Posted here because I’m not sure where it belongs. I understand that things will vary from lender to lender, and my best bet for factual answers is to go straight to them, but I want to make sure I don’t shoot myself in the foot by saying something I don’t necessarily have to say.
My situation - I’ll be separating from the military in just over a year. My wife and I plan to relocate, and we’ve been browsing for houses in a very specific neighborhood for about the last year now. Yesterday, the “perfect” house popped up for sale, and now we’re considering foolishly snapping it up. We have a few options for how we’ll pay the mortgage in the intervening year, but even in the worst case scenario we will have enough money saved up for 20% down payment + closing costs + a years worth of mortgage payments + property tax. Things will be very tight after all that, but that’s the worst case (I think).
Once we worked out all the math on that, we decided to see if we could actually get a mortgage now. And this is where we get into the questions. We’re first time buyers, and we’ve never been through the process before. We have great credit, we can prove our savings balance, and presently we make good money with dual incomes. But it should be pretty obvious to a lender that my military salary will terminate when I move, and while I have unofficial job offers in my back pocket, I don’t have guaranteed employment when I get there. My wife can prove current income, but we just had our second child and she’s running out the clock on her maternity leave/vacation time and will only be getting paychecks for another 2 months or so. After that, she’ll be on a sabatical, and will still be able to show an employment letter but won’t be collecting a salary for somewhere between 6 months to never.
How much of all that do I have to reveal to the lender? What should my angle be? Do they even ask those sorts of questions, or do they just ask for W-2s and run the numbers? I don’t consider us to be high risk given our education and earning potential, but I understand that there’s going to be a lot of termoil and uncertainty in the next year, and I’m worried that we may be rejected for our desired loan amount based on that alone.
Thanks in advance to anyone who takes the time to reply.
IANAMB, but I would imagine your 20% down payment will go a long way toward assauging anyone’s concerns regarding your employment.
It doesn’t cost anything to talk to a mortgage broker, and if you can, find one who is willing to do manual underwriting…they look at more than just FICO scores.
When you do go house-hunting, make sure you’re pre-approved, not pre-qualified. Pre-approved means that the bank is ready to cut the check once you find a house. Pre-qualfied means that someone has decided you’re an okay lending risk, but hasn’t done the paperwork yet.
I hate to be a Gloomy Gus, but based on your story, maybe you should wait until you have “official job offers” and maybe even paychecks?
Not planning for the future, and how to make a house payment, is what led so many people into the pit of foreclsoure they’re in now. I would be very careful about making assumptions about the next few years, particularly in this job market.
So far as the lender goes, I would imagine it would be easy for you to get qualified with the current info. AFAIK, they don’t really get into your future plans much, but that may have changed in the current credit market.
And, I’m sure you know this, but there will be another “perfect house” It may be wise to wait until your future financials solidify to buy it.
For some mortgages the process involves verifying employment. This does not mean that you produce a document from your employer, those can easily be forged. It means the mortgage company contacts your employer, you are not allowed to intervene. One question that may be asked is something in the nature of ‘Possibility of continued employment? Yes/No’. From the sounds of it, the military would answer ‘No’ in your case. Depending on what your wife has communicated with her employer, they may be obligated to point out the upcoming unpaid sabbatical.
Now, once the mortgage company has these answers they could ask you questions like, ‘Did you knowingly withhold this information from us?’ There may be statements in the mortgage application that you sign saying this is a big no-no.
These things are not guaranteed to happen, but they could in a normal situation. Maybe best to think through this a little more.
Foolish is an understatement. In the best of times, making an offer on a house without having all your ducks in a row is emotion ahead of common sense. When your heart rules common sense in terms of big money (a mortgage), when you lose, you lose big and you may not recover from it. In this economic morass, there no idea what tomorrow will hold, let alone a year from now. No sane lender will offer you anything if you show up on their doorstep desiring a mortgage for the “perfect” house right now.
Go to several lenders now and see if you pre-qualify for a loan, and for how much. Be open with them. Don’t be surprised if they are polite and show you the door, “Come back a year from now …”
Everyone has their own set of circumstances so any specifics mean nothing. Still, some generalizations are in order. The housing lending market is all but dead. Even folks with super credit histories, stellar FICO scores, great down payments, secure jobs, etc., are being turned down. Flat. As in go away, there is no money to lend.
Case in point. A coworker (federal employee) with 20 years of steady employment. She qualifies for a VA loan through her deceased husband. She already draws a lifetime military pension (through her deceased husband) that would fully pay the monthly mortgage on a $300,000 (and that’s not counting her annual fed salary). A FICO score in excess of 800. She can put down 50 percent on that $300,000 loan. She is only looking for a $200,000 loan. Turned down flat by her bank of 25 years. Turned down flat by several other banks. The stock answer? There is no money to lend.
And on top of all that, the economy will probably be in a much better place in a years time, when you know what your employment will be. I would also advise waiting until then.