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Question about buying a house/mortgage....?
Hi. I'm really asking a question that's not exactly about me. I have a friend buying a house. Here are the facts:
-The house cost $400,00 (it will appraise for about $450,000)
-She makes $60,00 a year
-She is putting down 5%
-She is taking $20,000 from her 401k for down payment
-She is doing 6% seller's concession
-It is a legal 2 family, tenants pay $1,300 monthly
-She has less than $20,000 in the bank
-She has a credit score of 695
-This is in NYS
-Her broker told her he is going stated (remember,95%financing!) and mentioned nothing to her about reserves.He told her he can get her 6.5% and didn't mention PMI
Here are my two questions:
1) Is there any way this loan is going to happen?
2) Will she be able to afford this in the long run?
I'm not totally nosey, just clearly worried. Let me know what you think. Thanks!
3 Answers
- 1 decade agoFavorite Answer
From the details you gave me it appears she can get approved for a loan. The terms though seem to be a little too good to be true. 6.5% is a great rate right now, but this seems to low for a stated income loan. If she is only doing a 5.0% down payment there is going to be PMI, unless its an 80/15 loan, and the broker is doing a 2nd mortgage to avoid the PMI. If it is an 80/15 loan then she needs to verify the monthly payment and rate on this portion as well. Her monthly income doesn't seem to be enough to handle the monthly mortgage on her own, so she would really be needing to make sure the tenants always pay on time, and continue to rent at $1300. This income does offset the monthly mortgage payment. But It is never a good idea though to purchase a home under the assumption that the $1300 income is always going to be coming in. Overall I think your friend just needs to confirm the details on the loan before they sign, and understand that if the tenants don't pay or move out she is still resposnible for the entire mortgage payment no matter what.
Source(s): www.mateomortgage.com 10 year mortgage broker - Anonymous1 decade ago
It can happen, but generally when brokers quote rates like 6.50% with no mention of adjustments, PMI or blended rate - it should prompt the borrower to ask more questions and review the diclosures sent.
Primarily review the GFE (Good Faith Estimate) and the TIL (Truth In Lending) this will show how much the borrower is paying for the loan (points and origination fees) plus the TIL will show any adjustments to rate and the frequency.
If no PMI was discussed, the broker could have placed her in an 80/15 combo (or piggyback) loan. This removes the requirement for PMI but the second mortage (15%) will be a higher interest rate.
Also, ask if the loan is SIVA (Stated Income, Verified Assets) OR SISA (Stated Income and Stated Assets)
Source(s): 5 years mortgage banker/15 year financial controller - 1 decade ago
its possible to get done unless the loan officer is a rookie..Your friend is the only one that can say if she can afford it or not because she knows her true monthly expenses. Have the loan officer give EXACT numbers so your friend can make a educated decision.