Mortgage expert

R

runner

100+ Posts
I've got some questions regarding mortgages, and wanted to tap into the HornFan expertise. I tried the interwebs, but I haven't found my exact situation out there.

I have a house and accompanying mortgage today in Austin. Kids are 4 years from being out of the house, so my bride wants to look at downsizing. Our thinking is that we would buy that smaller house now, rent it for four years then move into it, and then sell our current house and own the new house outright.

My questions primarily are around qualifying for two mortgages -- what are the rules? I make pretty good cash, but 1/2 my salary is base and 1/2 is commission if it makes a difference. How much house can I afford? Also, is there anyway other than putting 20% down to avoid PMI? Lot of other questions out there if someone can help. Thanks.
 
You can find mortgage companies that will do "investors" loans without the 20% down. I am in the DFW area and wrstarkey.com has been offering them. There was/is a branch in Austin.
 
what you need to do is buy the new house with an "owner occupied" mortgage, and tell them you intend to keep the current house as a rental, or better yet, sell it. That will get you a better mortgage on the new house.
 
80-10-10 or 80-15-5(first, second, down) and follow the advice of big will.

as far as qualifying with commission income, show some good track record and you should be fine.

there are a couple other things..... no new big purchases.

don't pay down debts, build as much cash or liquid investments as you can so you can prove stability above and beyond the down payment.
 
Austin
807 LAS CIMAS PARKWAY SUITE 150
AUSTIN, TX 78746
Phone: 512-329-9040
Fax: 512-329-9043
Toll Free: 877-340-9040
SHOP!SHOP! you will find what you wnat.
 
Lying to a bank can get you thrown in jail. Just ask Dan Morales. By the way, there are subtle provisions in the loan documents you sign that can be used in the event you overtly lie to the bank.
 
If WF has that deal above, that is probably going to be your best bet. typically lenders only give you credit for about 75% of the monthly income (ie if your true rental income is $1000 then they will only credit your Debt-To-Income ratio for $750). They advent of this is that you probably have a mtg pmt of $1100 and they only offset that by $750 so on paper it looks as if you have a negative income asset.

1. Don't recommend lying about the Own/Occ vs Investment deal, especially not in the current lending environment
2. Typical investment scenario won't let you do STATED Income on an investment so you'll probably need to qualify based on your last 2 years verifiable income. They take an average of last 2 years (usually) when you are in a predominantly commission situation. If you've been in your sales job less than 2 years, you're going to have a very difficult time getting a mtg until you have 2 yrs.
3. All of this advice applies to the majority of scenarios. There are lots of private investors and one-off situations that could help you but it will take quite a bit of leg work.
 
I work in the mortgage dept of a large bank.

These are all industry standards, but each bank does it's own make exceptions so just because one bank won't do it, doesn't mean another won't. Look around.

Provided you make enough money to carry 2 mortgages with a debt to income ratio no higher than 45% you can probably get the mortgage.

As far as commission income, the bank will take a monthly average over the previous 24 months & that's the amount that will count. They will want tax returns & 2106 deductions will count against you.

Most banks won't go over 90% financing on non-owner occ props, but a few will go up to 95%. 100% nowadays for NOO is pretty much out of the question. Stated income for NOO is disappearing as well so jump on it while you can. We do not go over 90% CLTV for NOO & we are a pretty liberal lender so just keep that in mind.

You won't pay PMI unless your 1st lien goes over 80% loan to value.

If you lie about buying the smaller home & making the current (larger) a rental then you likely won't get busted by any regulatory agency (even though it is illegal), but most underwriters simply won't approve you. They'll see right through it & simply deny you. Some will simply require a letter of explanation signed by you stating that you are downsizing because the kids are moving out. Just check with the lender before hand. Honesty up front is waaaaay more favorable even if the situation isn't favorable. I used to underwrite & when I caught a borrower or broker lying to me I just killed the loan on the spot with no looking back. I hate liars so I punished them pretty hard. When a borrower or broker told me the situation up front I was much more likely to grant them a favorable exception...BE HONEST FROM THE GET GO! I had people lie to me about making homes into rentals & I'd kill the deal. Once they realized they f'ed up & came crying back I still denied them. When they initally told me the truth I was always very fair & tried to approve them if I could. Underwriters have seen every scenario & have had slimy brokers try to sneak every scenario past them. If you try, 99% of the time they'll catch you. They are conservative by nature so they are already on the defensive. Just be honest about what you are doing.

Like I said, my bank is pretty liberal so we really appreciate the whole truth up front & will treat you fairly if you are honest. Most other lenders I have dealt with will do the same. If you have no mortgage lates, make good steady money, have 700+ credit, & keep everything above board then you can usually get what you want within reason. With the currrent climate in the mortgage industry it's tougher to get a loan, so being honest & having all of your ducks in a row really helps.
 
you're gonna have a hard time convincing any bank that the new smaller, cheaper house you're buying is your new residence. ain't gonna happen, they'll consider it investment property.

now, if its far enough away (more than 25 miles, generally), you might sell the concept of a "2nd home" which might have cheaper financing than an investment property.
 
If you would like to call me, I think I can answer pretty much all your questions. I have been doing home loans in Texas for over thirty years and I am a licensed mortgage broker. My local number is 936-258-8040, toll free is 800-210-8040. My email address is [email protected].

Brooks Hiller
Heritage Mortgage CompanyThe Link
 
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