Join Early Retirement Today
Reply
 
Thread Tools Search this Thread Display Modes
mortgage applications , rental applications
Old 08-31-2017, 01:22 PM   #1
Recycles dryer sheets
perinova's Avatar
 
Join Date: Apr 2006
Posts: 424
mortgage applications , rental applications

In the FIREd stage how is the mortgage application or rental application handled? Typically in the working stage you need a proof of income coming from an employer.
Do you provide proof of asset? Have you had any previous experience either rental or mortgage app being rejected?
__________________

__________________
perinova is offline   Reply With Quote
Join the #1 Early Retirement and Financial Independence Forum Today - It's Totally Free!

Are you planning to be financially independent as early as possible so you can live life on your own terms? Discuss successful investing strategies, asset allocation models, tax strategies and other related topics in our online forum community. Our members range from young folks just starting their journey to financial independence, military retirees and even multimillionaires. No matter where you fit in you'll find that Early-Retirement.org is a great community to join. Best of all it's totally FREE!

You are currently viewing our boards as a guest so you have limited access to our community. Please take the time to register and you will gain a lot of great new features including; the ability to participate in discussions, network with our members, see fewer ads, upload photographs, create a retirement blog, send private messages and so much, much more!

Old 08-31-2017, 01:40 PM   #2
Thinks s/he gets paid by the post
 
Join Date: Mar 2017
Location: New York City
Posts: 2,838
Quote:
Originally Posted by perinova View Post
In the FIREd stage how is the mortgage application or rental application handled? Typically in the working stage you need a proof of income coming from an employer.
Do you provide proof of asset? Have you had any previous experience either rental or mortgage app being rejected?
Before I got into being a home owner(at age 50), I wanted to get 2 apts in the same building , one for me and the bride and one for my elderly mother. We were going to buy the apts, they were co-ops. Turns out my mother who in my world is well off would not have been approved by the board. She did not have enough income. I would have had to put my name on her deed.
__________________

__________________
Withdrawal Rate currently zero, Pension 137 % of our spending, Wasted 5 years of my prime working extra for a safe withdrawal rate. I can live like a King for a year, or a Prince for the rest of my life. I will stay on topic, I will stay on topic, I will stay on topic
Blue Collar Guy is offline   Reply With Quote
Old 08-31-2017, 07:28 PM   #3
Thinks s/he gets paid by the post
 
Join Date: Aug 2004
Location: Laurel, MD
Posts: 2,929
There is a formula to convert retirement account assets to income available to lenders but it may depend on type of mortgage. I looked at it once and I think about 2 pct/yr could be applied as income.
https://www.google.com/amp/amp.kipli...-mortgage.html
__________________
...with no reasonable expectation for ER, I'm just here auditing the AP class.Retired 8/1/15.
jazz4cash is online now   Reply With Quote
Old 09-13-2017, 03:16 PM   #4
Recycles dryer sheets
perinova's Avatar
 
Join Date: Apr 2006
Posts: 424
I submitted for a loan pre-approval today. I could tell this is highly unusual to get a loan when there is plenty of asset to cover for the purchase price. Also I was trying to give as least amount of assets as possible to qualify, maybe I am doing it wrong.

My thinking is to get a loan with only 5% down since I was never a home owner. This way I can keep as much assets invested. Yes there is the additional PMI but the income from investments should well cover that.

Any opinion? I feel I doing this by the seat of my pants
__________________
perinova is offline   Reply With Quote
Old 09-13-2017, 03:28 PM   #5
Thinks s/he gets paid by the post
 
Join Date: Mar 2017
Location: New York City
Posts: 2,838
Quote:
Originally Posted by perinova View Post
I submitted for a loan pre-approval today. I could tell this is highly unusual to get a loan when there is plenty of asset to cover for the purchase price. Also I was trying to give as least amount of assets as possible to qualify, maybe I am doing it wrong.

My thinking is to get a loan with only 5% down since I was never a home owner. This way I can keep as much assets invested. Yes there is the additional PMI but the income from investments should well cover that.

