Payment Shock question

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  • #67995
    sweetlilly
    Participant

    Question about Payment Shock.

    Using my current rent amount of $725.00 (no late payments) in a place i have been living in for over 2 years and with a payment shock in the $700.00 range would this still hold true in my case.
    1. if i have over 5k ( and counting ) in my checking.
    2. 1k (and counting ) in my credit union savings.
    3. Aggressively contributing over 15% to my 401k for close to a decade. My hope is to pare this down to 10% when i transition to a home.

    Have not been to an Intake session yet.
    Just thinking out aloud as i try to upload the relevant docs to my web file.

    #67997
    Nelsont
    Member

    Yes. Payment shock is not a value you need to reach. It’s a savings pattern you need to demonstrate both a history of prior to being qualified and also maintaining it through until you close on your house. The idea is that you should not be spending everything so you will be qualified based on an amount you can safely afford (according your debt and income) and how much you can continue to save while paying your mortgage on time. So a $700 payment shock means you wwill be qualified for a $1400 mortgage. You can think of it like a trial mortgage payment. They want to see you demonstrate the ability every single month without fail the ability to pay your rent and save 700 which is the same as paying a 1400 mortgage.

    Just a thought though. Any and all changes to your income including retirement contributions need to be made prior to qualification in order for that to be taken into consideration. They will not take your word for anything they need to see you have already demonstrated it.

    They will look at your total financial picture and while your extra contributions to 401k may not affect your total DTI they will take it into consideration when reviewing your file. So in order to get your full qualification amount if you need to pare down your 401k you need to do it now and probably have 2 pay stubs showing the new net amount after the pare down. For instance if your gross income and debt say you can get qualified for $1425 but you are contributing $2000/month to your 401k (exaggerated example) you couldn’t possibly afford $1425 on your net pay. Otherwise you should talk with a financial planner to see what’s right for you.

    #67998
    sweetlilly
    Participant

    Thanks for the feedback.
    Thanks for your time.

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