True or not true? Income vs savings

lisab · Joined: 19 Oct 2008 Posts: 3

A relative of ours that works for a bank (not in the lending dept) said we could never get a loan because we don't make enough and that lenders don't look at your savings at all. They base the loan on your income only. I find that hard to believe, but those of you in the know, tell me how it really works. My husband and I do not make much as far as annual income (he is self employed), maybe 50K, but we have subtstantial savings (over 120K) both 800+ FICO scores and no dept whatsoever. we want to get a 200K or less fixed mortgage. We would put 50K as a downpayment. How much trouble are we going to have?
Thanks

liverichly · Joined: 10 Feb 2005 Posts: 199 Location: Orange County, CA

Income, or your debt to income ratio, is an important part of qualifying. There are loans out there that are based strictly on assets but they are non-conforming programs and as such the interest rates are higher.

$50k of income isn't too farfetched to qualify for a $200k mortgage. So you are saying you are looking at a $250k home and are looking to put $50k down? What are your other minimum payments (car, credit cards, student loans, etc.)?

Is the $50k of income what you pay taxes on, or is it $50k gross and then you write off expenses? For self-employed individuals, it's the after expense income what lenders consider. If you have 20% down, with your strong FICO scores there are still a couple stated income lenders though that don't require income verification.

lisab · Joined: 19 Oct 2008 Posts: 3

Hi Shane,
Thanks for your reply. To answer your questions, we would be looking for a $200,000 price on a house and then would put 50K in cash, so basically the loan would be for 150K after our down payment. we have no debt of any kind; cars are paid for, we hold no balances on our credit cards and no student loans.
50K would be gross income. My husband has very little in expenses, so we don't write any off, as they wouldn't amount to any significant deductions.
Lisa

liverichly · Joined: 10 Feb 2005 Posts: 199 Location: Orange County, CA

Hi Lisa, you are welcome. As long as your husband has been self-employed for 2 years it appears you should qualify very easily for the mortgage amount you are seeking. Your debt to income ratio would be anywhere from 26-34% depending on the property taxes in the area you'd be buying, and since you have excellent FICO scores and 25%+ down, any debt to income ratio in that range will be just fine.

Steve Ching · Posted: Sat Nov 01, 2008 12:21 am Post subject: Help obtaining a loan.

Hi Lisa,

There is a little known trick to obtaining a conventional loan (such as a Fannie Mae, Freddie Mac, or Ginnie Mae (Government FHA) loan when your income is insufficient but your cash reserves are large.

I know exactly how to make this work but I won't divulge it to borrowers unless they demonstrate a clear understanding of how they will be able to repay the mortgage. I don't want to be sued for putting people in a loan (conforming or FHA fixed rate or not) they later claim they can't afford.

Stephen Ching
425 344 2191

2809.blanche · Joined: 13 Nov 2008 Posts: 5

Hi Lisa,
Just read your question and I see your problem. Many people do have this problem now as banks dont trust in savings anymore.
Though I just would take bank loans into considerations as there are many people out there at the moment that lend money the dont have and that is very dangerous!

liverichly · Joined: 10 Feb 2005 Posts: 199 Location: Orange County, CA

I'm not sure where the "problem" is you two are seeing... and also FHA is not a type of a conventional loan program, it's a government program.

punani · Joined: 12 Dec 2008 Posts: 6

ANYBODY that thinks the general public is going to be able to save any money,and get away from credit reliance is not seeing the big picture.
the gov't and the feds and the world for that matter ,is trying to fix,a finacial crisis,caused by excessive credit ,with more credit, AND people
are going to gobble all that 'debt' [ credit ] up, why should they save,
and most wont be able to anyway, the sytem is set up to break you [me]
ya gotta luv it!!!!!!!!!