Large Down Payment vs Mortgage chances

jdlegall · Joined: 29 Sep 2008 Posts: 23 16.62 Dollars($)

Now, I've heard this from a mortgage broker and it does not sound true to me so I will put this question to you.

If you have limited income shown on a tax return but you have a large downpayment, say 20 - 35% down, will a large down payment get you approved? Or is this guy on another planet?

Guest

You would need sufficient income to pay the mortgage. All mortgages require sometype of income requirement. Usually in the form of debt to income ratio. Having a large downpayment will decrease the amount you are borrowing which will in turn reduce your monthly payments. Which will in turn reduce your debt to income ration. A 20% down payment in most cases will also remove hour requirement for private mortgage insurance. FHA insured mortgages only require a 3% downpayment are more foregiving in regards to debt to income ration. They are also not "credit score dependent", although some institutions have a minimum credit score of 585-600 for their individual fha programs.

Hope this helps. Mortgages are fairly complicated. Without all the details its difficult to say the broker is being straight with you. My advice is to talk to your local bank, or credit union and avoid a broker if possible. Take a copies of your credit report with you, and let the loan officer review them as a first step. It will save mulitple pulls if you need to shop around.

Good Luck

Guest

Please execuse all of the "typos" above. I didnt proofread prior to posting..

elnoralittle · Posted: Mon Oct 06, 2008 7:46 am Post subject:

It is all about what you can afford.
At a 6% rate, it's $6 per $1000.
So if you are thinking about putting $5000 more down, that would save you $30 a month.

It needs to make sense. What can you afford as a mortgage payment. then go from there.

gmakerley · Posted: Mon Oct 06, 2008 11:26 am Post subject:

ignore marty!

as for the "advice" your broker gave you...i question its validity.

your income, sd, as we discussed a few days ago, will be determined by your tax returns; and in 2008 you'll find lenders are far less impressed by cash outlays than they are by accurate and reasonable income numbers. your broker may be at least partially correct, but beware.

never believe everything you are told - it is far better to be a bit skeptical.

Posted: Mon Oct 06, 2008 3:31 pm Post subject:

Thanks Mr. Akerley,

I got that guy's number from a real estate agent.

Im more than a little skeptical about that bit of information, so I talked to Bank of America and AXXA mortgage today. Bank of America has a program that interests me; my income just has to be at/under the median income of the area Im looking, my score has to be better than 660 and I have to put 10% down.

Axxa on the other hand wants to offer me a stated income loan using the Gross Income on my Schedule C, at a higher interest rate, for a mortgage over $70k only? My score has to be over a 700 to be eligible and I have to put 20% down.

I think I'll stick to a lender I know that's actually reputable.

gmakerley · Posted: Tue Oct 07, 2008 8:16 am Post subject:

i am taking it for granted that "guest" is actually you, jd. also, i called you "sd" yesterday - didn't pay enough attention, i guess. my apologies.

you are right on with that last comment - stick with someone reputable.

jdlegall · Joined: 29 Sep 2008 Posts: 23 16.62 Dollars($)

Yes, that was me. I am finding all this feedback very helpful and am grateful that someone is actually answering my questions instead of dodging them. Very Happy

I've just got rid of the accountant who was giving me advice and will be using a new one who actually knows what they are doing. Like using the estimated tax form from the IRS to pre-pay your self employment taxes during the year so you can claim the income you actually make on your 1040 and not be stressed out about what you may possibly owe on April 15th. Whew! Rolling Eyes

That could have saved me a lot of headache. LOL Very Happy

Well, if it was just my credit score like that dodgy broker I've been speaking to for the past 18 months has been telling me along with "Gross" income, then yeah, I would be fine for a mortgage. I am now adjusting my mortgage schedule to a modest 24 months. From now.

It is two years of tax returns they need right? Not one? So....yes, 24 months. I've opened a 12 month CD to help save for the downpayment and closing costs. Hopefully I will get a FHA loan if those things are still around. Who knows if home prices are going to shoot back up by the time I do apply 24 months from now. Confused

Just have to stay vigilant and optimistic.

Hey, do CDs count for bank statements? I'll have one 12 mth CD, a personal savings and a personal checking by then. What about a money market account? Yes, don't laugh too hard but I was planning to finally realize that at 31 Im am getting old. Embarassed

A little late but better than never. When the market bottoms out it should be a great time to invest.

But back to the question....will all those accounts qualify for any bank statements they may want and would that also count as income?

gmakerley · Posted: Fri Oct 10, 2008 6:50 am Post subject:

any asset accounts you have that are verifiable will count, jd; so you are smart to open the cd and, of course, to maintain and increase your deposits.

as to whether they count as income...income is income. savings is savings. you gain interest on the savings, which is income; but that's not something that would be considered unless you have a two year history of receiving interest income (based on tax return) that would benefit you.

the benefit would be if your interest earnings were sufficient to make a difference in how you qualify. clearly, i dont know your situation, but short-term savings isn't going to do much for your qualifications. over the next 2 years, you may garner enough interest to make a difference, but keep in mind that interest paid on savings is minimal these days.

as for fha...that's probably going to be the predominant lending facility for many years to come.

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