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Originally Posted by Tomservo
Thanks to NoSoup and the gang for providing a lot of good information here.
So here's my situation- I'm moving to a different state next year, for law school (WUSTL), but I'd like to begin the home buying process in advance of the move, since my financial situation is extremely better with the job I currently have. It'll be a modestly priced house (likely below $150k) that I'll be able to afford, so I'm not concerned about my lack of significant income during the first year or two of law school, I'm just concerned with getting a mortgage broker to give me the $150k in the first place.
Any recommendations? My wife and I are well above the income median for St. Louis (where we're going) with our L.A. jobs, but we'll likley be below the median while I'm in law school. Other key factors - we don't own currently (rent, for more than our St. Louis mortgage payment WILL be), and I'm currently the leasee of an apartment in St. Louis. Thereby- I'm wondering if I could claim that I've held a residence in St. Louis, but I work in Los Angeles, simply for the purpose of getting the loan? I realize that's misleading the broker, but getting the loan is of prime importance, and it's dishonest.
In the end, my wife and I just want to avoid throwing away three more years of rent payments when we'll be able to afford (and prefer) to buy.
Additionally, both our credit scores are slightly below 700, we have one car payment ($500+), and every credit balance is below 50%. Oh, and we have about a $10k 401k we may draw the down payment from, as future earnings should be significant enough to replace the money. Thanks in advance!
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As I am only licensed in the state of Wisconsin, I am not sure if all this advice will be applicable or correct in St. Louis, but here is what I think based on my knowledge of the laws around here...
As far as residency is concerned, I don't think that will be much of an issue unless you are applying for government loans. Here in Wisconsin, we have no regulations concerning the borrower's current state of residency.
However, to qualify for owner occupied financing, you may have to sign documentation that you are planning on moving into the home within a set time frame - typically 30 days. Not that I am recommending doing this, but no lender I have worked with actually checked to see if the property is owner occupied.
As far as utilizing money from your 401(k) for the downpayment, It likely depends on your situation. If you are confident that you will be able to put enough away later for a comfortable retirement and could get better financing using those funds, I don't see any reason not to. Keep in mind, though, that the longer you wait to refill your retirement account the more money you will have to put in just to recieve the same amount upon retirement - compounding interest is your friend.
Your scores are decent, but I would improve them before buying a home - there is a world of difference with scores less than 700 or greater than 700... ideally, you can get your scores to 720+. Check out
http://www.transunion.com for options on purchasing your scores. Buy a tri-merge (all three credit reporting agencies) as well as the option that tells you what your scores are. The report will let you know what is damaging your scores the most - fix whatever you can ASAP, as it could potentially save you tens of thousands of dollars in interest. Purchasing your scores yourself don't count as an inquiry, so it won't damage your scores.
Prepare for owning a home by having a bit of cash saved up for emergency repairs. Owning a home can get real expensive, real quick if a couple of major things go wrong in a short period of time.
Hopefully that helps - if you have any more questions, please feel free to ask!