Re: Home/Townhome..chances?
well, it's not the realtor you have to worry about discriminating against you. It's the bank.
You will have to show you can afford a house and make payments on time, which means more than starting to pay taxes. This depends on how much you can put down, how good your credit is, and how much income you can prove you make. This isn't just over a year, but years. If your credit and income history is blah, then you better have like 20% to put down.
Before contacting a relator, you really should talk to someone that does mortgages and that person will be better able to assist you in getting the loan to buy the house in the first place.
I know this sounds gloom, but look on the bright side. By the time you get everything together, the houses will likely be cheaper than they are now.
Re: Home/Townhome..chances?
to expand on Emily's post, based on new regulatory guidelines recently put into effect ...
A. you must be able to 'prove' that you have a reliable income. At minimum this means being able to show the lender two years worth of tax returns, probably three. This also means having your other personal finances in order such that your after tax income less existing financial commitments less local cost of living still results in sufficient uncommitted after-tax income to be able to afford your mortgage payment. The days of 'teaser rates' and 'liar loans' are now over.
B. you must be able to plunk down a 20% down payment on the property that you wish to purchase ... and this money CANNOT come from a second loan. The down payment money must come from some documented 'asset' i.e. a bank account or existing investment. The days of 'piggyback' loans are now over as well.
C. you may still have difficulty with future lenders because your "business" carries a stigma of unreliability and insecurity. For example, what happens to your future income if the state of Arizona were to enact a 6ft no contact law ? What happens to your future income if you break your ankle ? What are you going to do for income 29 years from now in order to make your final year of mortgage payments ? - the banks know that it can't / won't be dancing in 99.9% of cases ! What other marketable skills do you have ? What sort of income potential do jobs using those other marketable skills offer ? How does that jive with continuing to make mortgage payments for 30 years ?
The banks realize that being 'self-employed' ... and in particular being 'self-employed' in an inherently insecure profession ... and even moreso being 'self employed' in an inherently insecure profession where the typical career 'length' is far shorter than the length of the mortgage being applied for ... represents increased loss risk to them. Thus even if you do jump through the necessary hoops to document your income, and accumulate the necessary savings to cover a 20% down payment, and you do manage to get approval for a loan, you can count on the fact that the interest rate will be 'subprime'.
Re: Home/Townhome..chances?
Wow..that's a lot to take in. Thanks! :D
So this may seem like a "duh" question. But, let's say I paid my taxes for 2 years & saved up almost $50-100,000 from working as a dancer & getting a second day job. Would I be more likely to get a house if I just used that as a down payment (since it's way more than 20%). Or, would it most likely just be best to save up the total amount of what the home would cost & just buy it?
Re: Home/Townhome..chances?
I don't understand why you'd get a 2nd job during the day.
But yeah, if you get the 20% down (you'll need a little more than that anyway because of closing costs) and you have decent credit, you should be fine. Most people don't buy their first home outright.
Btw, you should be paying your taxes anyway.
Re: Home/Townhome..chances?
Quote:
Would I be more likely to get a house if I just used that as a down payment (since it's way more than 20%). Or, would it most likely just be best to save up the total amount of what the home would cost & just buy it?
Again expanding on Emily's comments, at minimum you'll probably need to have 25% of the purchase price of a new home saved up ... to cover a 20% down payment plus closing costs plus required 'tests' (like structural and water and septic) plus your first year's homeowner's insurance plus utility company deposits etc.
This also assumes that you have already bought (i.e. paid cash for) other necessary stuff like a fridge and stove and furniture) - if you have bought these (or plan to buy these) on credit, it will affect your total monthly bill obligations thus your credit rating thus your probability of loan approval.
Because your primary source of income comes from a business which the lenders consider to be unreliable and insecure, you'll be forced into a 'subprime' mortgage loan. Where a 'prime' borrower (i.e. a highly paid corporate type) could probably secure a 30 year mortgage with a fixed rate of 6% to 6.5% right now, a 'subprime' borrower would probably be offered a fixed rate mortgage that carries an 8% to 10% interest rate instead. On a $200k 30 year mortgage (i.e. purchasing a $250k house with 20% down payment), this would mean that where the 'prime' borrower would have a $1300 a month mortgage payment, the 'subprime' mortgage borrower's monthly payment would be in the $1700 a month ballpark. The extra $400 a month in mortgage payment would constitute a de-facto 'subprime risk insurance' payment to the lender, designed to help offset the much higher costs to the lender of 'subprime' mortgageholders going bankrupt on them. In principle this is the same idea as charging young male drivers much higher auto insurance rates based on the presumption that young males will have more accidents. In both cases there will be many 'subprime' borrowers and many young male drivers that never have any problems, but statistically speaking these groups as a whole have more problems and cost the lenders / insurance companies more money, thus are charged higher payments to compensate for this extra risk.
