New Job: Can I get Pre-approved?

[fe2o3ez]

Hey everybody! I've been gone a while, but am happy to be back. Here is my latest dilemma:

My position was eliminated at my former employer in March, and I was let go. I managed to get some sub-contracting positions and work for myself as a consultant while I was searching for my new job. It paid the bills, kept us out of debt, and allowed me to be a bit picky about what I wanted in a W2 position.

My wife, though, is losing her job this month, and so I needed a position that could provide benefits. I started 3 weeks ago with a W2, long-term contract position. Unfortunately (or fortunately, depending how you look at it) the position is in another state and we may need to relocate. (it would actually get us closer to family, so there is additional incentive to move)

How tough will it be to get a mortgage, and what can I do to help my chances?

The facts:
- Held this job less than 1 month.
- employment contract term is initially 6 months, though I expect it to last 12-18 months, minimum; the company I work for would put me on a new project if this finished up.
- last I checked my credit score, it was 814
- my income in this position is about $12k/mth
- No debt, other than the mortgage
- savings wouldn't quite get us to 20% down, but if our house sells, that should put us close

[disneysteve]

My first question would be why are you in such a hurry to buy a home? What if the new job doesn't pan out? What if after the 6-month contract, the company has nothing else to offer you? What if you move and really don't like the area?

From what you've said, I think renting for the first year at least should be the plan. During that time, you can sock away money for a down payment and explore the area to identify where you would like to live assuming you will be staying there long term. Then when you do apply for a mortgage, you'll have a longer employment history and an easier time getting a loan.

[bjl584]

I agree with Steve. Renting a place to start would be a much better idea in your situation. There is no guarantee you will sell your current home in a timely manner. You don't want to get stuck servicing two mortgages.

[MonkeyMama]

Agreed with the others. I would definitely not buy a home in your shoes.

That said, my sister just moved out of state, and was unemployed (as was her spouse) for several months. Their mortgage loan was literally approved the day she got hired at a full-time job. They also put 0% down. You keep hearing the lenders are so hard to get through these days, but then I keep hearing stories like this. I can attest they were home owners within 30 days of her being hired - they had tried to get pre-approved and had their eye on this home for months. All she needed was a job offer ($10/hour or so) to finalize the deal.

[fe2o3ez]

Thanks for the quick responses. Let me clarify a couple points.

1. If our current house doesn't sell, we won't move. I'm not in the business of compiling mortgages and really dont feel the need to fund 2 of them. If I have to travel long-term, then we are prepared to have me do so.
2. If the house sells, we will likely move, regardless of the permanence of the job.
- this is the perfect time to do so, while my wife is out of a job as well
- the job market (for both of our professions) is better where we would move than here.
- we would like to get close to family and will find something in the new area that we like
3. As I found out the had way, job permanence is relative anyhow. In an at-will state, there's no such thing as permanent employment.
4. Can the long-term interest rates get much lower than they are right now? It is pretty tempting to want to lock in a rate, and I would like to take advantage of the Buyer's market, while it still exists.

[disneysteve]

4. Can the long-term interest rates get much lower than they are right now? It is pretty tempting to want to lock in a rate, and I would like to take advantage of the Buyer's market, while it still exists.

This is absolutely not a reason to buy a house. Your decision to buy should never be based on market conditions, interest rates, home prices, etc. You should only buy when you are financially ready to do so and are certain that you want to stay in the same spot for the long term.

None of your clarifications change my advice to rent for a year.

[snafu]

Generally, the housing market mess is forecast to last another two years since there is such a huge number of foreclosures with yet another tranche working through the process. [There are specific areas that are healthier]. Why not take this one step at a time. Ask an experienced realtor in your area for data on sales/valuation specifics. Meanwhile take the necessary steps to get your home as market ready as possible without being spendy. It will improve it's 'livability' whether you sell/rent or stay.

With a 6 month contract, I suggest you seek frugal accommodation, perhaps paying a relative for room & board, basement suite or even house share while you scope out 'deals' and check out financing possibilities. Short sales take months to process. If your wife finds work in the current location, she can always quit if the house is listed and sold. Try to boost saving to reach 20% DP.

[LMA]

To actually answer your question, you could qualify for a mortgage but it would depend on the amount. If you cannot do 20% down that might make it tougher but if you have the income history they might overlook your recent unemployment.

It would be fairly easy for a mortgage guy to look at your records and give you a fairly accurate idea if you can qualify or not depending on the price range you want to buy. It does not take much to qualify for an FHA loan with your income.

[photo]

This is absolutely not a reason to buy a house. Your decision to buy should never be based on market conditions, interest rates, home prices, etc. You should only buy when you are financially ready to do so and are certain that you want to stay in the same spot for the long term.

Agreed. The good news, though, is that although interest rates may creep up a little bit, there's nothing in this economy that suggests we're heading for a new housing bubble anytime soon.

[bjl584]

To actually answer your question, you could qualify for a mortgage but it would depend on the amount. If you cannot do 20% down that might make it tougher but if you have the income history they might overlook your recent unemployment.

It would be fairly easy for a mortgage guy to look at your records and give you a fairly accurate idea if you can qualify or not depending on the price range you want to buy. It does not take much to qualify for an FHA loan with your income.

FHA requires 3.5% down and a credit score of 680 or better. This is what the buyers did that bought my house. I would never buy a house like that, but since I was the seller I kept my thoughts to myself.