August 12, 2020 at 8:40 pm #71294
I would like to know how exactly I can increase my purchase amount. Ive been told three difference purchase amount since my husband and I started with NACA in June 2019. I met with my MC today and some changes were made to my file that gave me the lowest purchase price. I have removed my husband on the loan and recently consolidated my student loans. The student loan consolidation has not been in effect as yet and I feel that my current repayment plan is effecting my purchase price.
Ive read about buying down on my interest rate but Im not sure how it works or when I will be able to do so. I also signed up for an achieve the dream event next month and Im not sure if I should attend, since I will be meeting with my MC in November. My last achieve the dream event was in June and i was sent to UW but my MC flagged my file for an error that she couldn’t even find today, and made me write an LOE for her error. The MC at the event understood me better than my current local MC and Im not sure what to do next.
I know that was mouthful but any thoughts/suggestion?August 12, 2020 at 9:19 pm #71295
There are 3 ways to increase your purchase amount: increase your income, decrease your debt or buy down the interest.
Increasing your income will get you approved for a higher monthly payment except for when that increase is because you are adding a spouse who has a lot of debt.
Decreasing your debt will get you a higher monthly payment if the total monthly obligations decrease. For instance paying off your car completely will work. Putting an extra $1000 toward the balance will not.
Buying down interest will not get you approved for a higher monthly payment but it will lower the monthly payment of a house a that is too expensive. The way it works is every 0.25% decrease in interest rate will cost you 1% of the purchase price of the house and it will lower your monthly payment by maybe $20 or $30. You can buy down the interest rate 1.25% yourself and the seller can contribute an additional 2.5% although with the current rates you won’t be able to use all of that. So in other words you can potentially lower the monthly payment by $100-$200 which means you can potentially buy a house that costs $300k even if your income says you can only buy a $200k house. It’s all because a large chunk of what you are approved for is not a mortgage. It’s interest. Which is a 360 month fee the bank charges for loaning you the mortgage. The more expensive the house the higher the fee. Buying down interest reduces the fee. If you do this you need to show proof you saved that money when you submit a contract.
Attending the atd event is always a good idea unless you have already been submitted for underwriting.August 12, 2020 at 9:43 pm #71296
@Nelsont Thank you for this response. So when will I be able to buy down my interest rate? You example definitely is my current situation. My income states that I can only buy an $200k home but the houses in my area are typical $300k.August 12, 2020 at 10:30 pm #71297
Officially you do it at closing. But you need to have the money when you first put in the offer. You tell your MC you are going to buy down and they double check your bank account before you proceed. You will be notified the exact amount to the penny how much you need a certified check for about a day before you close. But you you should know when you are touring the house for the first time roughly what it will cost. The taxes and insurance are factored in and that’s more or less public information. So is the purchase price. So it’s up to you to do the math.August 12, 2020 at 11:13 pm #71300
@ So I would have to let my MC know i want to buy down but not how much I plan on buying down? Is MRF going to be included in buying down?August 13, 2020 at 5:18 am #71301MartinParticipant
If you use the NACA in-house realtor, they should be sending you a breakdown to you whenever you indicate you’re interested in seeing a particular property. That breakdown will include how much you would need to buy-down the interest in order for it to reach your affordability (monthly amount). I also had an excel spreadsheet with calculations showing how much I’d need to buy-down, and what that monthly payment would be with interest, taxes, insurance, and HOA fees if applicable.
You can’t create a Property Specific Letter on your own if doing a buy-down, you will always need your MC to do it for you. That can be a pain, so make sure you ask for a PSL on a property as soon as you’re more than 75% sure you want to put an offer in on it. Or at least that was my strategy to ensure there were no missed opportunities.
The amount you need for a buy-down is included in your Minimum Required Funds, along with other costs like EMD, HOI, ESCROW, and other things. You can read about it in the purchase workbook on the NACA website.
Wishing you the best!
August 13, 2020 at 6:41 pm #71318
- This reply was modified 1 year, 2 months ago by Martin.
@Martin thanks for you respond, very helpful and informative.August 14, 2020 at 3:47 pm #71334Faith81Participant
To add to Nelson’s respond. They will only increase your approval amount to a maximum of 31% of your gross income so decreasing your debt will not increase your amount if you are already at the 31% (Nelson taught me this the other day) Buying down the interest dont change your monthly payment but give you more purchasing power meaning you can buy a house that costs more but your monthly payment will remain the same if you buy down the interest.August 14, 2020 at 5:09 pm #71337
@Faith81 So is it best to inquire from my MC if my approval was/can be increased to 31% of my income? How did y’all go about this?August 14, 2020 at 5:32 pm #71340
Do you know what it is now? You ought to. Pay down your debt and you’ll get a lower DTI and more money toward a monthly payment. Discuss your plan your plan with your MC.
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