[Bailey52]

Hello, long story short... 25 years old, self employed filling second year w2s for the business this week. Anyhow since the business is new profits are low. Although I can afford the mortgage for which I am applying...

I am applying with my girlfriend, who's credit is decent about 680 or so.. all three of my scores have always been around 740 until my student loans took affect a couple months back but they are all now 721, 718, and 716

Anyway the problem I had was showing my income. The last company I talked to (CW) told me when I fill my second w2 and my score is about 700 that's all I needed, regardless of the amount of income or profit on my w2 to get a stated loan.

Does anyone have any suggestions for us? It seems like once I get one thing I need, its another thing I do not have... I have great credit history.. never missed a payment on anything I have 4-5 credit cards with total balances of about 7,000 with about 70,000 total credit available. Also have a 20,000 truck loan (I already own one work truck this is a second bought in July) and 40,000 in student loans (which I pay half of.. my Father pays the other half) I have been making 1,000 payments a month on the studentl loans to save a lot on interest. Anyway we are looking at about 250,000 in a mortgage. I would like to not put anything down, but I understand I may have to.

Basically I need to know what to do next... every mortgage person I talk to just wants to pull my credit.. and then deny me for something... I don't know what to do! I wish I was self employed and only making 25,000! I think it would be easier to get a mortgage!

Thanks!

[JBeaucaire]

If you want to use CREDIT to get your home, you have no choice but to play their game. You don't HAVE to do it that way, but no one tells Americans how to get ahead, just how to get a loan. So sad.

20% down on ANY loan can pretty much insure you get it with little resistance. You're giving the bank a good equity position so they're less stringent. 30% or 40% down and they couldn't care less about your income, almost.

You sound confident and that's good, but take a step back and see how much of your life you're leveraging using credit. Working to eliminate all of that except for the home mortgage means you have fiscal strength against the whims of FATE who will seek to undermine your plans.

Here's some more non-standard thinking... the banks will qualify you for a LOT more loan than is safe for your well-being. Using percentages only, I'd suggest the only safe loan would be a 15-yr fixed rate mortgage with 20% down and a payment that does not exceed 25% of your net monthly income.

The bank will probably qualify you for almost twice that, both amount and length, but of course then you're always 8 weeks away from broke at any one time. Is that any way to live?

[Bailey52]

Thanks for the reply. No that's no way to live. But a $250,000 mortgage with my income alone is sufficient to afford it, let alone the mortgage being paid by another income. I am being smart by looking at houses in this range, and not looking at more. I can afford more, the problem I am having is getting the mort. Companies to see it this way.

Also, I have the 20% to put down, I would like however to not put it down, so it can be used for other things. I understand that I may have to, but I am investigating 100% financing loans is all.

[ScottGem]

In today's market you are going to be hard pressed to find 100% financed no documentation loans. Especially since you are working for a startup company. You have to give the lenders an incentive to lend to you. I would forget trying to find 100% financing. It makes no sense for the lender and little sense for you. Once you get the loan, you may find it easier to get a home equity line and take the 20% back out.

I'm curious what you meant by filing W2s. A W2 is a statement of income and withholding. Your employer files this with the IRS and gives you a copy to file with your tax return. Does this mean you are getting a salary from your company? Are you taking income out in any other way?

[Bailey52]

Im sorry.. I meant to say my 1040

[ScottGem]

Ahh that makes more sense.

[JBeaucaire]

One additional consideration - MORTGAGE INSURANCE

PMI can run as high as $1500 a year on a $200,000 mortgage, so on a $250,000 mortgage it could approach $2000 per year.

That's money thrown away because you're borrowing more than 80% of the house value, so that's a real affect on your monthly income, too.

So investing in home equity not only reduces your payment, it saves these $100s monthly as well, a benefit you can still use in your normal lifestyle.

[ebaines]

One other piece of advice - if you are applying with your girlfriend please first draw up a written agreement between the two of describing what happens if you split up. Otherwise if/when one of you moves out that person is still responsible for the mortgage, and things get very complicated and messy. We get lots of posts on this web site from people who share a mortgage, then split up, and then wondering what to do. It really gets bad if the person still living in the house either refuses to pay the mortgage and taxes or can't afford to, meaning the person who is no longer living there must pay the full load or risk destroying his/her credit - what a mess! So have a pre-mortgage agreement, just like you would in any business deal.