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Old 09-19-2016, 03:42 PM   #21
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Originally Posted by Texas Proud View Post


One of the problems is they look at debt payments to income ratios.... so if you have low income, then you 'must' have low monthly payments...

I do not have to agree with their methods, just understand them and how to get around them if I need to....

I have zero debt. My house is paid-off and I have excellent credit.
The one and only reason I could not qualify was my low income...
which I purposefully keep low for tax purposes.

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Old 09-19-2016, 03:45 PM   #22
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Originally Posted by W2R View Post

So true.

Last year I decided to buy my home in cash. I sold mutual funds to do it, plus used my cash reserves, and replenished my portfolio somewhat with the proceeds from selling my prior home. For me, paying in cash makes life simpler, and I like not having to deal with mortgage company tyrants and all those stupid hoops they want people to jump through. I don't like to be jerked around.

But for the OP and many other forum members, YMMV and there are many ways to pay for a home.

My "can't get a mortgage" experience taught me a lesson... to not have the vast majority of my nest egg locked up in investments. So now I am working on having more liquidity.

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Old 09-19-2016, 04:10 PM   #23
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Originally Posted by Helena View Post
I have zero debt. My house is paid-off and I have excellent credit.

The one and only reason I could not qualify was my low income...

which I purposefully keep low for tax purposes.



.


I dont care what their computer generated guidelines say... Someone who is debt free with excellent payment history would be the type of person I would want to loan money too. The logic escapes me...I do have a very healthy pension, and I could go get over my head in debt with that through a loan, while people on this forum who could "own me" with their assets cannot...The logic escapes me.
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Old 09-19-2016, 04:25 PM   #24
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Thanks for the input. If we break some PenFed CDs we would only be 100 thousand short. The penalty seems stiff, 30 percent of the interest we would have earned if kept to maturity. Not happy about that but we'd save on some closing costs. I'm thinking we could find a bank or credit union to lend us 100k.

Another option might be to use the CDs as collateral for a loan until they mature. This doesn't work if they are IRA CDs. The rate is generally 2-3 pct above the CD rate.


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Old 09-19-2016, 04:27 PM   #25
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A big part of the OP's problem is likely that he/she is trying to get a mortgage for a second home. We had major problems getting a refi on our second home, even though we didn't even have a mortgage on our primary. I actually ended up buying a couple of rental units (for cash) partially to mitigate the "no income" issue. Before that happened I did manage to refi with Chase back when they were doing the Obama refinance credit thing.

I was told by many banks that I would have been able to get a mortgage on our primary residence based on our assets, but not the second home. Seems absurd, since you're making the same payment no matter which home it's on, but that's the credit industry today.

Also, back then (2010-ish) we were told that transferring money from our retirement accounts wouldn't do it. If there was a automated withdrawal from an IRA it would be fine, but manual transfers wouldn't count. Stunning levels of stupidity.
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Old 09-19-2016, 04:32 PM   #26
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I was told by many banks that I would have been able to get a mortgage on our primary residence based on our assets, but not the second home. Seems absurd, since you're making the same payment no matter which home it's on, but that's the credit industry today.
Perhaps more personal pain is imparted to the average Joe in loosing his/her main home then an extra home?

If I had to default, all things being equal, I know which one I would default on.
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Old 09-19-2016, 06:48 PM   #27
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FWIW the asset to income conversion formula is somewhat new e.g. 2013 and even worse a lot of lenders are not aware or choose not to use since it is a bit more work for them. My point is if anyone had a bad experience many yrs ago don't let that keep you from giving it a shot. I guess there are more folks living off of personal savings with little to no pension nowadays so Freddiemac put out new guidelines.


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Old 09-19-2016, 10:08 PM   #28
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Originally Posted by Helena View Post
I have zero debt. My house is paid-off and I have excellent credit.
The one and only reason I could not qualify was my low income...
which I purposefully keep low for tax purposes.

.

Right now you have no debt, but if you get a mortgage then you will....

And it would seem that the monthly payment amounts on a new mortgage cannot be supported by your low income....

That is what I mean by debt payment to income ratio.....
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Old 09-19-2016, 10:13 PM   #29
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I'd look at other banks. Wells Fargo has some weird criteria. I had a friend that worked there during the housing bubble, and they wouldn't loan him anything rational for a home loan. He had no trouble getting a loan from anyone else.
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Old 09-19-2016, 10:30 PM   #30
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I'd look at other banks. Wells Fargo has some weird criteria. I had a friend that worked there during the housing bubble, and they wouldn't loan him anything rational for a home loan. He had no trouble getting a loan from anyone else.
We when we're trying to refi when rates dropped I asked lending places up front if they considered investment assets, especially retirement account balances, in the underwriting. The places that said sure were our two credit unions, though I don't have a statistically large enough sample size to know if that was just coincidence or not. Some lending places only wanted to look at regular kinds of income like W2 forms, 1099 forms, pension or SS payments and wouldn't consider investment income if wasn't the kind of income that showed up on tax returns every year.
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Old 09-19-2016, 10:33 PM   #31
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Originally Posted by Texas Proud View Post


Right now you have no debt, but if you get a mortgage then you will....