Of course, over the course of the 30 year mortgage, this de-facto 'subprime mortgage insurance' payment would effectively cost you an extra ($400 * 12 * 30) = $144,000 compared to the corporate type in order to purchase exactly the same house and build exactly the same equity !!! For this reason you may want to consider simply waiting an extra 3 years or whatever in order to save up the whole $200,000 purchase price
As far as income taxes go, the IRS already has automatic reporting arrangements in place such that if a person purchases anything that requires a gov't registration ... i.e. a property deed, a motor vehicle title, anything costing more than $10k nationwide (and actually as low as $3k in some states), the IRS will receive an automatic transaction report from the state gov't agency and/or financial institutions. The following April 15th, IRS computers will back-calculate the amount of money that needed to be earned in order to allow that person to buy the property / motor vehicle / expensive item, and will attempt to cross-check tax records for a tax return having been filed by the same person declaring an income level that is sufficient to make these purchases / payments (plus also pay for local costs of living).
If the automatic transaction reports show that a person registered the deed to a property costing $200k which carries $1700*12 = $20,400 in annual mortgage payments, plus that person has also registered a car costing $25k which carries a $700*12 = $8,400 in annual car loan payments, plus lives in a zip code where the cost of living averages $7,000 a year, the IRS computer cross-check is going to expect to find a tax return listing at least $36,000 in remaining after-tax earnings ( = probably $60,000 in gross earnings) to allow that person to pay for these things. If the IRS computer cross-check finds a tax return claiming only $40,000 in gross earnings, or finds no tax return at all, ..... aaa-ooo-gah ..... an IRS audit will quickly follow.
This IRS cross-checking is relatively recent, and I personally know of two NY dancers who were busted big time after they registered their new and relatively expensive cars but had failed to previously report enough income to the IRS to explain where the money to purchase those expensive cars came from in the first place. But where an application for a new mortgage is concerned, it will be the lenders who expect to see 2-3 years worth of tax returns declaring $60,000 in gross income to prove that the would-be borrower has sufficient income to cover monthly mortgage payments if approved for the loan.
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Re: Home/Townhome..chances?
Quote:
Originally Posted by
PinkLove
let's say I paid my taxes for 2 years & saved up almost $50-100,000 from working as a dancer & getting a second day job.
BRAVO to any girl who can save up 50-100k in only 2 years in the current AZ market...
Re: Home/Townhome..chances?
^^^ double bravo to any girl who can save up $50k to $100k in two years AFTER paying self-employment tax plus federal and state income tax !!!
Re: Home/Townhome..chances?
^Well, I was considering after-tax income as well. I think it'd be damn near impossible unless said girl is doing a whole hell of a lot more than dancing. Even then, BRAVO.
Re: Home/Townhome..chances?
Hah, I didn't literally meant that was what I make. I guess I just meant if it was possible could I do so. But if I do get a full time second day job then I could save up a lot more!! :)
Re: Home/Townhome..chances?
Quote:
But if I do get a full time second day job then I could save up a lot more!!
well, this really doesn't work the way you think it does because of our 'progressive' tax rates. For example, if you take a 'straight job' for say $10 an hour, it would provide a pre-tax income of $400 a week. If you weren't working as a dancer and the straight job income was all you had, the $400 a week = $ 20,800 a year pre-tax income would turn into perhaps a $19,000 after tax income because all you would wind up paying would be a 7.6% = $1580 'employee' social security tax.
Now assume that you are working nightly as a dancer earning say $1000 a week = $52,000 a year but NOT also working at a 'straight job'. In that case your $52,000 pre-tax income would tern into perhaps $ 36,300 in after tax income because you would wind up paying 15.3% = $7950 in 'employer' plus 'employee' social security taxes, plus another 15% (blended tax rate) in income taxes.
But if you do as stated and work at a 'straight job' during the day plus dancing at night, the following happens. Your pre-tax total income increases to $73,000. You still wind up paying the social security taxes of $1530 + $7950 = $ 9500 more or less. But with a taxable income level of $73,000, your income tax bracket increases to 25% and your blended tax rate winds up being somewhere around 21%. Thus by working as both a dancer and at a 'straight job' your after tax income would be somewhere around $73,000 - $9500 - $15300 = $48,200 from BOTH.
If you look at it another way, if you decide to work at a straight job in addition to dancing, despite the fact that the pre-tax pay rate of the second job translates into $20,800 per year it will only make a difference in your after tax income of about $11,900 versus the $19,000 you would have been able to keep if you were not also dancing. On the basis of 40 hours per week 52 weeks a year, this means that working the $10 an hour second job actually only 'pays' you $5.72 per hour after all of the additional tax effects on both your straight job income and your dancing income are counted. Thus in terms of time and energy invested versus dollars earned after taxes, you would be far better off working a few extra hours as a dancer !!!
PS if working at a second straight job also causes you to spend an extra $10 a day for gasoline and a fast food lunch, all of a sudden that $5.72 per hour de-facto pay rate now drops to $4.52 per hour !
PPS this example does not count any state or local income taxes that may also exist ... which would only make the actual after tax 'pay rate' of working a second straight job even lower !!!
PPPS in reality, the energy you will have to devote to spending 40 hours per week working a straight job is going to adversely affect your energy level while dancing ... which in turn will translate into reduced dancing earnings. Thus between the progressive tax rate effects and the reduced dancing earnings it's distinctly possible that deciding to work a second straight job won't actually net you any more after-tax earnings at all !!!!
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Re: Home/Townhome..chances?
Thank you for that. I think you just saved me a lot of stress!! I never even realized. You really are amazing, thx again. :)
Re: Home/Townhome..chances?
Yeah, thanks also! I just read all that and it answered a whole slew of questions for me too!