My turn: 1st time home buyer and want to see what advice you guys have

[svtfocus2cobra]

I decided I would put in a request for approval for a home loan with my bank (Chase) yesterday, kind of just to see what I qualify for, but I also have my eye on a $229k condo nearby my work. I'm looking to live in for about a year but then turn into a rental at some point when my girlfriend starts school at the University of Washington in the Fall in which I want to get a place with her in either Seattle or Bellevue. I'm just living with my brother and his family at the moment, but it's kind of at the point where I need to get my own place now. I haven't just gone out and got an apartment because rent is stupid expensive out here. For a place that is somewhat nice and not even in the best area, you are looking at $1200/mo and then utilities and all that. I'm hoping to get a mortgage payment around $1100-1200/mo, but I would be willing to pay a little more if it is for something that is mine.

So Chase calls me back today and we start going over the numbers. Long story short: credit scores were 801, 811, and 780, I was looking at an interest rate of 3.7% with an APR of 3.9%. My only two open lines of credit are my GT500 which I'm paying $630/mo on because I rolled over some negative equity onto it and wanted to pay that down as fast as possible which I have paid about $9-10k so far. I wanted to get the car down about another $5k and then refinance. The other line of credit is a 0% credit card that has $2k on it from a suppressor purchase that just went through like two days ago plus a couple of other things, but I was going to pay it all off this month because next month the 0% rate goes away. On top of all of that I have VA loan eligibility as well.

But the overall verdict was that my debt to income ratio was too high, which basically means I make shit money for what I do. So I'm holding off on the home purchase until I get in a better position but I'm just frustrated overall. All the numbers say I'm doing it right for the most part but I still can't afford to get something that is basically bottom of the market for price range around here. With housing being so expensive in western Washington it makes it really hard to get anything. So where do I go from here? Just keep doing what I'm doing and try to reduce my debt? Is there any special programs I should be looking for from the VA or other organizations that can give me the upper hand? Wait to see if I get a raise that puts me into a better position?

 

[EarvGotti]

Come to Florida lol.

 

[EarvGotti]

I have 2 friends that have gotten great incentives because of being prior or active military so i think the VA would be a good option for you.

 

[mustangvsix]

Your gt500 @ $630/mo is your only debt and they wouldnt approve you? Try talking with a mortgage company not one of the giant banks. Also maybe consider looking ar buying new with a major home builder. Both entities are more interested in making deals and ultimately pass the debt along when they sell the loan. Also this calculator is a descent starting calculator too. Make sure to include property taxes. https://www.zillow.com/mortgage-calculator/house-affordability/

 

[EarvGotti]

Your gt500 @ $630/mo is your only debt and they wouldnt approve you? Try talking with a mortgage company not one of the giant banks. Also maybe consider looking ar buying new with a major home builder. Both entities are more interested in making deals and ultimately pass the debt along when they sell the loan. Also this calculator is a descent starting calculator too. Make sure to include property taxes. https://www.zillow.com/mortgage-calculator/house-affordability/

+1 solid points, the only thing I like about the bank is that you are told what you are pre-approved for and then you know what you can start looking at. As for the calculator, thats a great tool, never seen it!

 

[mustangvsix]

+1 solid points, the only thing I like about the bank is that you are told what you are pre-approved for and then you know what you can start looking at. As for the calculator, thats a great tool, never seen it!

Both options i list go thru pre-approval and ultimately underwriting etc and you get your "spend limit". With the home builder it is obviously with them. With my first home i tried getting preapproved with WF it took forever and never came to fruition. Went to a mortgage company got a phone approval in 30 mins, ended up buying new, the builder covered closing costs as part of their incentive (~about $5k on a $150k home). Loan was sold to WF in about 10 days after closing. Moral of the story go around the big guys its easier.

 

[gt347mustang]

Get rid of the gt500. Are you upside down on it?

Biggest factor in qualifying next to income is debt to income ratio.

