The reason no one will work with you is probably because you want such a small loan that the amount of work required by the broker isn't reflected in the commission they'll earn
Really; you think so? But people buy cheap houses with mortgages all the time in much of the country. I don't recall where kwynn is, but I'm guessing mortgages in the amount she's considering are not uncommon. I'd agree with others to check CUs and community banks.
You could try Churchill mortgage, which is the company Dave Ramsey endorses. They are supposed to be good to work with and could advise you on options. I think they'll do manual underwriting for people who have a 0 credit score, but are great candidates to buy a house because they have a lot of assets and no debt. If they do those types of things, I imagine they'd have a solution for you. Good luck!
The tightening guidelines are becoming worse and worse. I completely understand why they made stricter guidelines, but when qualified people are trying to get mortgages and can't, it is going to create another housing crisis, because nobody will be able to buy.
This is so true. It is even worse with condo financing. I get that we don't want to end up in the same mess, but many of the new guidelines don't make any sense.
I would think that it should be about risk. How would the OP be a riskier bet than the buyer putting down 3 1/2% with hardly any assets? I don't get it! Yet, they will loan to the 3 1/2% down buyer all day long.
Someone asked if they can come after your other assests if you default on the loan and the answer is yes.
OP, in addition to a credit union, I would try talking to a good mortgage broker. They often can do things that banks can't. Good luck to you!
Because they get the house if you don't pay. The collateral on a mortgage is typically the property.
Ohhh...I see. So what's the point in all the verifying if they have the collateral right there?
If you owe 100k on a home and you walk and they take the home and can only get 80k for it, do you then owe them the 20k? Couldn't they sue you for that and take your savings?
It's just silly I think---wouldn't the better collateral for them be actual cash?
It's the difference between a recourse state and a non-recourse state. If you're in a non-recourse state, they take the home back and that's all they can do. In a recourse state they can technically sue you for the difference in the balance (let's say you took out a loan for $200k but the value fell to $100k), but they haven't been enforcing that in years since most people don't have the money.
They don't really look at your bank accounts at all, other than to make sure you have 2-3 months in mortgage payments there. The bank doesn't care if you have the cash to pay off the balance, they just want to make sure you have the income to make their payments every month - if you think about it, they want you to have to make those payments every month, since that interest is how they make their money.
Post by wanderlustfoodie on Jan 16, 2013 18:00:27 GMT -5
I second the previous recommendation to contact some mortgage brokers. They will likely know some smaller banks that don't necessarily need to adhere to the income rules.
I'm sorry you've hit yet another setback. I'm late to this discussion, but I also think that it's OK for you to use your assets to buy a house outright if you can't get a mortgage. My DH is self-employed and we couldn't use his income on our latest re-fi last summer, either (fortunately mine was enough), so I do think it's correct that it's harder to get a mortgage on self-employment income than it was a couple of years ago.
Although historically investments will be making >3.5% annual average return, that may not be the case in the short term for the specific investments you hold, so it could even turn out that you're better off paying cash and then paying the mortgage amount back into your savings over the 2-3 years you'll need to build up the history. It's just so hard to tell for sure. And I don't think most of us would be "approving" your cash idea if it was going to be $760k out of your $770k, but the amount you're talking about is a relatively small part of your total portfolio, so you will still have plenty of investments that can grow.
You could try Churchill mortgage, which is the company Dave Ramsey endorses. They are supposed to be good to work with and could advise you on options. I think they'll do manual underwriting for people who have a 0 credit score, but are great candidates to buy a house because they have a lot of assets and no debt. If they do those types of things, I imagine they'd have a solution for you. Good luck!
I tried Churchill...but they use like ppl in individual cities that work for them, and the person they sent me to couldn't help, although he was very nice.
My assets are held via a financial firm and they don't do mortgages--they only do investing for individuals and institutions.
I'm embarrassed to call them and tell them what I'm looking for---I think they've gotten a little tired of all my questions lately and that I took literally 4 months to fill out paperwork they sent me.
Complete quoting fail for me in new system. My reply to the above is: Who cares if they're tired of your questions, you have a lot of assets with them, they're making money off of all of it, they can answer as many questions as you can think of.
And with what they do they likely have other clients who have found themselves with this problem and may know something that can help. I'd call them and I wouldn't apologize for it.
FWIW, my dad ALWAYS had this problem because he was a contractor. My parents had lots of assets, he made way more than my mom every year of their marriage and the banks were always hassling him about his portion of mortgage applications.
The reason no one will work with you is probably because you want such a small loan that the amount of work required by the broker isn't reflected in the commission they'll earn
Really; you think so? But people buy cheap houses with mortgages all the time in much of the country. I don't recall where kwynn is, but I'm guessing mortgages in the amount she's considering are not uncommon. I'd agree with others to check CUs and community banks.
I'm trying to buy in the suburbs of Pittsburgh, Pennsylvania, and a 120k house would get you a 3/2 in okay shape in an okay school district.
Many of my friends have homes that only cost 60 or 70k there, believe it or not.
