Should I Buy A Home

by Heather
(North Carolina USA)

Ask Kate: Should I Buy A Home Without Income? Hi Kate, My husband and I are hoping to be able to relocate soon. We both have good credit. Our concern is that he is currently unemployed, but enrolled in college.

Heather continues... I do not make a lot of money at my job. However, we have decent savings. We have enough savings we could pay off a new home, but obviously we do not want to do that.

Is it possible that we could get approved for a mortgage based on our savings rather than our income? We plan to put down a 25 to 30 percent downpayment. Thanks, Heather

Kate Answers: Should I Buy A Home

Dear Heather, I recommend not asking how can I get a mortgage but should I buy a home.

Conventional wisdom says buy a home before prices escalate and keep 6 months living expenses in reserve.

But taking into consideration a recession, it is realistic to doubt that real estate values are going up anytime soon.

This takes the panic out of buying a house today.

When your husband graduates from college, what if there are no available jobs? How long would the remainder of your savings last with monthly house payments and no income?

Reserving two years living expenses would be prudent.

Look, the two of you are good savers. You've demonstrated that. But even a comfortable savings evaporates quickly for new graduates in search of jobs and simultaneously responsible for mortgage payments.

Once your husband is out of college and employed, buy a home. By keeping your savings available for living expenses until a job is secured, you won't risk over-extending yourself or becoming cash-poor.

Preserving good credit and avoiding bad credit should always be number one priority.

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Should I Buy A Home

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Buying vs. Renting when unemployed
by: Anonymous

Dear Kate:
I had the same question as another person about wondering if I might be able to qualify for a mortgage loan based on my savings rather than my income.

I was laid off 2 yrs ago and have been taking care of an ailing parent who has not recently passed away. After distributing the inheritances, I will have over $100K in cash.

I want to move away from a southern California, overpriced, big city to a smaller, more rural-type city in western Colorado where my money will go much further. I would pay a minimum of $300/month LESS for a mortgage on a home I'll love there, than I'd have to pay for rent there. So buying would be a MUCH more affordable choice for me. I was so excited to see the other person's question because it's similar to my own. But your answer just didn't make sense to me.

Please advise if you've heard of any lenders that might qualify someone like me based on savings in lieu of income especially if I might be interested in buying an underpriced REO or HUD home. Thank you.

From Kate: Check this out: It's about an age old concept whose time may have finally come. (You'll be visiting my other website Prime Real Estate Articles.) Good luck and let me know how it turns out!

Continue to Save Additional Funds
by: Vikki

Dear Heather,

In today's market environment there are many things to consider before purchasing a new home. Although many potential buyers have the funds available in either savings or the equity they have in their present home, the home values today can be detrimental in the future of home prices.

I also agree with what Kate was trying to convey. Continue to place any additional funds into savings and when your husband graduates college and has obtained a steady job, only then would I recommend that you take any savings out to purchase a home.

Even at that point I would suggest that you do your homework in the area of your future home and any neighborhoods that are potential prospects. Such as the quantity of foreclosures, both past and present, this drives the home values down. The types of mortgages that are the best for you, since some appear to be a bargain on the front-end and are actually very costly to the homeowner over time.

Finally, if you are deadest about making a purchase in today's market, you can never have too much information. I would guard the savings account at all costs. That would be the last choice to use, in a purchase, even if you could find a lender willing to offer a mortgage before your spouse is gainfully employed.

Additionally, the interest you are earning on the savings account, more than likely is less than the savings and tax benefits you would be achieving in the purchase of a home.

However, I caution you to be very aware of all of the issues involved with homeownership and as Kate mentioned in her response your credit score and income are paramount in your purchasing ability, both now and in the future. One wrong step and you could be ruined for a very long time.

Remember, you don't know, what you don't know in today's real estate market. By all indications it will be several more years before the market turns, both in the housing market and with employment numbers.

Wishing You the Best of Luck!

Mortgage Approval Based on Savings Rather Than Income
by: Valerie Robinson,I.A.C.F.B.

The decision to buy a home and get a reputable mortgage is crucial and demanding. First, to address whether or not you should buy a home and use your savings instead of income -- typically your savings will be listed on your loan application anyway!

Second, a 25 to 30 percent down payment is in your favor and should help in the reduction of your mortgage payments. Such a large down payment can speed up the loan process, depending on both credit scores.

Third, if either spouse has part-time employment, that income can be used. If it's consistent for 2 or more years, then a lender might consider the savings and still grant the loan.

Fourth, do not be surprised if the lender asks for a greater down payment.

Finally, ask questions. Example: How much will your mortgage payment be if using your savings to qualify? Would doing so increase your down payment? Don't stop looking for answers. That's what your lender is there for! Take care and best success!
Valerie P. Robinson, I.A.C.F.B. 800-816-1046
U.S.Goldust International - 1020 Stratford Drive East, Bourbonnais, Illinois 60914

Want to contact Valerie Robinson? Call or go to our directory for more information.

Savings In Place of Income
by: Virginia

I had this same situation come up in the past. Except one spouse was going back to school. So, the only way to do it was to set up a payment from the savings for three years for the amount needed to reach the proper DTI. Just an idea :)

Virginia, if you'd like, you may include your phone number and office address next time you comment! Kate

Home Purchase no Income
by: Daniel R Helvey

Income comes in to play here, you must prove you are gainfully employed.
Typically we will ask you to obtain a 1 year guarantee from the new employer.
Questions call 419-381-6009
Daniel Helvey MLO Bank of America Home Loans NA

Want to contact Daniel Helvey? Call or go to our directory for more information: List of Mortgage Companies in Ohio (Note: Daniel lends in many states)

Housing Payment Question
by: Charles Clark

How much are you paying for rent? Is that payment coming from only your income, or from family members helping you? If you can find a home where, with the down payment, your payments will be about the same, then I would suggest that you go for it. This won't be getting a loan with out income, but getting one where you can afford the payments from your current income. Then when your husband graduates and gets a job, you can have payments that are easily affordable, or if your home can be sold for what you paid for it, sell it and move up.
Charles Clark
801-942-2249
Best Mortgage - 8453 South Rua Branco Drive, Sandy, UT 84093

Want to contact Charles Clark? Call or go to our directory for more information: List of Mortgage Companies in Utah

Should I Buy A Home
by: Akali Dennie

Hello Heather. My name is Akali Dennie and I am a Branch Manager of Freedom Mortgage. Kate's answer to you is very sound and should be followed. IF, you still would like to pursue a house once you relocate, AND your husband is still in college, I would suggest buying a basic, low cost starter home. Not your dream home but rather a smaller, more practical home until your husband finishes school and you can buy a much more suitable home. My suggestion would be a home under a $100,000 and go with an FHA adjustable where the rates are under 4 percent. Thanks for your question!
Akali Dennie 305-974-0330
North Star Lending - 17011 N Bay Road, Sunny Isles Beach, FL 33160

Want to contact Akali Dennie? Call or go to our directory for more information: List of Mortgage Companies in Florida

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