And it would seem that the monthly payment amounts on a new mortgage cannot be supported by your low income....

That is what I mean by debt payment to income ratio.....

If possible, I would do what I did last time.... pay down my mortgage and re-amortize with the money from the sale of my current house. Then I would pay the whole thing off asap. Last time my new house was paid off in three years. This time around I could pay it off with existing assets.

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Old 09-19-2016, 10:54 PM   #32
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To show you how "stupid" the rules are, we were almost turned down for a mortgage because of "low income" until they reviewed our 1040's and saw "large" income (taxable) due to converting tIRAs to Roths! That's all they needed. OP might see if his/her 1040 shows such "phantom" income. YMMV
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Old 09-19-2016, 11:05 PM   #33
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Originally Posted by Helena View Post
I have zero debt. My house is paid-off and I have excellent credit.
The one and only reason I could not qualify was my low income...
which I purposefully keep low for tax purposes.

.
Since banks use 1040 income as income, managing for low taxes has downsides. If for example one were to get a bunch of dividends they would qualify as income, or do banks reject schedule B income? (you do pay taxes on that income just the same)
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Old 09-19-2016, 11:39 PM   #34
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To show you how "stupid" the rules are, we were almost turned down for a mortgage because of "low income" until they reviewed our 1040's and saw "large" income (taxable) due to converting tIRAs to Roths! That's all they needed. OP might see if his/her 1040 shows such "phantom" income. YMMV
Another excellent reason to do conversions to ROTH.
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Old 09-20-2016, 12:15 AM   #35
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A while ago I looked at the "how much mortgage can I afford" calculator at BankRate.com. They used Wages + SS + Pension + Interest + Dividends in the calculation. In other words, 1040 income. I didn't think of Roth conversions, as Koolau mentioned, as that seems so transitory.

But I guess it isn't any more transitory than any of these following actions, AFTER getting the mortgage: Quitting the job; selling or redeeming the interest-bearing instruments; selling the dividend-producing equities.

So just the most-recent 1040 will do it?
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Old 09-20-2016, 02:06 AM   #36
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While reviewing mortgage lenders I recall banks and credit unions revealed how often they sold their mortgages. One credit union I checked out sold either 0% or 25% (forgot which), suggesting they kept most of their loans in house. They might have more flexibility, since they only need to adhere to their own criteria.
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Old 09-20-2016, 06:33 AM   #37
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A while ago I looked at the "how much mortgage can I afford" calculator at BankRate.com. They used Wages + SS + Pension + Interest + Dividends in the calculation. In other words, 1040 income. I didn't think of Roth conversions, as Koolau mentioned, as that seems so transitory.

But I guess it isn't any more transitory than any of these following actions, AFTER getting the mortgage: Quitting the job; selling or redeeming the interest-bearing instruments; selling the dividend-producing equities.

So just the most-recent 1040 will do it?
It's now been 6 years, but IIRC, they wanted to see 3 years of 1040s. As it turned out, those were the three years we hit the conversions (and actually taking some tIRA money to spend.)

What seems so silly about using 1040 income is that it says so little about what I would think of as income. In the case of converting from tIRA to Roth, one is simply paying the taxes (thus ending up with somewhat less total assets in the process.) Actually spending tIRA money - as we did one of those years - LOWERs your assets. One would think that was a "bad" thing to banks, but they have to slavishly follow their rules (rules primarily set by congress IIRC due to the housing bubble bust - but I could be wrong.) In any case, it didn't make sense to us then or now. We just had to play their silly little game.

YMMV
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Old 09-20-2016, 07:19 AM   #38
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Originally Posted by Koolau View Post
To show you how "stupid" the rules are, we were almost turned down for a mortgage because of "low income" until they reviewed our 1040's and saw "large" income (taxable) due to converting tIRAs to Roths! That's all they needed. OP might see if his/her 1040 shows such "phantom" income. YMMV
Agree, for allegedly smart people you would think that they would know that moving money from one pocket to another is not income. What I do is just say it is pension income and they totally buy it since it appears on the 1040 as pension income. If they ask further than I would elaborate but they don't ask further so I don't elaborate.
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Old 09-20-2016, 07:25 AM   #39
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To show you how "stupid" the rules are, we were almost turned down for a mortgage because of "low income" until they reviewed our 1040's and saw "large" income (taxable) due to converting tIRAs to Roths! That's all they needed. OP might see if his/her 1040 shows such "phantom" income. YMMV
This is because the underwriters are not trained in tax; just know what rules to follow. They looked at the taxable IRA distribution and treated it like income, not unlike dividend and interest income. Their focus is on the main schedules, not Form 8606 that actually details the conversion.
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Old 09-20-2016, 09:22 AM   #40
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Important to keep this in mind when deciding whether to payoff your sub 3.5% mortgage to feel better.
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