Of course, there are multi-million dollar homes there too if that's what you want!
Cheap area of the country for sure for housing (it used to be cheaper---a few years ago, 100k could get you a 3/2)
I'm sure ppl would be more excited to loan me money if it was a 300k mortgage though---I wish I was buying something that nice!
Post by phunluvin82 on Jan 16, 2013 18:23:54 GMT -5
If you exhaust all the options mentioned and can't get something, I think you should just pay cash for the house.
Even if you get approved for a mortgage, it might be at a higher rate to account for what they perceive as an increased risk.
If you get something in the high 4 to low 5% range, then you are not out a lot of money if your investments are averaging 6%.
Also, like you mentioned earlier, the house is an asset. We all know that, in the last several years, you can't always count on your home price going up in value...but if you are planning to stay put for a while, I think it would be the better $$ move for you to buy outright than to rent for 3-5 more years.
That's 3-5 more years that you could be replenishing your savings and investments with the money you are not paying in rent.
Ok, so here's my thoughts - you deserve to buy a house. Your description of how hard you've worked to save your money over the years has me in awe of your dedication and absolutely thinking it is time to reward yourself with some of the fruits of your labor. As you well know, life is too short to wait and you never know what could happen. You are in an excellent financial position and I think you should pay cash for the house and then pay your investment accounts whatever you'd pay into a mortgage. Sometimes the most "MM" decision isn't the RIGHT decision for an individual, KWIM? If you want a house and it will provide you with the lifestyle and stability you want, there is no reason you should miss out on that just to earn a little more return on your investments.
Post by imojoebunny on Jan 16, 2013 18:26:35 GMT -5
I am sorry. It is stupid from a risk assesment perspective. A person making $20 an hour can get a loan for a car, but someone with $500k in assets cannot. It also happens to retired people. I am in the same boat, unless DH consigns, I cannot get a loan, even of I have significant assets that are 15-30x the loan value in my own name. Ultimately, it is why I paid cash for the house we just bought. On the plus side, especially for an inexpensive home, closing cost can be pricy. We skipped all that, paid cash, and out entire closing cost we're $250.00 for the closing attorney and $345 for the inspector.
I think you would be wise to use some of your money to pay cash for a home, it takes the pressure off you somewhat, especially with a roommate. You can always "pay yourself back" and and do dollar coat averaging to invest what you pay yourself.
The reason no one will work with you is probably because you want such a small loan that the amount of work required by the broker isn't reflected in the commission they'll earn
LOL seriously? That may be a small mortgage to you, but it's a lot of money to a lot of people. My mortgage was only for 145k and I was never treated like I wasn't worth their time... quite the contrary. It's not like she's trying to borrow 5k, she's trying to borrow a reasonable percentage of the price of the home.
Post by suburbanzookeeper on Jan 16, 2013 18:51:22 GMT -5
You may also be able to get a better deal if you do ultimately decide to pay in cash, as it may make it a more attractive offer to a seller because they won't have to deal with lender issues or financing falling through.
If you're sitting on $200k in cash/bonds, then no, it's probably not earning 6%. Cash is around 1% these days and an index fund of the total bond market returned 4% last year.
I would pay cash. You're right, everyone without an income would be in the same position - they're not going to give a mortgage to a student, a stay-at-home spouse, whatever. If you look at the logic from a non-recourse state, the can't go after your retirement account or bank account or whatever if you decide not to pay. And what's to stop someone with a ton of cash, from going and getting a bunch of mortgages and then only paying the ones that make a profit. The financial mess that we got in five years ago makes these restrictions a necessity.
Wait, if you don't pay your mortgage, they cannot go after your bank account? Really?
That seems ridiculous---why not? Isn't the money I have in assets sort of collateral for the loan?
So you can just walk away and they can't touch your savings...I know student loans, credit cards, all other creditors will come after your savings with a vengeance.
I have 200k in retirement (mutual funds and stocks), 100k in cash, and the remaining 470k in a mix of things like muni bonds, stocks, funds, and other things I don't really understand. 1% sounds pathetic---I need to talk with my FA and ask him what percentage I'm getting exactly.
That seems outrageous that they can't get their money back if you do indeed have the money. That's straight up stealing to have, say, 100k in the bank and owe 100k on a house and just leave and never pay--how is that even legal?
It depends on the state. There are some states that are recourse states, and others that are non-recourse states.
In a recourse state, if you get foreclosed on, the bank can come after you for the deficiency, which is the difference between what the bank sold the house for after they took it from you and the mortgage balance. In a non-recourse state, the bank can only take the house and then not go after you for the difference.
You may also be able to get a better deal if you do ultimately decide to pay in cash, as it may make it a more attractive offer to a seller because they won't have to deal with lender issues or financing falling through.
I have heard this and find it very attractive. I love getting a good deal---I am considering this for this reason alone.
I meant to respond to this but work got in the way. If you make $25K consistently as a photographer over the past 2 years, you should be able to afford a mortgage for $75K. Have you filed your tax returns in the past 2 years as an independent contractor, and which reflects the $25K of income?