Any opinion? I feel I doing this by the seat of my pants
Thats if the markets dont crash. Do the safe thing, put at least 20 % down, take a 15 year mortgage.
__________________
Withdrawal Rate currently zero, Pension 137 % of our spending, Wasted 5 years of my prime working extra for a safe withdrawal rate. I can live like a King for a year, or a Prince for the rest of my life. I will stay on topic, I will stay on topic, I will stay on topic
Blue Collar Guy is offline   Reply With Quote
Old 09-14-2017, 01:35 AM   #6
Thinks s/he gets paid by the post
 
Join Date: Jun 2016
Posts: 1,142
Quote:
Originally Posted by perinova View Post
I submitted for a loan pre-approval today. I could tell this is highly unusual to get a loan when there is plenty of asset to cover for the purchase price. Also I was trying to give as least amount of assets as possible to qualify, maybe I am doing it wrong.

My thinking is to get a loan with only 5% down since I was never a home owner. This way I can keep as much assets invested. Yes there is the additional PMI but the income from investments should well cover that.

Any opinion? I feel I doing this by the seat of my pants


I would not pay PMI. Your investment earnings may or may not cover this. I'd put 20% down but I'd do a 30 year mortgage. You can always pay it down sooner if you want, but 30 years gives you more flexibility. Last time I did a mortgage transaction, 15 year rates weren't that much less than 30 year. YMMV
__________________
Scuba is offline   Reply With Quote
Old 09-14-2017, 06:12 AM   #7
Full time employment: Posting here.
 
Join Date: Dec 2010
Location: Midwest
Posts: 873
Quote:
Originally Posted by Scuba View Post
I would not pay PMI. Your investment earnings may or may not cover this. I'd put 20% down but I'd do a 30 year mortgage. You can always pay it down sooner if you want, but 30 years gives you more flexibility. Last time I did a mortgage transaction, 15 year rates weren't that much less than 30 year. YMMV
+1.
Payment is not only cheaper w/o PMI, but it is easier to qualify without the PMI hoops to jump through.

I agree with the 30 year vs 15 year mortgage.
__________________
brucethebroker is offline   Reply With Quote
Old 09-14-2017, 06:14 AM   #8
Full time employment: Posting here.
 
Join Date: Dec 2010
Location: Midwest
Posts: 873
OP, if your lender has a problem with "big assets, no/low cash flow", change lenders. There are plenty out there who would love to have your application in front of them.
__________________
brucethebroker is offline   Reply With Quote
Old 09-20-2017, 07:38 PM   #9
Recycles dryer sheets
perinova's Avatar
 
Join Date: Apr 2006
Posts: 424
Thanks for all the replies.

I am gearing toward a 30y mortgage since I can always do prepayment if I can down the road and shortent he life of the mortgage.

Still thinking about the 5% vs 20% down-payment. I had always wanted to do 20% in the past but since I am low on cash I am hesitating selling assets.
A quick calculation on a 400k home: The 5% vs 20% difference is about 60k and the PMI is 2k/year.
The PMI will stay constant and later disappear but the 60K will provide a 2k every year at a WR of 3.3%, increasing in time.
__________________
perinova is offline   Reply With Quote
Old 09-24-2017, 01:04 PM   #10
Thinks s/he gets paid by the post
 
Join Date: Feb 2008
Location: Indialantic FL
Posts: 1,193
Years ago we had PMI for a few years. Once lender confirmed quick appraisal value was 20% more than what we owed they agreed to drop the PMI. We may have made some additional principal payments that helped speed things up.
__________________
JimnJana
"The four most dangerous words in investing are 'This time it's different.'" - Sir John Templeton
jimnjana is offline   Reply With Quote
Old 09-24-2017, 03:20 PM   #11
Recycles dryer sheets
Luck_Club's Avatar
 
Join Date: Dec 2016
Posts: 322
Quote:
Originally Posted by jazz4cash View Post
There is a formula to convert retirement account assets to income available to lenders but it may depend on type of mortgage. I looked at it once and I think about 2 pct/yr could be applied as income.
https://www.google.com/amp/amp.kipli...-mortgage.html
2% is highway robbery. it is basically a debt to asset ratio of 0.2 or lower.

