Posted on: 05th Oct, 2012 09:21 am
First, some background:
We currently live in Ohio, and planned to relocate to New Hampshire next summer. As part of our initial search, however, we have located the perfect home which may put us in a position of having to make an offer much sooner than we anticipated.
The home is an REO, and the seller is not willing to consider FHA financing. From what we have been told, the home will absolutely pass a home inspection, but the seller simply does not want to risk any deal falling apart should the FHA inspection reveal minor defects to be corrected. So the deal will need to be done with conventional financing.
As noted, we were planning on a summer move, thus our plan for saving was initially focused on paying down debts and THEN saving cash. So at this point we are cash poor. We have, however, eliminated most debts. With an annual income of $75,000 our monthly obligations come to less than 20%, and that includes the mortgage payment on our current home. Credit score is 700. Current mortgage balance is $56,000 and home would appraise for $80,000 so we do have some equity.
The home we are considering in listed at $76,000 and would appraise for that or higher.
Now for the questions:
1) Is it allowable for the seller to provide the bulk of our down-payment and closing costs on a conventional loan? For example, if we were to offer $76,000 with the seller providing $6,000 to us at closing, netting them $70,000 AND providing the capital we lack?
2) With the above-mentioned credit score and debt-to-income, would be qualify for a conventional mortgage with a 5% down-payment, or is it more likely we would need 10%?
3) We would buy the New Hampshire home before year-end, but would not be able to sell our Ohio home until June when school ends. Would there be an issue with buying a new primary home when the current primary home is not listed for sale, meaning would a lender consider this New Hampshire property a second home or vacation home even though that is not our intent?
4) If we cannot get seller assistance sufficient to cover our upfront costs, or if such an arrangement is not acceptable to a lender, is there a way we could tap the equity in our current home to use for our upfront costs? For example, borrowing $15,000 against our current home would still leave the LTV below 90%. It would still not raise overall debt to income above 20%, even with the monthly cost of the second loan factored in. And if a sale went through before we sold our current home, and the mortgage on the second home is factored in, debt to income with both loans considered would still only be around 28%, so still plenty of wiggle room.
If there are no suitable options, we will simply need to wait until Spring when we are better prepared, but if something can be worked out before then given the information provided, we would act now.
We currently live in Ohio, and planned to relocate to New Hampshire next summer. As part of our initial search, however, we have located the perfect home which may put us in a position of having to make an offer much sooner than we anticipated.
The home is an REO, and the seller is not willing to consider FHA financing. From what we have been told, the home will absolutely pass a home inspection, but the seller simply does not want to risk any deal falling apart should the FHA inspection reveal minor defects to be corrected. So the deal will need to be done with conventional financing.
As noted, we were planning on a summer move, thus our plan for saving was initially focused on paying down debts and THEN saving cash. So at this point we are cash poor. We have, however, eliminated most debts. With an annual income of $75,000 our monthly obligations come to less than 20%, and that includes the mortgage payment on our current home. Credit score is 700. Current mortgage balance is $56,000 and home would appraise for $80,000 so we do have some equity.
The home we are considering in listed at $76,000 and would appraise for that or higher.
Now for the questions:
1) Is it allowable for the seller to provide the bulk of our down-payment and closing costs on a conventional loan? For example, if we were to offer $76,000 with the seller providing $6,000 to us at closing, netting them $70,000 AND providing the capital we lack?
2) With the above-mentioned credit score and debt-to-income, would be qualify for a conventional mortgage with a 5% down-payment, or is it more likely we would need 10%?
3) We would buy the New Hampshire home before year-end, but would not be able to sell our Ohio home until June when school ends. Would there be an issue with buying a new primary home when the current primary home is not listed for sale, meaning would a lender consider this New Hampshire property a second home or vacation home even though that is not our intent?
4) If we cannot get seller assistance sufficient to cover our upfront costs, or if such an arrangement is not acceptable to a lender, is there a way we could tap the equity in our current home to use for our upfront costs? For example, borrowing $15,000 against our current home would still leave the LTV below 90%. It would still not raise overall debt to income above 20%, even with the monthly cost of the second loan factored in. And if a sale went through before we sold our current home, and the mortgage on the second home is factored in, debt to income with both loans considered would still only be around 28%, so still plenty of wiggle room.
If there are no suitable options, we will simply need to wait until Spring when we are better prepared, but if something can be worked out before then given the information provided, we would act now.
Hi david_weaver,
If the lender agrees to it, then the seller can definitely provide you with the bulk of down payment and the closing costs. With the above mentioned credit scores and debt to income ratio, you may be able to qualify for a conventional loan. You should contact the local conventional lenders and apply for a conventional mortgage. If you already have a property with a mortgage on it, then it may be difficult for you to qualify for another loan on a new property.
If the lender agrees to it, then the seller can definitely provide you with the bulk of down payment and the closing costs. With the above mentioned credit scores and debt to income ratio, you may be able to qualify for a conventional loan. You should contact the local conventional lenders and apply for a conventional mortgage. If you already have a property with a mortgage on it, then it may be difficult for you to qualify for another loan on a new property.