Foreclosure in Chicago>Question Details

Damien Samuel,  in 60640

If I start my new entry-level position at the beginning of September, is it possible to close earlier?

Asked by Damien Samuel, 60640 Wed Jan 23, 2008

I am in my final year of graduate school and will begin my job on September 1st. I will have a yearly income of 160,000, and will have approximately 10% down on a house around $450,000. I would like to close earlier, like June and take advantage of the fact that the first mortgage payment would not be due until August 1. If I were to set aside two full mortgage payments (August 1 and Sept 1) after paying the down payment and closing costs, do you think a lender would allow a closing in June?

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The short answer is most likely you will not be able to close two months before you start your job. Lenders may take an offer of employment from a lender as long as you are starting right after you close (they want to be sure you can afford your first payment). This is not a discretionary decision by a particular lender but rather a Fanne Mae guideline that allows in some limited circumstances an offer of employment. It does not matter if you set aside payments, as the lender needs to be able to sell your loan right awy to investors and if it does not meet Fannie guidelines it will be denied.
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2 votes Thank Flag Link Mon Jan 28, 2008
Thank you all for the advice. Let me expand a bit. I will be in Chicago studying for the bar exam. My job is not contingent on me passing the exam the first time, and while I know there is no sure thing, 98% of those from my school pass on the first try.

I have approximately $60,000 saved up. This comes from a variety of sources, including jobs the last few years, diligent savings and investing, as well as annual gifts from my grandparents. I figure that this amount is enough for a sizable down payment (approximately 10%), a portion of closing costs, and perhaps setting aside one or two mortgage payments in order to close early.

Perhaps I am being a bit overzealous, but at the same time, I have thought through all of the various problems that you have all pointed out. I am quite familiar with the process, as I will be a real estate lawyer. While I recognize that plans change, I am hopeful to take recognize an opportunity when I see one. Interest rates are at historic lows, home prices are falling, and it is the most opportune time to be a first time homebuyer. Of course, I could wait until September to close, but that would also mean I would incur additional substantial moving expenses (for a second move), all while renting with nothing to show for it. I feel as though my fortunate financial situation will allow me to do so.

I, like you Ruth, am in a similar situation. I will be undergoing several "stressors" in the coming months. Like you, I got a puppy 6 months ago, will marry in August, and will start my new job in September. I recognize that my entire life will change, as did yours. Does that mean that you wish you would have done differently? Because it was difficult to change your name on the mortgage, do you wish you did not obtain one then? I agree that it is always wise to keep onself abreast of all possible outcomes (including the most unforeseeable), but if we always lived so cautiously, would we be where we are today?
1 vote Thank Flag Link Fri Jan 25, 2008
Hi Daniel:

I may be mistaken, but I believe you will only qualify on what is your current financial situation and not what WILL be your financial situation. You say you are studying for the bar and then will be employed as a lawyer. No offense, but are you absolutely sure you will pass the bar? Or is this "entry-level" job you speak of a solid committment from the firm regardless of whether or not you pass the bar, and will become an attorney job once you pass the bar?

It seems you are putting your eggs into a basket that is still be woven, and I am not sure a lender will be willing to take that risk, unless your current financial situation would support the loan.
1 vote Thank Flag Link Thu Jan 24, 2008
Basically, I will be in Chicago studying for the bar exam. I would prefer not to rent, as that would require me to essentially move twice (I am relocating to Chicago). And, as far as job stability is concerned, I will be employed as a lawyer. As a general matter, lawyers have been pretty immune to economic downturns (oftentimes, they actually have increased client revenue during these times). I'm not sure if a lender will take that into consideration.

As far as assets, they are well-documented. My credit score is upwards of 720. I lived in Chicago last summer and have gotten familiar enough with the neighborhoods to feel comfortable buying. It's only a matter as to whether a lender would be willing.
1 vote Thank Flag Link Wed Jan 23, 2008
Only way to know for sure is to ask. I suspect you'd need rock-solid documentation of your assets, available cash, and the job commitment letter. Even then, it might be difficult, or you could end up with a higher interest rate. You'd have to ask.

However, I'm not sure I understand your motivation for closing a couple of months before you begin your job. Is it just that you'll be settled in, with a place to live? If so, that's understandable, but you might want to reexamine that strategy. First, the job may not work out. That's certainly what the lender will be worried about, and it's a legitimate concern. That's why lenders like people with stable work histories, and a number of years on their current job. This'll be your first job (at least first post-graduation), with no time on that job.

