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Old 11-21-2010, 03:02 PM   #21
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That's the debt-to-income ratios. Income vs. PITI and income vs. all debts (including PITI). Roughly, the mortgage payment (PITI) should be no more that 1 fourth of your montly income and the total of all your debts (car loans, credit cards, and PITI) should be bo more that 1 third of your monthly income.

My descriptions were an aggregate of conversations I had during 3 refi's. Data on forms is good enough for most people, but FIRE'd retirement income doesn't usually fit in the "common" category. For example, the "income" I receive from my IRAs and other investment accounts is much larger than the income I receive from pension & SS.

I've never talked directly to anybody in "decision authority", just to the loan processors (the ones who collect the documentation from you and do the first-level review). That's the person you speak on the phone with. They are the ones who are the conduit to "underwriter" which is the person with the authority.

The first refi I was flying blind, and so was my loan processor. He was the one who spoke to the underwriter, because he didn't know how to enter all my income on the forms. There's no line for "money you pay to yourself" on the standard app form. It was the underwriter who told him (and he told me) that they just needed to see the letter from my IRA custodian confirming my standing direction to distribute $XXXX monthly to me. Once I gave them that, then the underwriter wanted to see my checking account statement showing the deposits of that amount.

The second refi, I knew all the magic words to say to the processor. The processor knew nothing about those things, so she talked to the underwriter who said, "Yes, that's the things we need to see."

Same on the third refi. In my first conversation with the processor, I said, "I've been through this before. These are the things that the last lender wanted to see, and if you check with your underwriter he will confirm it."
This one came back and said that the underwriter REALLY wanted to see the deposits going into my bank. Because evidently some borrowers have been playing games and said they took a monthly distribution from their IRA but didn't actually take it.
I thought this was rather silly. After all, it's just my money that I'm paying to myself. It's not income, it's just transferring my own money from one account to another. But they want to see it take that form, and I wanted the loan, so I set it up so they could see what the wanted to see.

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Old 11-22-2010, 04:53 PM   #22
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Originally Posted by ERD50 View Post
Surfdaddy - you might also want to search for mortgage pay off too. There are those with another opinion on that. I'm pretty much agnostic on it, but I do feel strongly that both sides of the issue should be considered. It's not a no-brainer on either side, I don't think it should be presented as such. It actually makes little difference either way, from what I've been able to figure.

There is no reason to keep it all in low % fixed investments - look at your overall AA.

ERD - thanks for the suggestion. Liquidity is not a problem at all. One question is whether I want to pay off a $70ish K mortgage, currently at 4.25%. Paying it off would not substantially affect my liquidity. My assumption was that since I have 9 more years on the loan, rates might go up in a couple of years and then I've preserved this relatively great rate when I might be able to get 5% or greater on a future CD. But of course it's all a guess.

And of course I'm getting unemployment right now. First time since I was 16 that I've been unemployed, and as a high wage earner the most recent 20 years or so, it's nice to be getting a check FROM the govt rather than paying oodles into the govt. But I am actually looking for w*rk, just not super-aggressively.

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Old 11-23-2010, 11:55 AM   #23
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rayvt-thank you for the clear explanation.


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