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Qualifying for a Mortgage?

September 28th, 2015 at 08:24 pm

So this past weekend I didn't do all that much, trying to muster up all the energy I could to go back to work this week. Ugh. (Today was a clustermess of buses running majorly late and very shorthanded all around.)

But one thing I did do was to check into the downpayment assistance program here in NE.

One of the requirements is that anyone who would reside in the house (over 18) has to take 4 two-hour classes. Another requirement is that the borrower (potential borrower) has a continuous work history of two+years.

I corresponded back and forth with the main person at the local office. The basic gist I got was that NE and I probably wouldn't qualify once our incomes were put together, and that there was no way NE could NOT come to the classes. (They are in the evenings on nights he works.)

So ... that avenue seems to be off the table.

I'm wondering though - is a two-year continuous work history that big of a deal?? I have worked/been employed (W-2 employment) for 4 years minus about 5 weeks. Would the minus 5 weeks be a huge stumbling block??

If so, then we might have to go with NEs finances, or wait til August when I'm at the two-year mark.

If we go with NEs finances, then we've got some major repair work to do. I offered to take over paying his bills so we could make sure they were paid on time each month - not sure if he thought I was serious or not.

I also was thinking about maybe a secured credit card, or some kind of small installment loan.

I also briefly considered selling my non-retirement funds stock to just forego completely messing with a mortgage. .... I sold about $4k worth of stock in 2013? and didn't have to pay any capital gains on it - I think because of my income bracket? (it had a cost basis of about $300 or so) So, if I were to sell $55k worth of stock with a cash basis of around $2k .... would that be counted as income and therefore majorly raise my tax bracket, or would I be in the same situation of not paying capital gains?

Really not planning on doing that (selling stock) but am kind of curious about what would happen if I did.

I've looked for info on what the mortgage people look for when deciding on loans / interest rate, but haven't found much beyond advertising. I'd really like to take that class, but it doesn't seem like they'll let me do it by myself. Sigh. Although I still think I'm going to apply - just in case.

One thing we talked about doing is sitting down with a mortgage person at my local credit union and seeing what they think our options are. I'm not sure what all information we should bring with us to something like that? Most recent tax returns? # of check stubs? documentation on any debts?

I did my last spend of the month today. (the first one since my mom left!) Bought some olive oil and bananas - both items with rebates, and both needed. (Used up my olive oil frying the eggplant when my mom was here.)

So now I'll get the 2.5 % interest. Smile Can hardly wait til Wednesday to see it. Big Grin

16 Responses to “Qualifying for a Mortgage?”

  1. creditcardfree Says:

    I'd probably apply for the assistance program on your own. Who's to say that NE will be living there...my point is they have no proof other than what you tell them.

    I'd also go talk to someone at the credit union. They will ask about debt and income, money you have for a down payment and where that money came from. Once you actually apply is when they will ask for income verification, and bank statements (usually last two months). They check your debt by pulling a credit report. Smile

    I'm not entirely sure on the income part if you were to sell stocks...

  2. Another Reader Says:

    In your shoes, I would not share a mortgage with someone that at age 49 has not learned to pay his bills on time. That's asking for trouble. If you want to own your own house, whether or not NE is part of the deal, then you should buy a house in your name on your income. If buying a house depends on getting married to NE, I would hold off on the house until NE proves he can be responsible with his finances and you are married.

  3. CB in the City Says:

    I agree. NE is not married to you yet, so he doesn't have to be part of the equation in terms of getting a mortgage. After you are married and his finances have stabilized, you can always refinance. August is not that far away. It would give you a tangible goal, to super-save for the down payment.

  4. Frugaltexan75 Says:

    Thanks CCF. I think I will go ahead and apply for the class, as well as talk to someone at the CU. the more info the better.

    AR - I'm kind of thinking this too. I did tell him that before we bought a house is want him to come up with at least half of the down payment. When his inheritance money comes in that could finish off his medical debt, which would give him room to save for it.

    CB - the more I think about it, I do agree that maybe this is a good thing. It'd give us both time to save more, and also work on improving his credit score. It'd also show me if he's really serious about all this, or ... Decides buying a boat is more important to him. That I think would tell me a lot.

  5. MonkeyMama Says:

    It sounds like the down payment assistance isn't really worth the hassle. Of course you can liquidate some stock for a down payment and just take out a small mortgage.

    Your total income, including stock gains, needs to be less than $47,000 for the gains to be tax-free. OF course, you can liquidate some this year and the rest early next year. Keep in mind too that this figure will double any years that you are married (as to total household income). You'll want to leave a buffer and make sure you don't have $47,001+ of income, or else the entire gain will be taxed. (I left a buffer in my answer too - I just have 2014 numbers in front of me but 2015 will be a few hundred dollars higher).

