mortgage question for newbie

[gamecock43]

Hey guys,
I have been reading this forum on and off for the past year, though just signed up to start asking questions.
At the moment, the question I have been kicking around lately is the idea of home ownership. (well I have been desiring to buy for several years now...but finally think I am ready and prepared to start looking in the fall)

My question is: given my soon to be husbands and my financials...will we be approved for the mortgage amount we need?

my financials:

My soon to be husband and I have almost 20% to put down on a house in the $200K-220K range, because we have been massively saving our money the last 3 yrs.

I have ALOT of money in the bank in the form of an IRA that I inherited a few yrs ago, but want to save that money to earn interest and keep that as my own retirement account. So I dont want to touch it. (although the market is driving me crazy..i feel like my hard earned discipline is wasted when I'm losing $ hand over fist every month)

I have a condo that is being rented out that has been paid off in full that i also inherited.

My fiance and i both have credit scores in the low to mid 700's. I think mine was 740 last time i checked.

Heres the kicker: neither of us works. He plays semi pro baseball and only makes $ to cover his bills, and maybe earns an extra $10k in private lessons.

I have been in school the last 3 yrs, and will be graduating soon but since I travel with him to play baseball that means we move every 6 months. And therefore I cant get a job, so I rely on my rental income.
We always have enough $ to live a middle class lifestyle, we dont live beyond our means, and have no debt whatsoever...even school was being paid in full as I went.

We rent right now, and have lots of furniture, so 6 months of the yr we pay 2 rents (one in FL that we live in during the off season with all our stuff, and the one we live in while he plays with his team wherever his team happens to be)
We really just would rather pay a mortgage and at least have a place to really 'come home to' at the end of each season.
But with a combined income of about $26k, will we get approved for a $180k mortgage? I dont want to ask a bank, because then if they aprove us i think we would be too excited to wait, and we know we need to save up a little bit more before we start the process.

i know you guys are gonna kick my ass asking how we can afford such a large mortgage payment on almost no money. But we've reviewed and reviewed, and we know we can afford to take it on. If a bank will trust us.
So do banks only aprove mortgages based on previous income...or will they take all my other factors into account?

[sweeps]

I would say it's unlikely now that mortgage companies have clamped down on no-doc and subprime loans. But really anything is possible. Having a 20% down payment won't hurt. If you talk to a mortgage broker, he or she will typically be working with lots of mortgage companies and can tell you if one will approve you.

I don't think you're ready to buy a house yet, but I think you expected that comment already.

[noppenbd]

How much is the rental worth, and how much income does it produce net of expenses?

[gamecock43]

The rental condo is worth a good amount of money. its in San Fran, the distance (from FLA) is why we dont live in it ourselves. I am holding onto it right now for sentimental reasons, but that ended up being a really good thing with this housing market crash going on.
but even if i did sell it, i dont know if the bank would care, because i already have a nest egg in the IRA that the bank could consider. I dont think adding to that nest egg would change the banks opinion if they are only looking at our incomes.
And i know i said i have been in school the past 3 yrs, but Im finishing a masters degree, not an undergrad. so I do have good earning potential. I just chose to get the degree because if im going to put my life on hold while we do the baseball thing for the next few yrs, i might as well be doing something productive.
Im just hearing from alot of friends (who dont know anything themselves) that banks really put alot of weight in you're past tax statements and pay stubs.

[jIM_Ohio]

gamecock-

I think you have positioned your situation well. I would advise AGAINST buying. Eevery time you move/ sell a house, it will cost you around 18k for a 200k house.

6% (12k) to a realtor
3k to close on house
3k+ to move in and out (will be higher if distance is high or you need storage).

I would continue doing what you are doing and make sure the debt stays low (while income is low).

[noppenbd]

The rental condo is worth a good amount of money. its in San Fran, the distance (from FLA) is why we dont live in it ourselves. I am holding onto it right now for sentimental reasons, but that ended up being a really good thing with this housing market crash going on.
but even if i did sell it, i dont know if the bank would care, because i already have a nest egg in the IRA that the bank could consider. I dont think adding to that nest egg would change the banks opinion if they are only looking at our incomes.
And i know i said i have been in school the past 3 yrs, but Im finishing a masters degree, not an undergrad. so I do have good earning potential. I just chose to get the degree because if im going to put my life on hold while we do the baseball thing for the next few yrs, i might as well be doing something productive.
Im just hearing from alot of friends (who dont know anything themselves) that banks really put alot of weight in you're past tax statements and pay stubs.

