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Thread: Putting 20% down on a house...

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    Veteran Member angelicat's Avatar
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    Default Putting 20% down on a house...

    I'm buying my first home in April, and have a few questions...

    If I put 20% down, is there any way that I can avoid my lender doing an income verification?

    If not, is there another amount that a down payment must be to avoid this step?

    Is it important to get pre approved before I find the house I want to buy?

    Do I have someone inspect the house before I buy it, or do I have to wait until after?

    First timer, sorry for the naive questions.

    Thanks in advance!!

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    Banned Melonie's Avatar
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    Default Re: Putting 20% down on a house...

    These days, EVERY reputable lender is going to perform an income verification as this is now required by regulators. Also, these days, plunking 20% down plus closing costs is a given.

    The lender will require that certain aspects of the house you intend to buy pass certain inspections ... as these are required for the lender to be able to 'resell' your new mortgage to Fannie Mae.

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    God/dess shasta's Avatar
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    Default Re: Putting 20% down on a house...

    putting 20 % down night seem like a big deal to you but many people sell one house to buy another and have way more than 20% to put down. It was a pita to get my loan in June with 20% down and that eaqual about in the bank. They looked at my bank statements for the last 2 years. Now they don't even want do do the bank statement thing and it is really hard. I hope you have been paying your taxes and showing that you have profited enough to qualify for the loan you want.

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    God/dess Zofia's Avatar
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    Default Re: Putting 20% down on a house...

    Quote Originally Posted by angelicat View Post
    I'm buying my first home in April, and have a few questions...

    If I put 20% down, is there any way that I can avoid my lender doing an income verification?
    Not in today's market. Probably not ever again. It is bad banking practice not to verify income. One of the foundations of good lending is the ability of the borrower to repay.

    If not, is there another amount that a down payment must be to avoid this step?
    100%

    Is it important to get pre approved before I find the house I want to buy?
    It improves your negotiating position.

    Do I have someone inspect the house before I buy it, or do I have to wait until after?
    After is too late. Have a home inspector go in before and have them give you the most scathing report possible. One it improves your negotiating position. Two, it alerts you to problems that will cost money down the road. I have bought five and sold four homes since I quit dancing. Everyone had problems. That's why I bought them. I still have a home inspector look things over before I buy. Every time the inspector has saved me his fee, and then some.

    First timer, sorry for the naive questions.

    Thanks in advance!!
    No problem. Ask lots of questions.

    HTH
    Z

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    God/dess Zofia's Avatar
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    Default Re: Putting 20% down on a house...

    I should have added, get a survey. Even if the bank does not require it, it's a good idea. Once again, just avoid problems down the road.

    Z

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    Default Re: Putting 20% down on a house...

    1. Always get a home inspection, and 2. you may also want to get pre-approved with a lender. Your home ownership expenses should not exceed 33-40% of your income. Some lenders take advantage of homebuyser, so make sure you have someone with your best interests at heart review the terms of your loan.

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    Default Re: Putting 20% down on a house...

    In fact, new regulations pretty much require lenders NOT to approve new mortgages where the combination of mortgage payments plus property taxes exceeds 40% of available (and verifiable) after-tax income - regardless of the would-be borrower's financial history or credit rating.

    This now poses an 'inherent' problem for people whose typical 'careers' will be far shorter than the duration of the mortgage they are applying for. For example, if a 20 year old exotic dancer applies for a 30 year mortgage, even if she is able to verify sufficient income levels for the past couple of years, the lender's credit risk committee is now going to be wondering how that exotic dancer plans on making the last 10-15 years worth of mortgage payments. Statistically speaking, there are very few active full time dancers over the age of 35-40.

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    Senior Member Butrcup98's Avatar
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    Default Re: Putting 20% down on a house...

    You also have to consider what a 20% down payment will look like to the IRS. Even if you've been paying taxes, I don't know any dancers who claim more than $30K per year. How are you going to explain saving $20K, unless you've been dancing for several years and paying taxes?

    All banks are going to verify income. When my hubby and I applied, they would not have approved just me, even though I make more than he does.

    You could always try to finance a 15 year mortgage. The bank might be a bit more favorable.

    ALWAYS get an inspection. And get your own. Don't let your real estate agent hire one. They will just hire a friend and you won't get the most accurate inspection. We are still finding things that our inspector "missed", like several shingles in poor condition.

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    Banned Melonie's Avatar
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    Default Re: Putting 20% down on a house...

    You also have to consider what a 20% down payment will look like to the IRS.
    We've covered this issue many times. The IRS now has automatic reporting mechanisms in place with every state property title agency. As soon as anybody purchases a house (or car or anything else with a title / registration), the state agency responsible for filing the title generates a report to the IRS including the buyer's personal info plus ... the amount of the loan, the amount of the down payment, the monthly payment rate, particulars about the lender etc. From this info, IRS computers will try and match up the buyer's social security number with past tax return filings. IRS computers will try to match up the amount of the down payment and monthly payments with the amount of previously reported taxable income. IRS computers will also attempt to match up the amount of the monthly payments with the average cost of living in the buyer's particular zip code area. If any of this computer analysis comes back looking suspicious, the IRS computers will 'red flag' this person's social security number (i.e. establishing probable cause).