Also, did you file a form 2106 or something similar? The bank usually will net out your monthly income from the expenses there.
I don't have any real advice, but this post makes me think of a quote from the truth about money: A mortgage is a loan against your future income. Annoying, but apparently even more true now. I'm not sure the cash out refinance would work either for the same reason.
I hope you figure something out. Its ridiculous that you are having these issues!
I meant to respond to this but work got in the way. If you make $25K consistently as a photographer over the past 2 years, you should be able to afford a mortgage for $75K. Have you filed your tax returns in the past 2 years as an independent contractor, and which reflects the $25K of income?
Also, did you file a form 2106 or something similar? The bank usually will net out your monthly income from the expenses there.
I do file tax returns every year...but my husband and I were married filing jointly, so my income is on a Schedule C. I do have my 2106's too.
The first year of my business, I only made 10k, then 16k, then 25kish. So it is growing, but not super fast.
So they actually would average that out (17k a year) and I might qualify, maybe, for like a 51k mortgage. And moving a business from out of state apparently has a whole other set of issues that they are telling me might actually be considered a "new" business and need to restart the clock?
I am considering doing it this way too, getting pre-qualified for just what I can do and putting cash down on the rest.
Ok, so here's my thoughts - you deserve to buy a house. Your description of how hard you've worked to save your money over the years has me in awe of your dedication and absolutely thinking it is time to reward yourself with some of the fruits of your labor. As you well know, life is too short to wait and you never know what could happen. You are in an excellent financial position and I think you should pay cash for the house and then pay your investment accounts whatever you'd pay into a mortgage. Sometimes the most "MM" decision isn't the RIGHT decision for an individual, KWIM? If you want a house and it will provide you with the lifestyle and stability you want, there is no reason you should miss out on that just to earn a little more return on your investments.
I agree with this. I hope one of the suggestions above works out for you since you'd feel more comfortable not needing to buy in cash, but in your situation I think buying in cash is a much better option than living somewhere you don't want to live. Your quality of life is important. Sure, sometimes we have to sacrifice quality of life because we really can't afford it, but it sounds like you'd be sacrificing quality of life to earn a few percent more on your savings that you're not depending on to live. Is that really worth it? It wouldn't be to me. I'm sorry that you're in this awful position, it's really not fair.
The tightening guidelines are becoming worse and worse. I completely understand why they made stricter guidelines, but when qualified people are trying to get mortgages and can't, it is going to create another housing crisis, because nobody will be able to buy.
I would think that it should be about risk. How would the OP be a riskier bet than the buyer putting down 3 1/2% with hardly any assets? I don't get it! Yet, they will loan to the 3 1/2% down buyer all day long.
I completely agree it should be about risk. Based on what the original poster said about her finances, this is completely absurd that they will not loan to her. She seems extremely low risk compared to others that are getting financed.
Kwynn - Are you talking to the big name banks, I.e. Wells, BofA, US bank, etc. I know Some these big name banks have pretty relaxed standards and it would surprise me that they would not qualify you. This is in no way an endorsement of them, (talk to a credit union or USAA), I just find it surprising if these banks are saying no.
I agree with those that say you should just pay cash. If in a year or two, you are making more money and the rates are good, you can see about options for refinancing and investing, and if the rates aren't good, then at least you didn't rent or longer only to be met with fewer options to buy instead of more.
So I was thinking about this some more, and there have been a few stories on NPR about the new regs proposed by CFPB this week. I was wondering if that is what they were talking about when they told you it was going to get even harder. So I looked it up. They clearly included assets, not just income!
The 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act created broad-based changes to how creditors make loans including new ability-to-repay standards, which we are charged with implementing. Among the features of our new Ability-to-Repay rule:
Potential borrowers have to supply financial information, and lenders must verify it;
To qualify for a particular loan, a consumer has to have sufficient assets or income to pay back the loan; and
Lenders will have to determine the consumer’s ability to repay both the principal and the interest over the long term − not just during an introductory period when the rate may be lower.
I just want to throw my cents in and say pay cash. If nothing else than for the reason that you deserve it, you sound like you've worked your tush off.
I did mortgages at a big bank years ago so laws have changed a lot, but these days it's hard to get a mortgage on self-employment income. It's good that you've been at it for 3 years and have the steady increase in income, but I think they may want to see more in income. When they look at someone employed by an employer, they also look at the type of work they do and how steady they are at each job so someone who hops from job to job (especially to different fields) will have a hard time getting approved too. Lenders like consistency and being self employed is difficult to prove that.
Keep trying though! I've heard recently that there are a few small banks out there still willing to lend on stated income. Big banks tend to be more strict and follow the guidelines more closely. If I were in your shoes though, I'd continue to rent for a few more years or pay cash.
The reason no one will work with you is probably because you want such a small loan that the amount of work required by the broker isn't reflected in the commission they'll earn
I don't think that's necessarily true...maybe a stuck up mortgage rep . Reps make anywhere from 1-5% of the loan so even 1% of $75k adds up.