Mortgage questions for experts

Tracon · Joined: 09 Oct 2005 Posts: 3

I have signed a contract for purchase, and have applied for a mortgage. I am nervous because I really like the house and it has all of the features I am looking for.

Purchase Price 98,000 5% down

Income is 4750 monthly

Fico scores are 679,701,701

F/E DTI 15 Total DTI is .51 , but this includes 401k loan.

Does the 401K loan that I am re-paying count against my DTI? If so, will I be approved with a total DTI of .51?

Without the 401K loan my DTI would be .38.

Thanks in advance for any answers.

m2c · Joined: 03 Aug 2005 Posts: 761

Your LO didn’t put you mind at rest! This should sail through on a conforming basis assuming you neglected to tell us about that Chapter 7 that was just discharged.

No 401K payment does not count in total debt ratio.

With a 701 representative FICO I’d inquire about lend paid MI or a discount on regular borrower paid monthly MI.

Tracon · Joined: 09 Oct 2005 Posts: 3

Thanks for the answer m2c. I am a first time buyer who sort of jumped in without much knowledge.

There are no bankruptcys or anyything negative on my credit reports. Just the high DTI if the 401K loan is counted.

I need to find out more about the lender paid MI.

m2c · Joined: 03 Aug 2005 Posts: 761

Your LO can go over the figures he has available but here are the dollar amounts I’d offer:

Standard monthly MI (0.78% annual factor): $60.52/month dropping to $15.52 for 12 months after 10 years. This is what likely shows on your TIL form. Discounted MI, if available, should drop another 6 to 8 basis points of the annual factor.

LPMI: 1.15% (on mortgage amount) one-time charge or $1,070.65 usually taken as points. LPMI is more widely available than discounted MI but rates may vary. Payback is 18 months ($1,070.65/$60.52). Other factors should be considered – cannot be cancelled, option to cancel early (rapidly appreciating local housing market) with appraisal on standard MI, etc. You’ll get a separate disclosure with LPMI. You can mix and match the 1.15 discount point hit between rate and points but I think it’s most effective when you can pay it upfront. Available cash is usually what drives buyers away from this option.

Haplo · Joined: 20 Jan 2005 Posts: 2406 Location: Springfield, IL

Quote: Does the 401K loan that I am re-paying count against my DTI? If so, will I be approved with a total DTI of .51?

Actually, you have to be careful on this. Even though it's a loan on your own money, if it is a monthly payment and is shown in your paystubs, it's going to come up, and most likely they're going to want it added in. I've had this come up not only here at Wells but previously when I was a broker.

Other than that, you really shouldn't have a problem. You have a good credit score and good income. Just pay attention throughout the process and be on the ball about helping your lender get you through :)

m2c · Joined: 03 Aug 2005 Posts: 761

Haplo,

I can’t remember any questions on this “non count” at least after FNMA enshrined it. Actually I think it was FHA who first moved and then FNMA.

I just show the loan on the 1003 and indicate the corresponding debt service is not to be counted. If the underwriter brings it up, just keep chanting “FNMA X 702.02 F” and it will go away.

Haplo · Joined: 20 Jan 2005 Posts: 2406 Location: Springfield, IL

Hrmm, I'll have to check that out :) Thanks M

chow · Posted: Mon Oct 10, 2005 11:55 am Post subject:

As much as the UW's quote those regs to us- It's kind of fun to quote one back to them on occassion! :lol:

Tracon · Joined: 09 Oct 2005 Posts: 3

The mortgage was approved today and they are ready to close so I guess I was worrying for naught. Thanks everyone.

chow · Posted: Tue Oct 11, 2005 9:04 pm Post subject:

No problem, some of us got a little updated because of your question!

You made us think too! :wink:

Enjoy your new home! XOXO

sophia · Joined: 08 Oct 2005 Posts: 3

Deleted ad

~Haplo

David · Joined: 19 May 2004 Posts: 703

Certainly some companies do not count this, because in a sense you are paying yourself back. For example, I know that City Financial here in Atlanta does not count it against you.

chow · Posted: Tue Oct 25, 2005 4:16 pm Post subject:

This is something that is based on what loan program the buyer is going to be able to fit into, and what END Investor is available for the broker or bank to whom the buyer makes application with.

The first issue anyone outside of the finance world needs to understand is:

We have different rules and loan to values based on what type of loan a borrower will need, and what type of property, and the payment habits of the borrower.

Let me confuse you one step further-(don't worry, I'm along for the ride on this one)

Location, rising values, stable values....declining values???

Then factor in the liguid cash we can find, and document.

There isn't an instant credit answer!!!