Existing Condo Owner wanting to buy Single-Family home and Mortgage Questions?

[perini1975]

I am looking for advice on few questions I have. I currently own the condo I live in which I bought in 2009 for $225k and has about $140k mortgage left on it. I pay $225 every month in HOA fees that I hate to pay every month. Here is my predicament: I am currently looking (doesn't mean I qualify for it nor can I afford it...I know I know but hear me out) at single family home $545k that will be new construction and requires 5% down and rest at the time of closing/possession which is 1 year away (basically with 5% down you book your lot and they build the home for you in 1 year at which time you close after final walk-thru). I have 17% down payment in cash on hand right now for the home I am looking at which is priced at $545k as mentioned above. Our yearly household income is $170k gross which equates to $14,166 per month gross. The taxes on current condo are roughly $4200 annually and taxes on SF I am looking at are $11000 annually. Both our (me and hubby) credit scores are 760 and 792 respectively so credit is fine. Am I crazy to think that I can rent out current condo and still can qualify for SF I am looking at? Further questions will follow as you answer the ones I have here. I appreciate your help.

 

 

[Brian B The Loan Professor]

I am looking for advice on few questions I have. I currently own the condo I live in which I bought in 2009 for $225k and has about $140k mortgage left on it. I pay $225 every month in HOA fees that I hate to pay every month. Here is my predicament: I am currently looking (doesn't mean I qualify for it nor can I afford it...I know I know but hear me out) at single family home $545k that will be new construction and requires 5% down and rest at the time of closing/possession which is 1 year away (basically with 5% down you book your lot and they build the home for you in 1 year at which time you close after final walk-thru). I have 17% down payment in cash on hand right now for the home I am looking at which is priced at $545k as mentioned above. Our yearly household income is $170k gross which equates to $14,166 per month gross. The taxes on current condo are roughly $4200 annually and taxes on SF I am looking at are $11000 annually. Both our (me and hubby) credit scores are 760 and 792 respectively so credit is fine. Am I crazy to think that I can rent out current condo and still can qualify for SF I am looking at? Further questions will follow as you answer the ones I have here. I appreciate your help.

Welcome to the forum - Based on the income you have as long as your other debts are not crazy with large payments every month there is no reason to think you couldnt do this? With a scenario like this your debt ratios will have to include both the condo and all costs associated with it as well as the new home mortgage. The fact that you have money - great income and great scores will help?

 

If your total debts come to less than 45% of your income (monthly payments vs. monthly gross)

 

Take Care

B

[perini1975]

We have two cars that are both paid for and there is no other debt. We do put all household expenses like cell phone, grocery, gas, etc. on our credit cards and pay it in full every month. is that considered credit card debt that I need to account for as monthly debt?

 

How will new mortgage company look at this situation? will they count the rent on current condo as income? or will they dock the existing mortgage against me?

 

Can you please explain what you meant by "if your total debt come to less than 45% of your income (monthly pmts vs monthly gross)?"

I am not following you here.

[Brian B The Loan Professor]

They will whatever numbers show on your credit report - so for afew months you may want to not use the cards and just pay cash this way when they pull your reports it shows a zero balance and zero payment - if it shows a payment they will include it.

 

They will not consider rental income unless you have been a landlord for 2 years and can document the income via taxes so yes that condo mortgage will count against you.

 

Debt to income is what they look at to consider eligibility

I will use simple numbers to explain

lets say your income is 10,000 gross a month

They would then add the minimum payments for both mortgages and all credit debt showing on your report

as long as that number is less than 45% ($4500) you should be fine

 

if you do not have any credit debt you shouldnt have any issue qualifying with both mortgages (they also include taxes insurances and the HOA)

 

Hope that helps

B

[perini1975]

What about utility bills, water and sewage bills etc??

[perini1975]

Also, does the length of employment matter? my wife is currently working part-time but will start full time next month....the 170k gross annually includes her portion of expected full time salary....will the mortgage company require conditions like xx number of yrs employment etc?

[Brian B The Loan Professor]

items not on credit are not counted

for employment a 2 year work history is required -

How long has she been at this job

How long in the line of work

[perini1975]

the line of work is licensed profession and been doing for 10 yrs

up until now it was part time due to kids being young but now going full time.....i have been at my work for 5 yrs....