Because of the hints I got on this forum, I'm exploring getting my final line of credit before retiring. Told the banker I'm going to retire roughly $300K of other debt, but I want you to raise my line by $200K. Not likely to happen she tells me. I think a smarter banker is in my future.
__________________
2017 dry run spending: 2018 accelerate debt elimination: 2019 RV procurement & 1MY begins: 6/19 DW last month: 9/19 start cross country loop: 1/20 first reinforcements arrive. 6/20 sell business or shut doors. 9/20 begin globe trot: 4/26 401K reinforcement.
Luck_Club is offline   Reply With Quote
Old 09-24-2017, 03:32 PM   #12
Confused about dryer sheets
 
Join Date: Jul 2015
Posts: 6
If you use a Mortgage Broker rather than a bank you will find many options for < 20% down and NO PMI. You do not need to pay PMI if your credit is good even if you don't want to invest a huge down payment. Broker look across multiple lenders.
__________________
jojo777 is offline   Reply With Quote
Old 09-24-2017, 10:00 PM   #13
Thinks s/he gets paid by the post
 
Join Date: Aug 2004
Location: Laurel, MD
Posts: 2,929
Quote:
Originally Posted by Luck_Club View Post
2% is highway robbery. it is basically a debt to asset ratio of 0.2 or lower.



Because of the hints I got on this forum, I'm exploring getting my final line of credit before retiring. Told the banker I'm going to retire roughly $300K of other debt, but I want you to raise my line by $200K. Not likely to happen she tells me. I think a smarter banker is in my future.


I'm not following your logic wrt "highway robbery". 4 pct/yr is widely used as guideline for converting assets to income. If you're using half your income for mortgage that's a pretty high ratio.
__________________
...with no reasonable expectation for ER, I'm just here auditing the AP class.Retired 8/1/15.
jazz4cash is online now   Reply With Quote
Old 10-02-2017, 01:18 PM   #14
Recycles dryer sheets
perinova's Avatar
 
Join Date: Apr 2006
Posts: 424
I am/was working with a direct lender which looked at my assets but they are unable to give me an approval letter without a CPA looking at my financial situation and writing a letter that I can draw $X/month from the assets.

Any recommendation to who would be used to those kind of financial situations?
- "big assets, no/low cash flow"
- mortgage brokers are better than direct lenders since they have more options?
__________________
perinova is offline   Reply With Quote
Old 10-02-2017, 02:49 PM   #15
Thinks s/he gets paid by the post
 
Join Date: Aug 2004
Location: Laurel, MD
Posts: 2,929
CPA? Sounds like a CYA letter for the lender. Not necessarily something I would use a CPA for. They would need to be someone that specializes or willing to cite some well known standard (like 4% SWR) or use the Freddie Mac guideline I referenced above. Will lender advise the amount required for approval so you can back into the calculation?
__________________
...with no reasonable expectation for ER, I'm just here auditing the AP class.Retired 8/1/15.
jazz4cash is online now   Reply With Quote
Old 10-02-2017, 04:45 PM   #16
Recycles dryer sheets
perinova's Avatar
 
Join Date: Apr 2006
Posts: 424
Quote:
Originally Posted by jazz4cash View Post
CPA? Sounds like a CYA letter for the lender. Not necessarily something I would use a CPA for. They would need to be someone that specializes or willing to cite some well known standard (like 4% SWR) or use the Freddie Mac guideline I referenced above. Will lender advise the amount required for approval so you can back into the calculation?
They are using the 43% rule of housing expenses (mortgage+property tax) to income rule. Dividends and Cap Gain do not cover that amount so I would have to sell shares every year (on those taxable accounts) to generate income. The tax deferred account left aside of course until later.