If the condo is worth more than the house you are buying why not sell it or pull out some equity and pay cash for the house? I think you will have an easier time qualifying for a Home Equity Loan than a mortgage.

BTW Jim they are not talking about buying/selling a house every 6 months. The house would be permanent home, then they would rent a house short term during the season. Right now they pay for 2 rentals part of the year.

[noppenbd]

OP, another question, what did you study in school? Maybe there is a way you can generate some income from it, even on the road.

[gamecock43]

Actually, pulling out home equity to buy the house in full sounds like a good idea but also scares the hell out of me. I guess because I was raised to think that doing things by the book is the way to be safe.
Yeah, we pay one rental year round, but live in it 6 months a year, we pay a second rental 6 months a year to live in for the baseball season only. Thats why a mortgage is sounding really good...at least the money we pay for a house we dont live in is creating equity for us.
the degree is public relations. During the season I always do something to generate work, I worked retail one year, worked at a temp agency, this year I think i might try my hand at tutoring kids...but its not exactly work that has mortgage companies excited.
Im assuming we will get a mortgage. After all...people win the lottery, quit their jobs and then buy 3-4 houses...

[noppenbd]

Why does pulling out home equity scare you? It is no different than getting a mortgage and there is certainly nothing wrong with it. Actually, the upside is that if you can't pay it at some point you would lose the condo rather than your residence.

[Gruntina]

I am kind of confused... what will you be using to make the monthly payments? seems like 26k will not go far?

[disneysteve]

I am kind of confused... what will you be using to make the monthly payments? seems like 26k will not go far?

I'm confused, too. How can you afford a $180,000 mortgage on a $26,000 income? Your payment would be about $1,100 plus taxes and insurance and utilities and all the other expenses that come with being a home owner. Let's say your total monthly housing costs would run about $1,600. That's over $19,000/year. How can you possibly do that if you only earn $26,000?

[gamecock43]

We already pay $800 a month in rent in FL. We figure we can take the extra money we have been putting into savings for a down payment into the mortgage payment. A $1200 plus utilities bill is doable since we are already doing $800 plus utilities.
Our income is not steady but we know how to live lean at times, and have saved almost $40k in 3 yrs...im not sure how we did it, (just putting all extra money into the savings account) but neither of us is scared of picking up an extra odd job here or there if our wallets are getting low.
And the $26k income is a guestimmate...since each team he plays for pays different and rents in certain areas are higher than others, and his lesson schedule is variable. But I clear $14,000 a year not including extra temp jobs, and his tax statements are also in the 12-14K a year range..but he pics up odd jobs when he can for under the table money...so our reported income is about $26K.
We have been living this way for several years, we know that we can handle a larger payment...I guess if we do get a mortgage and manage to do it...I should write a book huh? I hear about $70,000 incomes and debt and truly realized that being debt free is a lifestyle mindset, not a money issue.
but I am wondering what a bank will think.

[Brokemofo]

The rental condo is worth a good amount of money. its in San Fran, the distance (from FLA) is why we dont live in it ourselves. I am holding onto it right now for sentimental reasons, but that ended up being a really good thing with this housing market crash going on.
but even if i did sell it, i dont know if the bank would care, because i already have a nest egg in the IRA that the bank could consider. I dont think adding to that nest egg would change the banks opinion if they are only looking at our incomes.
And i know i said i have been in school the past 3 yrs, but Im finishing a masters degree, not an undergrad. so I do have good earning potential. I just chose to get the degree because if im going to put my life on hold while we do the baseball thing for the next few yrs, i might as well be doing something productive.
Im just hearing from alot of friends (who dont know anything themselves) that banks really put alot of weight in you're past tax statements and pay stubs.

They put a lot of weight into taxes and stubs because thats your income. They will or can at their descretion use your ira/stocks/ or ohter assets as income. What's hard to get anymore is a "stated" income loan. At least at a good rate.

[disneysteve]

he pics up odd jobs when he can for under the table money...so our reported income is about $26K.

but I am wondering what a bank will think.

Obviously, the unreported income helps matters, but unless you start reporting it, it won't enter into the calculation of what a bank will lend you.

I hear about $70,000 incomes and debt and truly realized that being debt free is a lifestyle mindset, not a money issue.

How very true.

[noppenbd]

You are going to have a tough time getting a straight up mortgage. The bank is not going to look at your IRA or the value of your condo when they underwrite you for the loan. If you truly want to have a house, your best bet is probably to sell the condo and pay cash.