 

 

[Brian B The Loan Professor]

If she has been at that job for a while and transitioning from part time to full time you should be ok -

[perini1975]

its not the same place....part-time somewhere else and quitting that place to go full time some other place....? but in the same industry for 10 yrs

[Brian B The Loan Professor]

its not the same place....part-time somewhere else and quitting that place to go full time some other place....? but in the same industry for 10 yrs

Will likely need 30 days worth of paystubs before you will be eligible.

[perini1975]

^{30 days should not be an issue since as i mentioned its only 5% down for now and we'll likely close and get possession summer 2013.....what do you think?}

 

also is there way to lock in current mortgage rates for expected closing in summer 2013? it seems the rates could be lot higher by then...? My calculations of monthly mortgage pmt right now could be way off by the time we close next yr? any thoughts?

Edited April 2, 2012 by perini1975

[Brian B The Loan Professor]

You should be fine with the employment

 

No way to lock a rate that long - too risky for the banks -

B

[perini1975]

I am in real predicament as this would be 30 yr mortgage and what if the spouse decides to go back to part-time, we'd be real tight at that point.....but we love the place and community around it

[perini1975]

Here is another thing....at this development I am looking at, some lot sizes are 13,000-15,000 sq ft and some lot sizes are 7,000-9,000 sq ft but they sell at the same prices and with taxes based on the purchase prices....does that mean someone booking 15,000 sq ft lot is getting much better value and more bang for his buck than someone buying 7,000 sq ft lot at the same price? typically do township come around after few years and assess based on lot sizes once whole development is sold off?

 

 

[Bookersnook]

I would never lock in this market. I would float that pig all the way to the end

[perini1975]

Here is another thing....at this development I am looking at, some lot sizes are 13,000-15,000 sq ft and some lot sizes are 7,000-9,000 sq ft but they sell at the same prices and with taxes based on the purchase prices....does that mean someone booking 15,000 sq ft lot is getting much better value and more bang for his buck than someone buying 7,000 sq ft lot at the same price? typically do township come around after few years and assess based on lot sizes once whole development is sold off?

 

 

 

 

do you guys know about this?

[jst300z]

Here is another thing....at this development I am looking at, some lot sizes are 13,000-15,000 sq ft and some lot sizes are 7,000-9,000 sq ft but they sell at the same prices and with taxes based on the purchase prices....does that mean someone booking 15,000 sq ft lot is getting much better value and more bang for his buck than someone buying 7,000 sq ft lot at the same price? typically do township come around after few years and assess based on lot sizes once whole development is sold off?

 

 

GENERALLY SPEAKING, since I do not know where you are and your specific market conditions, I can say this:

 

The value between the lot sizes would be minimal, if any. Reason? There are probably deed restrictions on these lots (specific builders, design, etc) and an additional 30-40 ft x 100 ft strip of land would only produce more grass to cut.

 

We call this 'surplus' land. Surplus meaning it cannot be subdivided into another usable lot so the additional land/square footage is basically more grass.

 

So a 9,750 s.f. lot is basically worth the same as a 12,940 s.f. lot in this particular subdivision.

[perini1975]

Here is another thing....at this development I am looking at, some lot sizes are 13,000-15,000 sq ft and some lot sizes are 7,000-9,000 sq ft but they sell at the same prices and with taxes based on the purchase prices....does that mean someone booking 15,000 sq ft lot is getting much better value and more bang for his buck than someone buying 7,000 sq ft lot at the same price? typically do township come around after few years and assess based on lot sizes once whole development is sold off?

 

 

GENERALLY SPEAKING, since I do not know where you are and your specific market conditions, I can say this:

 

The value between the lot sizes would be minimal, if any. Reason? There are probably deed restrictions on these lots (specific builders, design, etc) and an additional 30-40 ft x 100 ft strip of land would only produce more grass to cut.

 

We call this 'surplus' land. Surplus meaning it cannot be subdivided into another usable lot so the additional land/square footage is basically more grass.

 

So a 9,750 s.f. lot is basically worth the same as a 12,940 s.f. lot in this particular subdivision.

 

 

HOW DO I CONFIRM IF THIS IS THE CASE WITH THE DEVELOPMENT I AM LOOKING AT? WHERE DO I CHECK THIS?