    Once the 'red flag' has been set, an IRS agent can make a network request for financial info on that person using the SS#. Within 5 minutes this will return the person's credit rating, bank account transactions, credit card transactions, the existance, amounts, and monthly payments of any other loans, the existance and amounts of stocks / bonds / retirement accounts, the existance and amounts of college tuition payments etc. IRS computers will then add this additional financial data and try to estimate the amount of after-tax income necessary to support the person's level of spending / monthly payments / savings & investments. If there is still a discrepancy in previously reported income levels, it's virtually guaranteed that a full audit will quickly follow.

    I would add that many of these automatic reporting requirements are relatively new (like within the past couple of years). And they are very effective in raising additional tax revenue for the IRS. For example, I know of two NY dancers who were recently audited by the IRS because they bought and registered relatively expensive new cars without having sufficient reported income to explain how they could have made the down payments or the ongoing monthly payments. Both girls were audited. In both cases the IRS ruled that the girls had deliberately under-reported past income on their tax returns. As a result, the IRS then developed an 'estimated actual income' level corresponding to the amount of real earnings the IRS estimated would actually be required to allow these girls to purchase the new cars plus pay their monthly bills plus cover their bank and credit card transactions. The IRS back calculated for three years, and sent each of the girls a bill for back taxes plus penalties in excess of $100,000 !!! Since the dancers didn't have any official documentation to prove to the IRS that they DIDN'T actually earn as much money as the IRS claimed they did, the girls had no option other than to accept an IRS settlement (losing their new cars and their bank accounts in the process).

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    Default Re: Putting 20% down on a house...

    You can expect that amount of due diligence always will be practiced by a lender. But you may be able to skirt this by finding an owner willing to hold the mortgage. But I would think that lender type would be even more circumspect about qualifying a mortgagee. But you may find an exception.

    That said, you had better make sure that you can pay the loan for the years you expect to be there. Else you are just part of the current huge problem.
    I loved going to strip clubs; I actually made some friends there. Now things are different for the clubs and for me. As a result I am not as happy.

    Customers are not entitled to grope, disrespect, or rob strippers. This is their job, not their hobby, and they all need income. Clubs are not just some erotic show for guys to view while drinking.

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    Default Re: Putting 20% down on a house...

    That said, you had better make sure that you can pay the loan for the years you expect to be there
    And herein lies the 'catch 22' situation for exotic dancers, for professional athletes, and for people in any other career that has a 'limited' number of peak earnings years. Bank risk managers have to evaluate a whole bunch of additional variables when someone requests a loan that will take 30 years to repay, yet work in a profession where 99% of current workers will be forced to find an entirely different line of work (with an entirely different earnings scale) before that 30 year loan is even halfway paid off ! Privately financed mortgages are essentially no different ... so beware that any privately financed mortgage isn't simply a high priced 'rent to own' arrangement, with the owner / lender counting on a high probability that he can collect an extra 20-30% in 'rent' while still being able to evict the 'rent to own' buyer at the first occasion of default.

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    Default Re: Putting 20% down on a house...

    Quote Originally Posted by Melonie View Post
    ... so beware that any privately financed mortgage isn't simply a high priced 'rent to own' arrangement, with the owner / lender counting on a high probability that he can collect an extra 20-30% in 'rent' while still being able to evict the 'rent to own' buyer at the first occasion of default.
    Different states have different laws. But, in North Carolina where I live, a privately financed mortgage is treated the sam in the law as a bank mortgage. Webster, Real Estate Law in North Carolina § 13-5, Lamberth v. McDaniel, 131 N.C. App 319, 506 S.E.2d 295 (199. The short answer is, a vendor has to go through with foreclosure and the buyer has the right of equitable redemption. No ability to "evict" the buyer on the first default.

    HTH
    Z

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    Default Re: Putting 20% down on a house...

    ^^^ many states do have such laws which essentially outlaw 'rent to own' arrangements. In doing so, they create the same sort of potential loss risk upon the 'self-financing' property seller as a conventional mortgage creates for a bank. As a result, it will be extremely difficult to find willing 'self-financing' property sellers in such states.

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    God/dess Zofia's Avatar
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    Default Re: Putting 20% down on a house...

    Quote Originally Posted by Melonie View Post
    ^^^ many states do have such laws which essentially outlaw 'rent to own' arrangements. In doing so, they create the same sort of potential loss risk upon the 'self-financing' property seller as a conventional mortgage creates for a bank. As a result, it will be extremely difficult to find willing 'self-financing' property sellers in such states.
    North Carolina has had the rule since at least 1998 and there seems to be no shortage of seller financed sales right now. It seems to be more a function of the housing market and the desparation of sellers than the law protecting buyers. When times are good and credit is easy, seller financing is all but unheard of here. When credit is tight, or the market is slow, more seller financing takes place.

    Z

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    Default Re: Putting 20% down on a house...

    In this economic climate you might look into pre-foreclosures. You would have to handle the delicate situation, but you could emphasize that you are helping to salvage the credit of the distressed homeowner.
    I loved going to strip clubs; I actually made some friends there. Now things are different for the clubs and for me. As a result I am not as happy.

    Customers are not entitled to grope, disrespect, or rob strippers. This is their job, not their hobby, and they all need income. Clubs are not just some erotic show for guys to view while drinking.

    NOTE: anything I post here, outside of a direct quote, is my opinion only, which I am entitled to. Take it for what you estimate it is worth.

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