[08rookie]

sorry its long...only read if you are bored...i value this board and the people that frequent the site... dont bash me please!

general outline...im self employed...cash business...my w2 are doesnt necessarily define my financial situation...my business pays for my car, cell phone, gas, tolls...the paycheck i write to myself is pry a lil more then what some people might spend a night out in nyc...im planning to purchase my first property in the next year and would like some advice to maximize my borrowing power...im looking small...maybe something under 200k...

i have some college loans in my name that i am paying, i have one credit card in my name that im paying and my car (even though it is getting paid through my business) is in my name only...

my debt to income ratio is 31%...my debt to credit ratio (the ration of actual credit given to the balance) is rather high...like 77%...my college loans were originally at 11,500 and now they are hovering around 8500...my bmw loan was original 25k and now its close to 17,900...my credit card limit is 2700 and my balance is like 1 grand...

of all the loans ive never missed a payment, never been late...my fico is decent like 680...not the best but not the worst...like is said bmw financial approved me for a 30k with my signature last year...

soooooo....should i continue to save money to throw down on the house? should i use the money that i have saved to pay down some debt and maybe decrease my debt to credit ratio to under 50%? the more money i use to pay off debt the less i will have to throw down. im worried that with my w2 will greatly effect the future loan amount more so then my ratios and credit score, even if my ratios and credit score were to improve greatly....so then am i to discuss with my CPA about giving myself a raise?! because thennnn if i give myself a raise i would declare more but only after 2 years because banks need at least 2 years of tax returns...

correct me if im wrong on this too...a friend who used to do mortgages said that if you are self employed and some of your expenses run through your business you can use a percentage of your expenses as income?!

lastly...do i need a mortgage broker? can i contact the lending institution directly and speak with the actual loan officer who will approve or deny the application?!

thanks to anybody who reads and responds!

[Kroy]

It's been a few years but I used to be a LO for a mortgage company. I only did refinance though. Once you apply, they're going to ask for your ss# and run your credit. I would not suggest giving out your ss# to everyone especially if you're just looking right now. Only give out SS when it's game time otherwise risk running your credit to the floor. BTW, there are no "safe" credit pulls, it's all BS. But running your credit doesn't necessarily lower your score; had instances where I run someone twice and get a higher score on the 2nd pass.

You can show bank deposit if you're 1099.

You can get a few more lines of credit to boost your fico.

Loan officer does not approve you... LO would approve anyone they can if given a choice; they need to follow guidelines. Anyways, they only make money if the deal goes through, so it's in their best interest to make it work.

A few questions.
Do you rent currently?
Can you easily afford new monthly payment for mortgage?

How much down payment?
I assume you're buying a 200K house so you need to figure out your loan to value (LTV) based on that amount. ie owing 150k/200k = 75% LTV. You probably need to stay under 80% LTV to get a decent rate. If you are above 80% LTV, you will need a 2nd mortgage.

Take everything I've said with a grain of salt. I'm no longer in the industry and even when I was, I didn't really know that much. Taking that into consideration, you should watch out what your LO tells you. They may not be the most informed people; they're salesmen.

[kyleb350]

Try paying off your credit card first and request for a limit increase if possible to get your available credit up and debt down. It'll help your credit score significantly.

Like Kroy said, you can also save a lot of money if you save up to put 20% down on a house (I know that's a lot).

[El Cheapo Loco]

Pay down your debt before doing anything else. Two significant benefits: saves on interest on current debt and boost your FICO. The later will eventually land you a better rate on your mortgage, which will save you thousands.

[Freakazoid]

put a 20% down payment on the house.... this combined with your 680 fico score will get you a loan no problem.

I was able to get a 15 year mortgage with a 20% downpayment with a fico score about 50 points lower without a problem.

if you're serious about a house the 20% will go further than paying off some of that credit imo

[08rookie]

thanks guys..