    OF course, this is the info you asked for, but I agree with just getting a mortgage on your own. You have the means to do this on your own, and it wasn't that long ago that you weren't sure if you even wanted to stay with NE. I presume things have gotten much better if you are now talking marriage. But now you are bringing up financial red flags. I imagine you would be more level headed if you could separate the house stuff from the NE relationship. (Then you won't be trapped if the relationship goes sour). & as others mentioned, you can always include him later if you marry or he improves his finances. & I really don't like the idea of taking over paying his bills. I'd approach it as more of a "teach him to fish" thing. You can help him without taking it over. Maybe the older and wiser woman can chime in but the paying the bills thing just strikes a bad chord with me. Maybe it's just me.

  6. MonkeyMama Says:

    **Correction** Only the part of the gain above $47,000 *total income* would be taxed. I mis-spoke on that part on my last post. IT's not all or nothing, so probably no big deal if you go a little over.

  7. Ima saver Says:

    I am curious, why are they requiring you to take a class and what does the class teach. Well, I do think you should offer to take over handling NE's bills. I took over handling all the money and the bills just as soon as we got married. (We were only engaged 5 weeks) I don't think I could ever be happy letting anyone else but me handle the money in the family. Lucky for me, my husband has no desire to handle money and is happy with his weekly allowance for gas and misc.

  8. livingalmostlarge Says:

    I agree on buying only on your own and then adding NE. You can help him, my DH has no idea what we are spending on and would never do YNAB

  9. VS_ozgirl Says:

    Ima saver my husband is exactly the same! FrugalTexan how exciting!!! I'm not sure what advice to give in terms of sharing finances with NE but perhaps try to qualify on your own first, would be easier given NE's financial history not to mention safer. Then when you two move in together take over all of the bills? If you two are meant to be, it will all work out fine.

  10. Kiki Says:

    I am excited for you to begin this road having just done it myself in February of this year.

    I did receive down payment assistance and I didn't think I would qualify for the extra help due to my income. My class was online and it is part of the federal program so it will cover budgets, bill paying, home owner expenses, the mortgage process, insurance, etc. It was easy to take and did not take me the full 8 hours online. I took the tests quickly and never missed a question. Is there an online option?

    But don't throw away free money (in my case it was a grant - no repayment necessary. Even the no interest loans are worth it as many of them expire after 5- 10 years of ownership. It may seem like a lot of hoops but really it is an easy process.

    I agree with the comments above that you should focus on buying the house yourself and then consider NE at a later date. Things are not set in stone and just a few months ago you were not sure about staying together. I hope you will move the process ahead, take the courses and not wait. You can add him at a later date if you desire to but consider this your project to complete.

    Also, consider meeting with a mortgage broker - not just a mortgage officer at one financial institution. The CU person can walk you through the process they require but may not know of other programs or incentives at other financial institutions. So something to consider.

  11. FrugalTexan75 Says:

    Wow. Thank you everyone for your comments and thoughts! I apologize if I miss anyone in my responses.

    MM - That is good to know about the $47k level. I could sell about $20k worth of stock without having to pay capital gains on it! That'd make for a pretty hefty downpayment. I really don't think that is the avenue I want to go though - especially with that particular stock down about $40 from its high - and the market being so fickle right now. Maybe if it got right down to the wire and I found a house that I absolutely fell in love with, but was just short a bit on a good down payment ...

    I noticed several people mentioning that I'd not been sure of NEs and I's relationship status a few months ago. I'm not sure how that came across. We've been back together a bit over a year now since our 3 week break.

    Financial red flags ... yeah. They definitely do become more apparent with the more serious we've been talking about / house looking. I'm not sure how I could leave NE out of the equation for purchasing a house though? Even if I wait til August when I'll have two years of continuous employment, if we do get married, then he'd be contributing to the mortgage payments/expenses. So even if his name wasn't on the deed, he'd be a part of it.

    Part of the reason that I'm asking him to come to the table with half the downpayment +1/2 the closing costs is to see if he is really financially committed to this, or if it is just a dream which gets pushed aside for smaller desires. Partly also though is to have us go into it a little bit more evenly. Although maybe even the fact that I'm thinking this way, isn't a good sign. Maybe this is kind of what you were referring to as keeping level headed about the whole thing?

    It really bothered me when his first major reaction to my idea/time line was that he wouldn't get his boat til year 6 or 7. Do you know how long I've wanted to go on a European cruise/travel adventure? How many times I got my big goals funded and started funding the cruise ... but then had to start from zero again? I didn't even include the cruise as a shared savings goal ... would save for that from my own spending money. So ... maybe year ten or eleven if I was lucky.

