Financing in Stevensville>Question Details

CubbieFan, Both Buyer and Seller in Stevensville, MD

Is it possible to get pre-approved... with rather high Debt to income ratio... if I am downsizing...?

Asked by CubbieFan, Stevensville, MD Tue Nov 20, 2012

Income: $ 8,050
Rental Property1 rent: $ 1,500
Rental Property2 rent: $ 1,600

Debt/obligations
Mortgages:
Primary Residence: $ 1,660
Rental Property 1: $ 1,440
Rental Property 2: $ 950

Car 1: $ 620
Student loan: $ 250
Car co-sign: $ 440 (Looking to have this person re-finance to get it off our credit record)

Help the community by answering this question:

Answers

4
Rental income is calculated using Schedule E from the tax returns for at least 1 year (or 2 years if it's been owned for 2 years), or if it's been acquired after the most recent year's tax returns have been filed, then the lease agreement is used. Then you reduce it by the expenses on the property, the result is either a positive (added as income) or negative amount (added as a liability). So if your calculations are correct, you would get $60/mo income from rental property #1 & $650/mo income from rental property #2... and no liability from either of those properties, leaving only the $620/mo car loan & $250/mo student loan to be included in the debt ratio (as it appears you would be purchasing the new home after or at the same time as you are selling your current primary residence). If you purchase a new home for $260k ($260k minus $80k down payment = $180k mortgage), then from the numbers you provided, I figure your debt ratio should be less than 30%.

Was the credit union you spoke to still considering your mortgage on your primary residence in the debt ratio? Even if they were, you still look like you could qualify for a $260k sales price.

Obviously I'd have to look at the actual numbers to give you pinpoint accurate advice, but from the info you laid out my take on your situation is it should be possible to qualify for what you are looking for.

Shane Milne | Lending in all 50 states | NMLS #81195
0 votes Thank Flag Link Tue Nov 20, 2012
This question is really for an experienced loan officer. However, if you are downsizing and will have a smaller mortgage payment, that should count as a compensating factor to hopefully offset the high debt-to-income ratio.
0 votes Thank Flag Link Tue Nov 20, 2012
Okay, let me try this. First of all, I know the credit unions have tighter guidelines than most lenders. But I;m confused with your statement of being $100K short. If you are expecting to get about $80K back from sale of primary home and you want to purchase a home at about $180K, then you only need to borrow $100K, right? Credit union will pre-approve for $80K, so you are actually $20K short. Perhaps you could try and get pre-approved with another lender who may be able to help you with that $20K difference.
I hope I understood your delemma.
0 votes Thank Flag Link Tue Nov 20, 2012
Let me clarify, we are looking to purchase home in $ 250k-$ 260k range. After the sale of the primary home, after the loan has been paid off, we are hoping to have around 80-90k available for down payment, so we would need 180-200k in loan... depending on how much our current home sells for....
Flag Tue Nov 20, 2012
We are looking to sell Primary Residence, and downsize. Current balance on it is $ 273,000, and we are looking to purchase a home with mortgage of $ 180,000 (Using the proceed from sale of the current home to use as down payment, est... about $ 80k)

Credit Union would only pre-approve us for $ 80,000 loan... short by about 100k...
0 votes Thank Flag Link Tue Nov 20, 2012
So your mortgage is $273,000 now and you want a MORTGAGE of $180,000 (buying a house for around $250,000 or so I assume)... I would get in touch with a small, local bank (Queenstown Bank, Centreville Bank, Peoples Bank, etc). They would more than likely entertain your home loan since you are putting 30% down (even with the high Debt-to-Income). I could put you in touch with someone at Queenstown Bank if that would be of help.
Flag Tue Nov 20, 2012
Search Advice
Ask our community a question
Email me when…

Learn more

Copyright © 2016 Trulia, Inc. All rights reserved.   |  
Have a question? Visit our Help Center to find the answer