 

[svtfocus2cobra]

Good info, but all new homes around here are going to be $350k and up which is automatically going to put me out of my range unless I move further out into the country which is going to be pretty far away from everything. All of the rural surrounding areas of where I am at are highly sought after areas to live in as people try to get out of the cities, so home values are pretty high there as well. Moving further out from there would put me at a 1 1/2 hour at least commute with traffic. I've been using that Zillow calculator and that is how I came to the conclusion that I am going to have to stay in the low 200k range.

My GT500 is my largest bill. On top of that I just have the credit card and then my phone bill and insurance which is only ~$200/mo for 2 vehicles, a motorcycle, renters insurance, and life insurance, but that is it. I have my Ducati which is paid off and I'm considering selling it to help with a down payment if needed. I could probably come up with $15k if I had to. My Bronco is paid for too obviously but I don't want to sell it as it is my only other normal vehicle and I'm letting my brother use it as a commuter at the moment.

What kind of lending companies should I be looking at? Are they just local ones or are there nationwide companies I should be talking to? I do have a friend that I believe is a lender so maybe I should start talking to him.

 

[P49Y-CY]

that does seem like an awfully high car payment, unless i am just really getting old. i think you would be in a much better position to be able to qualify without the gt500, even though as a fellow car enthusiast that does sound like the worst idea possible.

 

[svtfocus2cobra]

Get rid of the gt500. Are you upside down on it?

Biggest factor in qualifying next to income is debt to income ratio.

Depends on what I can sell it for. It looks like values have dropped on them the last couple months but it only has 33k miles so I would say I need to pay another 4-5k so I'm not upside down. That would be my guess. I screwed up when I bought my last F150 so I'm just trying to fix that mistake and recover from the negative equity I accrued on it which I have paid off at this point.

 

[EarvGotti]

that does seem like an awfully high car payment, unless i am just really getting old. i think you would be in a much better position to be able to qualify without the gt500, even though as a fellow car enthusiast that does sound like the worst idea possible.

my 2015 GT with Performance package and fully loaded with 0 down was $800 a month.

 

[BrunotheBoxer]

You guys are doing it wrong. Having car payments that high is not smart unless you're making serious bank.

 

[gt347mustang]

You guys are doing it wrong. Having car payments that high is not smart unless you're making serious bank.

Scary truth right there.

Depends on what I can sell it for. It looks like values have dropped on them the last couple months but it only has 33k miles so I would say I need to pay another 4-5k so I'm not upside down. That would be my guess. I screwed up when I bought my last F150 so I'm just trying to fix that mistake and recover from the negative equity I accrued on it which I have paid off at this point.

Sell the bike and gt500. Use any leftover cash to pay off the credit card. Right now is the time to sell both toys, right before summer, everybody's got spring fever. Your income isn't high enough to have multiple toys and a house. When qualifying you need to have as little debt as possible and as high income as possible. All the lenders care about is you making a monthly payment.

In the long run the bike and car will both depreciate significantly whereas the house which will appreciate. Any way you try to justify keeping one or both toys is hurting your chances of qualifying.

I know my reply seems harsh, but you're asking hot to get into a house and that's the way to do it.

 

[gt347mustang]

Also, what's your yearly income? Maybe I missed it?

 

[Blk04L]

Can definitely try other banks, as some are more hesitant than others. But yea, it just comes down to debt to income for most lenders(28/36 rule). I've forgotten quite a bit, but IIRC they also look at your current level of rent/mortgage and want to make sure it's not a huge jump, in payment, from current to the loan they'll give you*.
What's hurting you more than likely is the payment on the Shelby as that plus the loan for the house probably knocks you over the 36% mark. Either refinance(if it makes sense) it or sell it(edit-missed the later post where you may be upside down on it by 4-5k). Can always get another one if you really want that condo sooner than later.

*At least that's what my lender brought up when you are close to the 36% level.

Might have to wait, or sell the bike and the Shelby to 1. increase Down payment on house and 2. Eat the negative equity on 500.

 

[IronSnake]

In the process of buying our first home..

Home: 240k
Income: 65k by myself. But have long time girlfriend and best friend/his woman moving in. Plus I'll have an extra room to rent if I feel like it. It's a big house.
Loan: FHA w/ 3.5% down
Monies: Will have enough to do the down payment/closing costs with a little left over. Monies hard to save here when rent is 1400 for a not ghetto appt. Sold my 2016 GT and have about 2400 in credit card debt. So debt free aside from small student loan payment and a small credit card balance.

