Multiple Mortgages and Their Effect

Submitted by wiillrus t3_yi9mep in personalfinance

Will my owning of a home ruin the chances of my fiancé (will be wife soon) and I purchasing a home together?

Currently own a home with my brother (joint - purchased in 2019) and all payments have been on time. Purchased for $145k, $133k current balance. $1,000 payment; split. 3.875% rate; 30 years. This home will likely not be sold prior to my wife and I’s purchase.

Fiancé owns a home (purchased in 2021) and all payments have been on time. $800 payment. This will likely be sold at the same time as the purchase of the new home, barring no unforeseen circumstances.

My salary is $85k, hers varies but falls between $80-100k depending on overtime. Credit scores are 760-785 for me and 780 for her. Once the loan forgiveness is applied, my only outstanding consumer debt will be $12k for a vehicle and $5k for a personal loan.

Will my house cause any issues in the home-buying or approval process for her and I?

Thanks in advance!

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lost_in_life_34 t1_iuhls20 wrote

most lenders will find out if you have any other mortgages and will only qualify you based on being able to afford multiple mortgages

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twotall88 t1_iuhosmq wrote

Underwriters at banks don't care about agreements or situations, they just look at the facts of your financial situation in a very black and white manner.

You and your brother are equally liable for the $1,000 payment in whole. Your Debt-to-Income will include the entire $1,000 payment to the mortgage as well as your fiancé's $800 payment (I have to assume you're not including escrow in these numbers, you should be).

The banks will just take the total of you and your fiancé's combined monthly debt payments and divide it by the sum of both of your gross monthly income (averaged over the last two-three months as well as the last 2 years of tax returns). They also don't care if you plan to rent the houses out unless you have 2 years of rental income for the property included in your federal tax return.

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wiillrus OP t1_iuhts3s wrote

Understood. Those figures do, however, include the escrow as well. Is there a general rule of thumb for DTI threshold? Online searches yield results ranging from 30-40% with 50% as the cutoff in special circumstances. Using a calculator, I’m coming out at 25% or less. The 25% is including my full mortgage amount and student loan payments until they’re formally forgiven.

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twotall88 t1_iuhwllv wrote

It just impacts the rate they are willing to offer you until their individual cutoff that could range between 30-50% depending on your situation and the type of loan you're trying to get.

For example, to get an FHA loan with federal guidelines you have to have 31% or less DTI before the loan (front-end DTI) and 43% or less DTI after the loan (back-end DTI).

For most conventional loans the cutoff is between 45-50% depending on credit worthiness (you can go above this amount if you have really good credit, like near perfect).

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Werewolfdad t1_iuhlwm4 wrote

Unless your house is a rental property, it will increase your DTI so you’ll be able to buy less house then you otherwise would

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wiillrus OP t1_iuhn4mc wrote

For the sake of calculating DTI, do lenders consider my entire mortgage payment amount ($1,000) or only the portion I pay?

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MayorOfHamtown t1_iuhnowq wrote

Generally speaking, banks do not recognize any agreements between you and a co-borrower. The risk is that the other party could stop paying at any time and then you are responsible for the entire mortgage, so they calculate DTI with the whole monthly payment.

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Syyina t1_iuhnd9d wrote

I think lenders will consider your total debt and your income, not necessarily the amount of your monthly payment or the portion of the monthly payment that you have agreed to pay.

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twotall88 t1_iuho8jp wrote

>not necessarily the amount of your monthly payment

Debt-to-Income (DTI) is literally the ratio of total monthly payments (credit bureaus have the payment amounts) over your monthly gross income. https://www.consumerfinance.gov/ask-cfpb/what-is-a-debt-to-income-ratio-en-1791/

This would be the whole mortgage payment as both OP and brother are equally liable for the $1,000 payment.

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93195 t1_iuhpdah wrote

While it won’t “ruin” your chances, it does count against your debt to income ratio. The lender has to be convinced you can afford all the loans and all the houses. Hers will likely need to be sold before as well, not at the same time.

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Gobucks21911 t1_iui8htu wrote

That’s a question for your mortgage broker or loan officer. Only they will know your entire situation and if you qualify.

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