Matt Young of MDC Financial Services Group (mattyoungloans.com) has been kind enough to answer a few questions posed by potential real estate buyers. This is the second part of his responses.
Question from Myra, in Encinitas: I’m a senior citizen, just turned 65. Can I still get a mortgage or am I too old?
Answer: No one is “too old” for a mortgage. That would be age discrimination and is not legal. Any adult with legal competency to enter into a contract may get a mortgage, without regard to the length or term of the mortgage, as long as you have the ability to repay the mortgage and have qualifying credit history.
Question from James and Sally, downtown L.A.: Can you help us figure out how much we can afford on a house? I am a nurse, and I make $72,000; James works construction and makes about $60,000. We have about $75,000 saved for a down payment. Can we afford anything here?
Answer: Well, there is some other information we would need to review to make a complete assessment, but assuming you have no other monthly debt obligations and no other reductions to the monthly income apply, then yes, you can qualify for a mortgage. Most borrowers can put as little as 10 percent down on a home and have a mortgage as high as $562,350, the maximum FHA and conforming loan for San Diego County. Any loan higher than that is a “jumbo loan” and would require a 20 percent down (with a couple of exceptions). With your income and down payment, it appears you would income-qualify for a purchase price of $625,000 with at least 10 percent down ($62,650). That would bring you to the maximum loan of $562,350. The next step would be to have your financial documents (including tax returns) reviewed by a mortgage professional to ensure that the income used to qualify is the same as the underwriter will use. Once that is completed, you would inform your real estate agent what your buying power is and you would begin the house-hunting process.
Question from Peter, a writer in San Diego: I have some money saved from an advance, about $100,000. I want to buy some place to live but my income varies from year to year. How can I have a chance at a mortgage?
Answer: Many self-employed buyers like you qualify for loans every day. Rather than looking at paystubs and W2s as a traditionally employed person would have, the underwriter will be looking at your two most recent tax returns, paying specific attention to your Schedule C, where your self-employed earnings are reported. The issue here is that if you are one who has a lot of deductions and you write off as much as you make, well then you probably won’t be reporting much income and may not qualify. The underwriter will be looking at each year’s net income and either taking the two year average or going with the most recent year, whichever yields a lower income result, as your qualifying income.
I have had borrowers who may not qualify in one year wait until the following tax year when they know they will show more income. I have had other borrowers who might not qualify on their own this year, but they are able to get a friend or relative to co-sign for them. Every situation is different, so I would suggest having your tax returns reviewed by a mortgage professional to determine your buying power and establish a game plan, if necessary. Until you do that, it is all a guessing game and you will end up sitting on the sidelines always guessing what you might or might not be able to do and these great low rates will pass you by.
It seems that there are lots of opportunities to finance new homes and to refinance old ones, for people in all walks of life. So get out there and start shopping. And call Matt, when you find the one!