    As far as taking over his bills .. yeah, I do see your point - at least before we're married. My example hasn't exactly been enough, so maybe if a 3rd party told him that he needs to keep his bills current for a better mortgage rate/chance at a mortgage .. he might get motivated enough.

    Ima - For the downpayment assistance program - part of the requirements is to take a class which talks about budgeting, paying bills, homeownership costs/responsibilities, etc.

    LAL - NE definitely wouldn't be too interested in YNAB ... his eyes kind of glazed over when I showed him my sample budgets for the 16 year plan.

    VS - Thanks. I guess only time will tell, right?

    Kiki - The program I was looking into is a local one which has local classes. I'd much prefer an online one! (so I don't have to control my eyes rolling at all the "budgeting" information or importance of paying debt ... etc.) An online course would even be something we could do together (NE and I). Did you find the federal program through the http://nifa.org/ site?

    If the house is eventually both of ours though, I can't exactly just purchase a place that *I* like without considering what he wants as well?? Leaving him off the mortgage/deed right now would be the smart way to go most definitely (at least in terms of interest rate/qualifying.)

    How do you find a mortgage broker? Online? Local? Would a broker be someone who can advise as to how best to prepare yourself credit wise (i.e. as in strongly advise the importance of paid on time bills, etc.?)

  12. MonkeyMama Says:

    I think there is a big distinction between taking over someone's finances "because they can't handle it," versus the tendency for one person to take the helm of a joint-finances situation. It's a completely different dynamic if you take over "when" you combine your finances. Before that point, it sounds really dysfunctional. Like you are trying to be his "mom". Just to clarify. Was more what I Was speaking to.

    I think it's smart to ask him to go in 50/50, to see how committed he is to the whole thing. I think it's important to work through goals together before marriage so you get a feel for things will be for the long-term. So that whole part sounds smart.

    As to the rest, let me back way up. If the relationship is that serious (I missed that part before) then I think it's probably best to slow down and work on buying a home together. I don't really see the point on working on it separately if you will be married sooner rather than later. I get the impression it will be a lot more slow going if you wait for him to improve his FICO score. I think at this point I'd just slow down and see what your options are and how much he is helping you toward your goal.

  13. FrugalTexan75 Says:

    Thanks MM,

    I agree with your point about taking over the bills as not being a good idea (before marriage at least.) I hadn't really thought it through I think when I said it.

    Yes, we're definitely going to have to take it slowly. It'll be interesting to see how the next ten months play out before I have my two years in. (I have now seen it on several different places that this is the bare minimum to even be looked at. Sigh.) I may even still sell some stock though - because one of the sites I was reading (Realtors) it said that the best rates are not just for great credit scores, but also at least a 35% down payment. I won't expect him to do half of that in ten months - I couldn't even save half of it in ten months! (well, maybe if I stopped funding my ROTH, etc.)

  14. creditcardfree Says:

    I'm pretty certain we have had 'the best' rates for all our houses because of our credit scores. The down payments have never been the full 20% I'm sad to say. We have probably had closer to 10%+.

    You can get a mortgage at major banks and most credit unions. They employ mortgage brokers.

  15. FrugalTexan75 Says:

    Thanks CCF. That is good to hear. I'd much rather not have to sell any stock to get a good rate!

  16. Kiki Says:

    I met with a broker about a year before I bought. I showed what my salary was, what I am saving, approximate down payment then went from there. Once you get serious about looking for a house the agent you work with will have names of people they use. At least meet with them for a feel of if you like them. I went with Vitek because they had a local office and she is the one who found the plan I qualified for with the assistance. I didn't need it but it is essentially free money. It kept more of my money in the bank and I felt better about that.

    Look for mortgage brokers - they are all over - and just see if you feel comfortable with one. I took a copy of my own credit report when I was interviewing people as I didn't want multiple pulls on my credit report until I was ready to buy. That way I know what I qualified for (and purchased only about 60% of my buying power).

    The broker can let you know what you qualify for money wise, programs available to you, and actually review your specific standing in getting ready for a purchase. I found it helpful to meet with a couple although one wouldn't take no for an answer and he continued to call even after I closed and moved in!

    All the programs are federally funded and each state can choose how to do their prep work for the buyer. They are following a federal guideline that says borrowers must complete education prior to getting the funding but each state can choose how to do the education.

    If he is not ready when you are I would not put off the purchase. I would find something that we both like and buy it with just my name. You can refinance to add him later if you wish but if this is your future family home then I think it is OK. And that way I know no matter what I can take care of myself and the house.

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