If you have a low income say 20K but a large amount in savings say 70K would a bank give you a mortgage and if so how much?

Asked by Neil198, West Springfield, MA Mon Jun 28, 2010

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Dan Chase, Home Buyer, Texas City, TX
Mon Jul 5, 2010
You might be able to borrow around $60,000. Maybe a bit more or less depending on interest rates. You have to meet certain requirements including fico score and debt to income ratios. Those could change that amount drastically.

You need to figure out closing costs. They add more money to the need to have column.

It might be a good idea to hold back about $10k in savings when you buy. That way if anything happens you can probably afford to buy those needed repairs.

Below is a basic overview of the house buying process.
http://www.trulia.com/blog/dan_chase/2010/01/its_your_first_…

Looking at this economically does renting or buying cost least? Use your numbers to find out.
http://www.trulia.com/blog/dan_chase/2010/01/does_it_make_mo…

Why renting at a higher monthly payment could really be the best choice. A very different perspective below.
http://www.trulia.com/blog/dan_chase/2010/02/why_rent_if_you…

This could be important when buying. Things to find out about any property before buying. It can save you from many problems.
http://www.trulia.com/blog/dan_chase/2009/11/questions_i_wou…
0 votes
Scott Godzyk, Agent, Manchester, NH
Mon Jul 5, 2010
neil there may be programs available, the only true way to tell is to meet with a local and trsuted mortgage broker in your area. you can get prequailified at no cost and this will let you know if tehre are any programs available after they review yoru credit score and financials. that is the only true way to tell 100% if you can or can not get a mortgage. Please stay away from internet lenders.

good luck with yoru mortgage, for more information check out my blog

http://www.trulia.com/blog/scott_godzyk/2010/05/secrets_to_g…

TIPS ON GETTING A MORTGAGE
Web Reference:  http://www.ScottSellsNH.com
0 votes
Dane Hahn, Agent, Englewood, CO
Tue Jun 29, 2010
Wayne makes a good point, there are programs and good ones that will help buyers like Neil become home owners. But with his stated $20,000 annual income (even with good savings--or at least money available) my suspicion is finding a suitable home for Neil would be a difficult assignment -- with a small prize at the conclusion.

I sat through a meeting yesterday with a couple who earn $24,000. His health insurance (he's had 2 heart attacks) runs over $1,000/month. They own a house but can't afford it and want to sell it in favor of a trailer in a park. The local park they want is now at $475/month for rent, not counting the purchase of the unit, which might run in the $50-$65,000 range. (2x wide). He stated that he has gone through all his savings and annuities, and now has to sell the house as his last asset.

Here's a hair-raiser, his income will increase when he goes on social security! But that's still 2 years away.

Back to Neil's issue--a little different story I suspect. To get him into a house in the 100K purcha, he will have to use all his savings and all his credit. I am way too conservative to think that's a good solution for anybody. But Wayne, you are right, I am writing from my own point of view and I would simply caution him to not over extend himself. With an income of only $20K--he needs some savings to protect himself from unknown events.

Let me put it this way, if this were one of my kids, I would offer the same advice that I wrote on this post the other day.

Dane Hahn
0 votes
Wayne Laverd…, , Dover, NH
Mon Jun 28, 2010
Sorry Dane, but I have to disagree with some of what you've posted. There are several programs we have available that do not necessarily require a large down payment and one of them we can do 100% financing (no money down) at around 5% interest rate and no PMI (private mortgage insurance) required either. I do agree that it's great to have good equity in a home when you buy it but keeping most or all of the $70,000 in your savings acct or other higher yielding acct making you interest sometimes can be a better option. Again, there is alot to look at when qualifying a home buyer but if they qualify on their current income (without putting a large down payment down) there are some smarter options than to just drop your whole life savings down on your new home.
To avoid PMI on all loan programs you'd have to put 20% of the purchase price down. If you buy a duplex or 3 unit we can use 75% of the market rent to help qualify you. If you're looking to purchase in ctr Barnstead, NH I live in the very next town south, Strafford, NH and would be happy to go over your options.

Thanks,
0 votes
Dane Hahn, Agent, Englewood, CO
Mon Jun 28, 2010
Hi Neil,

My experience with lenders (lately) is that if you can show--beyond a shadow of a doubt--that you DO NOT NEED a loan, they will gladly make a loan for you. So I would say that you would qualify for a purchase in the $130K range. But you will have to put your $70,000 down, and borrow the other $60,000. It will be good to have 55% equity, so you won't need PMI (private mortgage insurance).

Then of course the house will need to appraise, and you will need a cushion for taxes and insurance.

If you only want to put down a minimum amount, figure $15,000 down on a purchase of $75,000, in which you borrow $60,000.

$75,000 may not buy a huge home in West Springfield, but the numbers do work.

If you find a smallish 2 family in which you could live in one side and rent the other, about 80% of the income you can generate from the rental will be considered income, so that might raise your personal income to 30K or so, and that will change all the numbers, with that income you might be able to borrow $90,000, and if put down $25,000 or so the purchase price could be $115,000.
0 votes
Wayne Laverd…, , Dover, NH
Mon Jun 28, 2010
Hello Neil198,

Qualifying for a mortgage has several aspects to it. The property needs to appraise and qualify, income needs to be figured and two debt to income ratios need to be figured (one for housing expense and one for housing expense plus all other monthly debt), and credit needs to be examined. If any one of these items fail it would hamper you from getting a mortgage. There are several programs out there though and even though you might not meet the standards for one, you may meet the standards for another.
I'd be happy to help and walk you through the process and very readily available too.
Hope this helps answer your question.
Wayne Laverdiere
0 votes
Elizabeth Ja…, Agent, Nashua, NH
Mon Jun 28, 2010
It depends upon alot of things, including your credit score. It's a quick call to a lender for a no-obligation, no cost pre-approval. I can put you in touch with a reputable lender.
0 votes
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