I was really surprised this week when one of my clients was getting pre-approved for a home purchase. This young couple is upwardly mobile with a growing family and needs a larger home. I thought they would be a "slam dunk" since they have:
- great credit;
- good jobs,
- no car payments;
- no credit card debt;
- only owe about another $8,000 on student loans
However, the lender tells me:
- If the home they are inheriting out of state free and clear records prior to their closing the new home, it will be considered a liability since they will have to show things like property taxes as an expense and can't count the income yet since it hasn't been on the record for a year;
- We can't even wait for it to record and then do a home equity loan against this house since that would show as even more debt;
- they can't count their current home's potential income as a rental but they do have to show it as an expense so it is their intent to keep it as a rental (no more credit at 50 or 75% of fair market rents allowance);
- They can't go FHA again since they already have an FHA loan;
This "slam dunk" almost fell apart!.
Fortunately, we found a Fannie Mae foreclosure that meets their needs in Meridian, Idaho that offered HomePath financing. We will take advantage of:
- the lower down payment (3 percent instead of 20);
- HomePath allows for up to 3.5% of the buyer's closing costs to be paid for by the seller;
- There is no mortgage insurance issues regarding the expanded ratios;
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