It looks like a good idea to move to a retirement home prior to retiring. Not the other way around. I wanted to qualify for the mortgage purely using investments but am now considering taking a job to show income.
__________________
perinova is offline   Reply With Quote
mortgage applications , rental applications
Old 10-02-2017, 05:27 PM   #17
Thinks s/he gets paid by the post
 
Join Date: Aug 2004
Location: Laurel, MD
Posts: 2,929
mortgage applications , rental applications

Are you comfortable with generating income (e.g. Selling assets) to cover the payments with 20% down for 30 yrs? Does the income requirement exceed 2% of assets (the Freddie Mac rule)? 43% seems extraordinarily high. I recall ratios around 30% for piti and ~40% for ALL monthly expenses (home+ revolving debt, other loans etc). I would find another lender at least for comparison.

Edit: Is the rate competitive or is this a hard money loan?
__________________
...with no reasonable expectation for ER, I'm just here auditing the AP class.Retired 8/1/15.
jazz4cash is online now   Reply With Quote
Old 10-02-2017, 05:32 PM   #18
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
pb4uski's Avatar
 
Join Date: Nov 2010
Location: Vermont & Sarasota, FL
Posts: 16,135
Quote:
Originally Posted by perinova View Post
I am/was working with a direct lender which looked at my assets but they are unable to give me an approval letter without a CPA looking at my financial situation and writing a letter that I can draw $X/month from the assets.

Any recommendation to who would be used to those kind of financial situations?
- "big assets, no/low cash flow"
- mortgage brokers are better than direct lenders since they have more options?
I'm a retired CPA and doubt that you will be able to find a CPA who would write such a letter.... it's really not their wheelhouse. Ask them to show you letter that they have received like that with client information redacted... they won't... they are blowing smoke.
__________________
If something cannot endure laughter.... it cannot endure.
Patience is the art of concealing your impatience.
Slow and steady wins the race.
pb4uski is online now   Reply With Quote
Old 10-02-2017, 05:33 PM   #19
Thinks s/he gets paid by the post
 
Join Date: Aug 2004
Location: Laurel, MD
Posts: 2,929
Here is example of the formula I linked above:

The formula takes 70% of qualifying assets, subtracts what will be needed for down payment and closing costs and divides the remainder by 360, the number of months in a standard loan, to arrive at a monthly income used to determine the applicants' maximum payment and loan amount.


Also see: Is Now the Time to Get That Mortgage?>>
HSH.com, the mortgage-information firm, says, for example, that a borrower with $1 million in assets could count $700,000. After taking out $10,000 for closing costs and dividing by 360, the borrower could show $1,917 in monthly income.
__________________
...with no reasonable expectation for ER, I'm just here auditing the AP class.Retired 8/1/15.
jazz4cash is online now   Reply With Quote
Old 10-03-2017, 10:15 AM   #20
Thinks s/he gets paid by the post
 
Join Date: Jun 2016
Posts: 1,142
Quote:
Originally Posted by pb4uski View Post
I'm a retired CPA and doubt that you will be able to find a CPA who would write such a letter.... it's really not their wheelhouse. Ask them to show you letter that they have received like that with client information redacted... they won't... they are blowing smoke.


I agree!
__________________

__________________
Scuba is offline   Reply With Quote
Reply


Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
 
Thread Tools Search this Thread
Search this Thread:

Advanced Search
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


Similar Threads
Thread Thread Starter Forum Replies Last Post
Credit Applications Delawaredave5 FIRE and Money 3 08-30-2016 06:17 AM
Rental Mortgage Payoff in Anticipation to FIRE Senator FIRE and Money 15 08-06-2014 07:26 AM
Old Dogs/Old Trick/New Applications kaneohe Other topics 4 05-21-2014 08:04 PM
pay off the rental mortgage or refinance and invest the difference? WM FIRE and Money 19 02-12-2007 06:32 PM

 

 
All times are GMT -6. The time now is 10:25 AM.
 
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2017, vBulletin Solutions, Inc.