mortgage questions

[JHZR2]

Hi,

I have a few questions about getting a mortgage...

Say you want to get a mortgage for a first time home purchase. Say you have family willing to give 1)gift of money 2) private undocumented loan with liberal payback terms 3) private "mortgage" with liberal payback terms and no interest.

How do these effect/change your mortgage qualifiers/metrics? I have top notch credit, a professional salary, no debt... and a fiancee who once out of med school will be making more than me with very little $$$$ in loans.

I am sick of my commute, and the reality is that any house worth living in that lets me live closer than 35 miles worth of traffic is a lot of $$$. Family is willing to help a bit, and with RE as it is, anything helps. I can keep my retirement contributions at ~15% this way, and still have some extra $ for emergencies.

Whats the best way to take money when offered? A straight gift? Pre-purchase and disclose it only as my personal funds?

As I understand it, these applications are truly a pain in the butt, and theyre looking for every excuse to force you into a higher rate mortgage...

Any advice/info would be appreciated.

Thanks,

JMH

 

[Islandvic]

Interest rate generally is decided on your FICO score, and whatever points the lender tacks on.

Gift of money should be used for down payment. Make the seller of the house you buy pay for part or all of your closing costs pplus the 1yr home warranty.

You can usually negotiate lender fees and doc fees. This is the commission the lender makes.

It is very hard to intergrate outside undocumented funds.

Lenders look at FICO, Loan to Value ratio, and debt to available credit ratio. You should utilize no more than 50% of available credit. Anymore lowers the FICO score.

Plus limit any credit checks 6months before shopping for a home loan (cell phone, car purchase, new credit card etc etc). Each credit check (unless a "soft check" from a creditor or a personal inquiry) will knock a FICO 10-15pts per hit.

RE loans for non-investment purchases will seem to stabilize if not go down some this year.

Good luck.

 

[tom slick]

quote:

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How do these effect/change your mortgage qualifiers/metrics?

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how the amount of extra money changes the deal depends on the price of the house.
example;
$20,000 on a $100,000 house is 20% which will get you past the PMI threshold and may be worth putting down. on a $250,000 house $20,000 down changes your monthly payment very little (like $20) but you locked up your saved $20k. That $20k may be better spent fixing up the house or invested somewhere else.

 

[Amkeer]

Majority of loans will not allow you to borrow money for down payment.

If its a no verification type of loan you will need a substantial down payment 20% + and the interest rates will be considerably higher.

 

[Al]

If you are looking at receiving money, I'm sure you are aware that gifts up to 11K per calandar year per contributor are allowed and not reportable. Too bad you just missed Jan cutoff for last calandar year.

Also (I'm sure you took this into account):

Fiance is not wife and
Med Student is not doc. Things and relations can and to go wrong/

And never say never.

 

[The_Jeff]

Treat the undisclosed money as your personal funds. Get a series of $1000-1500 checks to deposit over a series of weeks if they make you feel better.

You will have to sign an onerous looking thing that says the down payment is all your money. As it has already been gifted to you, that is true and legit.

 

[Pablo]

Pretty decent advice on the "grant". And from Al!

Personally I hate borrowing money/receiving from relatives. I "allow" some gifts for the kids college funds, but that's it. I feel slimey or something. Maybe it's just me.

quote:

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2) private undocumented loan with liberal payback terms 3) private "mortgage" with liberal payback terms and no interest.

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Just one practical note. I AM NOT A TAX EXPERT. If you do borrow for the mortgage from a relative, it's not a straight forward tax deduction. Interest earned by the relative will have tax implications for them as well. OTOH If no interest, what are you waiting for?

 

[JHZR2]

pulling the numbers, its tough now to decide...

monthly payment numbers drop very little if I use it as a downpayment; it seems that unless it makes me look good to put more $$$ in the pot from the getgo, I get very little assistance from it.

Better would be to keep it in my ING account making interest, and then saving more of my salary for retirement, etc, and allowing this $$$ to fill in the gaps for a while.

So in a little different twist on the question... do they consider a person sitting on a relatively large pot of cash as having more spending power or be better qualified for more mortgage, even though, say 20k might only bring your monthly payment down less than $100? Im not worried about fico scores, im in a good spot there, and Navy Federal's rates just dropped... but Id like to set myself up for as much qualification as possible. Not that Id take all the $$$ offered to me, but it gives me more flexibility to put more or less dowwn, etc. when I run the final numbers.

Thanks!

JMH

 

[Win]

I think as long as you disclose to the lender that it is, in fact, a gift, there should be no further consequence to you, although there may be a tax implication to the gifter.

The gifter will probably be required to sign an affidavit that the money to you is a gift.

While $20K may not make much of a difference in your loan payment, it may be a substantial reduction in interest over the life of the loan.

 

[The_Jeff]

Just get whatever halfway decent mortgage you can and start living in the place in which you're building equity. I'll own my house when I'm 46.

If you get a 5% down mortgage with PMI the bank will assume you'll pay the minimum and you'll have PMI for 8-10 years... a nice profit center for them. Ergo they might give you a better rate with the PMI-- kind of like massaging the numbers so it looks like you're getting more money for your trade-in when you buy a new car. But if you prepay a little and get reappraised in a rising market you can kill that PMI in a year or two. Real all the fine print of course. And don't assume anything with regards to the future of home valuations, interest rates, jobs, etc.

I hated the premise of PMI (I think everyone does) but I refinanced a year later, got a shorter term, and killed PMI all with one stone!

 

[Amkeer]

like I said earlier you can not come up with a wad of cash for a down payment without it being in your account for a considerable period of time. The lenders frown on money recieved from outside sources for the down payment. They want a paper trail for money down. They want to make sure you have enough funds after closing also.

The PMI or MIP you can request be dropped after the loan to value hits 80%.

 

[Amkeer]

You can borrow funds against an account to finance the down, but it will skew the ratio. I had folks borrow against 401k to finance the down.

In the past I used Community Home Buyer programs where the borrower, first time home buyer, was income eligible for down payment assistance. As long as that borrower was in the property for a certain length of years that loan for the DP was forgiven.

 

[Shannow]

quote:

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Personally I hate borrowing money/receiving from relatives. I "allow" some gifts for the kids college funds, but that's it. I feel slimey or something. Maybe it's just me.

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Nope, not the only one.