While not ideal and I wish I had 9 million in the bank and could put 20% down, PMI is in my future. But home prices here are going thru the roof so.. in about two years I'll refi and drop the PMI. Between property taxes/ins/mortgage i'm looking at about 1500 a month w/ PMI. 1300 without it.

 

[DHG1078]

Did you put your GF or anyone else on the pre-approval application? Depending on how much your GF makes, you would have qualified. Although if you aren't planning on spending the rest of your life with your GF, I wouldn't put her on the loan.

Definitely go to a mortgage company.

 

[sutyak]

OP, you should first ask yourself what will happen if you lose your job and have to float a few months. It sounds like you have a lot backwards. Debt can be useful in the short-term, but absolutely don't get the thought in your head that you have to have constant debt forever. I fear that's commonplace now.
Instead, look ahead to when you can be 100% debt-free, sock away wads of money at a time, and buy stuff without credit, or extremely short-term credit. Do this early in life.
Remember that anything you have financed is NOT yours. When you pull up to a mortgaged home, in a financed car, possibly with student debt, it should make you a little sick.
The day when your house is paid off, your car(s) are paid off, and everything is 100% yours is the day you want to focus on.

 

[SVT-BansheeMan]

I just have the credit card and then my phone bill and insurance which is only ~$200/mo for 2 vehicles, a motorcycle, renters insurance, and life insurance, but that is it. I have my Ducati which is paid off and I'm considering selling it to help with a down payment if needed. I could probably come up with $15k if I had to. My Bronco is paid for too obviously but I don't want to sell it as it is my only other normal vehicle and I'm letting my brother use it as a commuter at the moment

Do you pay your credit card off in full every month?

You sure do have a lot of toys. That gt500 needs to be paid off or sold IMO. We just went through this a few years ago. Some lenders when i was younger wanted to lend me far more money than i could afford. A few years ago, the bank i went with did debt to income ratio and that reall wake you up.

You are living with family with a $700 car note while you could be driving something much cheaper(although boring) and get on your own much faster.

My wife and i lived separately with our own folks while saving for a home. Meanwhile, everyone we knew was got a house, new cars etc. That is the only way i had nice toys and still were able to keep them after the house. I think you have to sell the toys or accept you will be living with others much longer.

The idea of renting the condo out when you even even afford to get a house throws me for a loop. It's like you are counting the chickens before they hatch.

The subject of a gf on a home loan is a touchy subject. But if it isnt TOO serious, you should be able to afford it if she splits up. Dont count on anyone but you to pay the bills.

 

[Torch10th]

OP, I would not even consider a house yet until you're at the point with your significant other that you guys are ready to make the move. You're making some assumptions on what's possible without knowing how any of this works yet.

Condo's in most parts of the country are still money-sinks and you don't get much of anything out of them. They are like a depreciating asset unless it's in a market where condo's are the only game in town (Denver comes to mind).

It sounds like you're trying to get in to one with minimal down and on a salary that is likely low for the amount you're looking at. Unless there's a lot you're not telling us about, for your DTI to be so out of whack that you can't get lending with prime credit, you're spending an inordinate percentage of your income on your GT500.

In a year or so when you go to try and get a place with your SO, your plan to turn the condo into a rental will require that you have enough liquidity to cover it's payments for a minimum of 6 months, on top of your payment for the new house. You're basically going to be told that you need to close on your condo before you can close on your new house. Based on what you've said so far, I don't see that as a possibility.

You're at the point in your life where your lifestyle has outpaced the money you earn and you're seeing that first hand. To do what you want to do gives you a couple options. Either earn more money so you can maintain that lifestyle where you're at, move to a location in the country that your income will support your chosen lifestyle or change your lifestyle to make it appropriate for your location and income level.

It sounds like you enjoy your location. If it was me, I'd sell your motorcycle, sell your GT500 and replace it with a much cheaper option. Then continue to put away as much money as you can so that when you and your significant other are ready, you have the funds to make it happen.