Real Estate Home Mortgages/buying with a reverse mortgage
, the husband am 65 years old, my wife is 63
We own a house worth 625,000 in NY
Mortgage balance is 345,000
We want to retire to Florida.
We want to buy a house in Florida with a reverse mortgage to keep our living expenses low.
We found a house for $385,000. A reverse mtg lender said we could get 240,000 but pay 20,000 in fees and net 220. I would have to put up the difference of 165,000.
I sold my boat for 140,000 this week plus I have another 90,000 in cash. I can rent my home here for 4300.00 I am paying 3300.00. I would net 1000.00 a month towards my living expenses in Florida.
The lender told me I would be charged the 3300.00 debt to pay the mortgage on the NY house but no credit for the 4300.00 rent. The taxes and insurance in Florida would be $484.00 per month.
I was then told that there is a debt to income ratio of 43%.
My income in retirement would be, 2000.00 social security,
1800.00 rent income in Florida
500.00 sale of business income
1000.00 net income from house in NY
Total 5100.00 month
I was told by this lender that the underwriters would not credit me any rent from my big house but would use the 3300.00 monthly payment as a liability.
I would have that 3300.00 as an expense, and 484.00 a month expenses in Florida. Total for both would be 3784.00 a month. This being 43% of necessary income I would have to have income of $8800.00 a month or 105,600 yearly income to qualify. My real income would be 4300 a month without the net rent from NY. I had the NY house on the market for a year and no buyers, I have a couple who want to buy it on a land contract but I was told the HUD people would not recognize the sale that way, so I cant use the 160,000 down as liquid assets until it is aged and the mortgage payment I would receive canít be included as income, but again, I would be penalized the 3300.00 mortgage payment I make as that same liability screwing up my debt to income ratio the same as mentioned before.
How can I make this purchase in Florida happen with the circumstances I have to work with?
Your question has some complexities to it but I will do my best to sort through it. Feel free to follow up with questions if I make any incorrect assumptions or if you have further questions.
First, with regard to doing a reverse mortgage you would not need to worry about a debt to income ratio at all or worry about the rental income from your New York property being counted as income. Reverse mortgages do not look at debt to income ratio's because there are no mortgage payments due on the property as long as you live in it. If your loan officer is using a debt to income ratio on a reverse mortgage it is likely that he/she is not familiar with reverse mortgages- those mortgages are more of a specialized area- and I would recommend dealing with a reverse mortgage specialist. several can be found on the web of course. reversemortgagecalculatorfha.com and mortgagereversecalculator.com are both good sources.
Secondly, the down payment for a reverse mortgage may come from the sale of an asset such as a boat- that should not be a problem. Lenders do not accept down payments from borrowed money however. They will check for the source of the funds and may look back at your bank statements for up to 90 days to verify that the funds were not borrowed.
Next, if you are looking at doing a conventional mortgage in Florida you would be looking at working out the issues of the debt to income ratio. If you have any history managing rentals or have rental income from the past you should be able to get the underwriter to include the rental income when calculating the dti. The formula used is to take 75% of gross rents and subtract that from the monthly mortgage payment on the property. Whatever is left over is either considered monthly income or debt. Whenever you get into a situation of dealing with multiple properties and rentals it is best to use an experienced loan officer who has had dealings with investment property financing. An experienced mortgage broker may be a better fit as he/she would have access to a larger pool of underwriters and lenders. This is important because each lender has its own internal rules regarding matters such as allowing rental income on newly rented properties and requirements for documenting that your new property will in fact be your primary residence- another hurdle you will need to jump over.
Feel free to follow up with questions, hopefully i was able to answer the questions you had.
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