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What are the odds???


Ravenous Wolf
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I am thinking about selling my house and building another house.

Right at this moment, I know would not qualify. But my question, what are the odds that a mortgage company would work with my situation.

I found this really cool lot that I want to buy now because it won’t last long. I had intended to wait for a few months before looking to build a house but this lot is awesome.

Anyway, here is my situation.

For almost two years, I have been paying on the mortgage for my current house. Right now, my credit is golden in that I have over 30 trade lines in each credit report with not a single late payment and about half of them are paid in full.

The problem is that my utilization and debt to income ratio sucks big green donkey [EXPLETIVE DELETED].

And the house to be built by the builder would cost like 50k more.

My plan is this:

Sell the house as quickly as possible but at a fair price. The neighborhood is finished and there are plenty of people looking at buying houses here so I don’t think that is a problem. Two years worth of mortgage is not much but I would like to shake off as much equity as I can from the sale of my house.

The builder has a move up program especially since my current house and the future house is the same builder. That is, they will help you sell your current house so you can move into the new house.

The next part of my plan is this.

My wife and I move into in with our in-laws so as a result, there is no mortgage payment, utility bills, etc. I devote huge chunks of my paycheck to closing out some debt and then when my utilization is better, do a HUGE bills consolidation loan to get whatever is left into a loan with one single monthly payment. And even close a few revolving accounts.

And the next piece of my plan is this:

As soon as the rest of the documentation comes in, I will file my taxes and I am expecting a very large refund.

I also have a small 401k that I will empty out by the time closing rolls around.

So from the tax refund, living with my in-laws, and perhaps gift money if needed, I know I can come up with a down payment larger than the first time around. And by the time closing rolls around, my utilization and debt to income ratio ought to be back down to earth.

So, what are the odds that a mortgage company (which is owned by the builder) or any other mortgage broker would be willing to work in my situation. Like, me putting down earnest money this weekend so I can take that lot off of the market and then work with me for the next seven months until the house is built and my down payment and debt ratio/utilization has improved?

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Worst thing about building new homes is after they are done you are always thinking of "If i could do it over, I would do this and this and this differently." It happened to me the first time I built a home, stayed there less than two years, before I decided "Let's do it again."

Right now, you say that the DTI to qualify for a new mortgage is all out of whack, and this certainly needs to be considered for a healthy financial future, but living with the "in laws" ......( Well, maybe your's are different than mine).

I would personally look into to the "guaranteed sale" program with the builder. Realize that they will not give you full price in the guarantee, but if the home sells before the new one is built, you will get an acceptable price. The key is whether or not the guaranteed sale price will exceed the mortage payoff, and still let you take care of the closing costs and down payment on the new home. That will be a personal decision.

Next, would be to see if the builder will work with a "Contingency contract" (This means that your obligation to purchase is "contingent" on the sale of your current home.) This is fairly common practice with purchase agreements in all markets, just as a contingency "subject to mortgage approval."

If your credit is accepatable to obtaining some of the riskier loan products, you may be able to get a preapproval of some sort (thinking some of the stated, no ratio, no doc programs) to enable some type mortgage financing. This may be having to pledge the reserves of liquidating your 401k accounts but, this would make the mortgage approval real easy to prove. Then again, six months down the road, everything will be different anyway, and your loan program can change for the better.

Now for hammering away at the debt........

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