tight., they can pay a lesser amount.

As I mentioned to you, Good Luck - the Loan Process can be fun - at least I love being a Broker, getting to help my clients is rewarding to me. Find a Broker who cares and will go over the full loan process with you and be in contact with you daily. The one on one customer service is important, to you, the client, to let you know the whole loan process.


Welcome to the USDA Income and Property Eligibility Site

http://eligibility.sc.egov.usda.gov/eligibility/welcomeAction.do

1. This site is used to determine eligibility for certain USDA home loan programs. In order to be eligible for many USDA loans, household income must meet certain guidelines. Also, the home to be purchased must be located in an eligible rural area as defined by USDA.
To learn more about a USDA home loan program, click on the Loan Program Basics link on the left side of this screen and select one of USDA's home loan programs.
To determine if a property is located in an eligible rural area, click on the Property Eligibility link on the left side of the screen and select a Rural Development program. When you select a Rural Development program, you will be directed to the appropriate property eligibility screen for the Rural Development loan program you selected.
To determine income eligibility of an applicant/household, click on the Income Eligibility link on the left side of the screen and select a Rural Development program. When you select a Rural Development program, you will be directed to the appropriate income eligibility screen for the Rural Development loan program you selected.
To find out how to apply for a Rural Development Loan, click on the Contact Us link on the left side of the screen and then select a Rural Development Loan program.


Rural Housing Direct Loans are loans that are directly funded by the Government. These loans are available for low- and very low-income households to obtain homeownership. Applicants may obtain 100% financing to purchase an existing dwelling, purchase a site and construct a dwelling, or purchase newly constructed dwellings located in rural areas. Mortgage payments are based on the household's adjusted income. These loans are commonly referred to as Section 502 Direct Loans.
2. Purpose: Section 502 loans are primarily used to help low-income individuals or households purchase homes in rural areas. Funds can be used to build, repair, renovate or relocate a home, or to purchase and prepare sites, including providing water and sewage facilities.
Eligibility: Applicants for direct loans from HCFP must have very low or low incomes. Very low income is defined as below 50 percent of the area median income (AMI); low income is between 50 and 80 percent of AMI; moderate income is 80 to 100 percent of AMI. Click here to review area income limits for this program. Families must be without adequate housing, but be able to afford the mortgage payments, including taxes and insurance, which are typically within 22 to 26 percent of an applicant's income. However, payment subsidy is available to applicants to enhance repayment ability. Applicants must be unable to obtain credit elsewhere, yet have reasonable credit histories. Elderly and disabled persons applying for the program may have incomes up to 80 percent of area median income (AMI).
Terms: Loans are for up to 33 years (38 for those with incomes below 60 percent of AMI and who cannot afford 33-year terms). The term is 30 years for manufactured homes. The promissory note interest rate is set by HCFP based on the Government’s cost of money. However, that interest rate is modified by payment assistance subsidy.
Standards: Under the Section 502 program, housing must be modest in size, design, and cost. Modest housing is property that is considered modest for the area, does not have market value in excess of the applicable area loan limit, and does not have certain prohibited features. Houses constructed, purchased, or rehabilitated must meet the voluntary national model building code adopted by the state and HCFP thermal and site standards. Manufactured housing must be permanently installed and meet the HUD Manufactured Housing Construction and Safety Standards and HCFP thermal and site standards.
Approval: Rural Development officials should make a decision within 30 days of the Rural Development office's receipt of the application.
Basic Instruction: 7 CFR Part 3550 and HB-1-3550

Section 502 Guaranteed Loan Program:
1. Section 502 loans are primarily used to help low-income individuals or households purchase homes in rural areas. Funds can be used to build, repair, renovate or relocate a home, or to purchase and prepare sites, including providing water and sewage facilities.
Eligibility:
Applicants for loans may have an income of up to 115% of the median income for the area. Area income limits for this program are here. Families must be without adequate housing, but be able to afford the mortgage payments, including taxes and insurance. In addition, applicants must have reasonable credit histories.
Approved lenders under the Single Family Housing Guaranteed Loan program include:
Any State housing agency;
Lenders approved by:
HUD for submission of applications for Federal Housing Mortgage Insurance or as an issuer of Ginnie Mae mortgage backed securities;
the U.S. Veterans Administration as a qualified mortgagee;
Fannie Mae for participation in family mortgage loans;
Freddie Mac for participation in family mortgage loans;
Any FCS (Farm Credit System) institution with direct lending authority;
Any lender participating in other USDA Rural Development and/or Farm Service Agency guaranteed loan programs.
Terms: Loans are for 30 years. The promissory note interest rate is set by the lender.
There is no required down payment. The lender must also determine repayment feasibility, using ratios of repayment (gross) income to PITI and to total family debt.
Standards: Under the Section 502 program, housing must be modest in size, design, and cost. Houses constructed, purchased, or rehabilitated must meet the voluntary national model building code adopted by the state and HCFP thermal and site standards. New Manufactured housing must be permanently installed and meet the HUD Manufactured Housing Construction and Safety Standards and HCFP thermal and site standards. Existing manufactured housing will not be guaranteed unless it is already financed with an HCFP direct or guaranteed loan or it is Real Estate Owned (REO) formerly secured by an HCFP direct or guaranteed loan.
Approval: Rural Development officials have the authority to approve most Section 502 loan guarantee requests.
Basic Instruction:7 CFR Part 1980.

If you are a Vet -
VA Loan Information: Visit the home page of the VA. http://www.va.gov/

http://www.vamortgagecenter.com/

The VA has increased their loan limits! The maximum loan amount in most cases is $417,000. The VA also offers some advantages over conventional loans:
Other benefits of a VA Loan:
1. No Down Payment required at closing
2. Lower closing costs than conventional loans
3. No prepayment penalty if you pay off your VA loan early
4. No monthly Private Mortgage Insurance payment
5. The lender is willing to negotiate your interest rate

GOING TO THIS SITE, IS A MUST: http://www.homeloans.va.gov/veteran.htm