@Kroy-i do rent...i could comfortable afford maybe a 1200-1500 dollar month mortgage without cutting back in lifestyle i think?! im not looking big here...i kno what is above my means...i dont have a family or kid yet...im looking at properties listing for 140-160?! FHA loans only require 3 or 4 percent down so i think i can cover that easily lol

assume that i am going to put down 20 percent i am still capped off on what i am allowed to borrow...if a bank bases what i can borrow solely on my income, regardless of fico and other debt/credit ratios i will only be looking at homes within a certain value...i was told by a LO before that based on my situation (which was one year ago) i could approve for 120k...a year ago i had higher ratios and a lower fico but still the same income...that was also an FHA loan and only needed like 3 percent down...

if i found a property for 200k and threw down 20% i still would need a mortgage to cover the ramaining 160k which i would not get approved for based on my income...i might have 40k but if you had 40k cash saved would you want to drop it all on a house dp?! what if there something came up where i needed to dip into savings.....i wouldnt want to empty the bank just to be a home owner then live paycheck to paycheck.....im obviously not a rich guy lol

[El Cheapo Loco]

You should always have enough cash saved to cover ALL living expenses for a minimum of 6 months, if not a year. Do this before you buy a house.

Imagine this. You got sick and can't work for a few months, therefore cannot afford the mortgage. The lender will foreclose on you and your 20% will go poof.

[GreenPlease]

Whatever you do make sure you get a 30yr fixed. Rates are definately going higher. Given our current economic predicament, we'll either get high rates with low inflation or low rates with high inflation (seems contrary to what one is taught in finance/economics but it makes sense when you consider how the fed has gone about quantitative easing). We will probably end up with both high inflation and high interest rates (negative wealth effect). Anyways, just lock your rate in

[Kroy]

Originally Posted by 08rookie

thanks guys..

@Kroy-i do rent...i could comfortable afford maybe a 1200-1500 dollar month mortgage without cutting back in lifestyle i think?! im not looking big here...i kno what is above my means...i dont have a family or kid yet...im looking at properties listing for 140-160?! FHA loans only require 3 or 4 percent down so i think i can cover that easily lol

assume that i am going to put down 20 percent i am still capped off on what i am allowed to borrow...if a bank bases what i can borrow solely on my income, regardless of fico and other debt/credit ratios i will only be looking at homes within a certain value...i was told by a LO before that based on my situation (which was one year ago) i could approve for 120k...a year ago i had higher ratios and a lower fico but still the same income...that was also an FHA loan and only needed like 3 percent down...

if i found a property for 200k and threw down 20% i still would need a mortgage to cover the ramaining 160k which i would not get approved for based on my income...i might have 40k but if you had 40k cash saved would you want to drop it all on a house dp?! what if there something came up where i needed to dip into savings.....i wouldnt want to empty the bank just to be a home owner then live paycheck to paycheck.....im obviously not a rich guy lol

I only said 80% because that's what I remember that max for 1st mortgage was. If you owe above 80%, you need to get a 2nd mortgage to cover the remainder. 2nd mortgage is usually at a higher rate.

If you threw down 20% and could prove income, then they'd likely give you the loan. Think about it, if you forfit, then the bank takes your house, along with the 20% you put in. I'm not saying you NEED to put 20% down, just giving you a scenario.

I agree with greenplease in saying you should get a 30yr fix. Don't refi if possible. Heck, if possible, get a 15yr loan; you'll be paying much more monthly, but you'll save paying like 50% of your house cost.

Getting a 30yr fix isn't a solid rule; it's just you can rarely go wrong with a 30yr fix at a good rate. In some instances it would be good to get a ARM (adjustable rate mortgage) starting out. Make sure you refi out of that in a timely manner and into a nice fixed conventional 15/30yr loan. Just beware, if you keep refinancing and jump from ARM to ARM, you'll make monthly payments but never own your house. Every time you refi, you restart that 30yr cycle.

To be honest, not sure what type of advice to give you. All my knowledge is from slangin loans while in college. (subprime FTMFW!) You seem to have a good head on your shoulders so as long as you proceed cautiously, things should work out fine. If you have any questions, I'll try to answer best to my limited knowledge. What's your goal for this house? Live and keep for life? Sell in a few years? etc.

Not sure the rates nowadays, but you should get somewhere in the mid 6%. One good thing about buying a house, you don't pay points to the realator. The seller does. So that's like 2-3K savings right there.