It might also make your purchase offers weaker. Assuming you got a prequalification letter from a lender, it'd be contingent on a number of factors--primarily that the job is there, and will still be there, when you go to closing. You may have noticed that the United States appears headed for a recession (my guess is we've been in a recession for at least 4-5 months now, but that's another story). Some jobs are going to disappear. If I were a seller, I'd be concerned that the job you think you have might evaporate by the time you're due to begin work.

It's your call, of course. And you did ask whether a lender would allow an early closing: My answer is: You'll have to ask. Things are changing constantly. What you didn't ask--but what I feel compelled to answer anyway--is whether you should proceed with that strategy. In today's economic climate, with your personal circumstances--I'd probably advise against it. Rent for a year, get solid in the job, build up some work experience, get to know the neighborhoods in relation to your work site, then buy. With the economy in its current condition, I don't think it's much of a risk waiting.

Either way, good luck.
1 vote Thank Flag Link Wed Jan 23, 2008
Don Tepper, Real Estate Pro in Burke, VA
I was asking myself that same question when I was writing. We were young and poor then and the 12% interest rate coupled with leaky windows in cold winters with high gas bills were awful. But, "What doesn't kill you makes you stronger" and all these stressers build "Character". What I wouldn't give for that same EXCITEMENT today. My stress is far worst today than it was twenty years ago. I don't know if I would have done it differently 20 years ago. I do know if I could turn back the clock 16 months, I would not have bought the house we bought in Oak Park because of other stressors in our lives such as job changes, my father unexpectedly dying and dog dying just to name a few. The biggest difference is positive verses negative stressors. I was LUCKY, nothing negative happened 20 years ago.

One think I know I wouldn't have changed 20 years ago, when the wedding stress was really getting to us and the checklist of items was unsurmountable, we blew them all off and went to a Cubs doubleheader. I didn't get the flowers I wanted at the wedding, the program spelled my name wrong, and me and my husband didn't even get to consummate the marriage on our wedding night after we were married because of other disasters caused by us going to the Cubs game. But on the morning of our wedding day, I called my bridesmaids and told them not to come over as planned so that my future husband and I could spend the morning in bed. That morning and the Cubs games mean more to me 20 years later than our $10,000 wedding.

Congratulations! Love will get you through anything.
0 votes Thank Flag Link Fri Jan 25, 2008
Ruthless, Other/Just Looking in 60558
You have received some excellent advice and a great question. I know how awful it is to move and how wonderful it is to have your own home. I am also jealous of your optimistic youth (no offense). Nevertheless, my advice would also be to wait. But I do have some additional questions for you.

You mention setting aside 2 mortgage payments; are you currently working while attending school? How have you come up with the 10% down payment? Would this be your "first home'? Was the time you spent in Chicago working for the firm you are going to work for? Will you have student loans and other debt affecting your debt to income ratio? These are all "mitigating circumstances" (sorry if I'm not using the term technically correct).

Back to optimistic youth, when I bought my first home it was the same month that I got married, changed jobs and got a puppy. As exciting as all of these were/are, they are life stressers. The Realtors, Attorneys and lender all said that they had never have anyone "write a contract", then get married, then "close". This minor adjustment in timing meant more paperwork because I changed my name. It's the little things associated with the big things that can be a problem.

You are facing some big stressers as exciting as they are. If this is your first home there may be some surprises that you may not have thought about. From studying law, you have seen situations that are "not right" but they happen. I gave my two week notice once for a new job that then changed the terms of our agreement. I would not have quit with the illegally modified new terms but my only option was to be unemployed (blackballed) while suing. These are just some things to ponder based on your own situation.

If you have acquired the 10% down by being a young investor buying and selling property while in school, I'm sure you and the lenders will be more comfortable with you closing early. If your 10% down comes from family money and family will support you even if the job disappears, I'm sure both you and the lenders will be satisfied. If all of your changes are all new, even a lender willing to lend might be taking advantage of you given the current state of financial institutions.

Here is a possible alternative. There are many homeowners desperate to sell, many excellent homes with owners NOT facing foreclosure but feeling the drain. Look at homes with the smart business decision of "willing to walk away". If you find the home you would love to own, make an offer for rent with option to buy. This will allow you to take advantage of the current housing inventory situation, watch interest rates to close quickly if they start going up, buy at a low price in the future if housing prices go up or renegotiate a lower price if housing prices go down in the future or start over if the job doesn't work out or you made too optimistic of a buying decision.

Good luck,
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0 votes Thank Flag Link Fri Jan 25, 2008
Ruthless, Other/Just Looking in 60558
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