What kind of mortgage can I get with a letter of hire?

[MBK2003]

I'm finishing fellowship in June 2009 and signed a letter of hire for a position starting in July 2009.
We've been renting for past 18 months due to a decrease in income and wanting to find a good school district & neighborhood. We had two previous homes owned on the basis of spouse's income and due to very fortunate timing of sale of last home, have 10-15% down payment saved. Our local real estate market is depreciating, but not double digits and still very few foreclosures. We have a good credit history and no debt (not even med school), but only one income (mine).

The Problem:
I would love to get into a mortgage and close on a home in June so I'm unpacked before the new job starts, but local mortgage people are looking at me like I'm crazy. I've been told things ranging from "Call us once you've established 6 months at the new income level" to "We couldn't provide you any assurance based upon a letter of hire or even a contract due to the recession."

Any thoughts on garnering better options in this economy? I'm waffling between hoping a personal relationship with someone local would be more fruitful, to casting a wider national net and hoping that it doesn't fall through in the underwriting. This is frustrating given the mortgage considerations my colleagues who graduated in June 2008 were given for their mortgages.

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[Sol Rosenberg]

You're not going to get a conforming loan without documentation of your income. Don't you have an income now as a fellow? They can get the paperwork rolling with current income and an offer letter/contract, but they usually want 1-2 paychecks from your new job before the loan can get through underwriting. This was a standard deal before "subprime" loans existed, and, I presume the standard deal now that the subprime market has pretty much gone away. Maybe some want 6 months, but I think that if you shop around you will find somebody a little less draconic. That won't get you into the house before you start, but it would be pretty close.

Of course, you might look into a "Doctor's Loan," if they still exist.....(do a search here for many previous threads about them.) I have no experience/knowledge about these types of loans, so I can't offere any help/suggestions about them.

 

[The White Coat Investor]

How big of a mortgage are you looking for? Perhaps if they won't lend you that much there is a reason?

Come up with 20% down and you're much more likely to get what you want. I would try to qualify off your current income combined with your spouse's current income. If that isn't enough to eke in under the requirements, perhaps you're buying a little too much house? I couldn't believe how big of a mortgage I qualified for. If I would have taken one that big I wouldn't have had any money to do anything else with. Things are a little tighter now, but the principle is the same.

Good luck. There are worse things than renting for a few months and checking the area out to make sure the job is stable and you like the area before you commit to buy.

Edit: I just went back and read your post again and realized your spouse isn't working anymore. Yup, you've got a problem. I do think the best solution is to rent for a few months in your new location. You'll then know exactly what neighborhood you want to live in, you'll know you like the job, and you'll have 20% to put down, which will give you a MUCH better rate on the mortgage.

 

[2ez]

I agree with the 20% (min) down idea. You say you have decent credit....but what do you consider decent ? How are your reserves ?


There are lenders still offering Stated Mortgages...but the rules are a little more stringent and this is why I asked about your credit score ?

Have you considered FHA since you are going to owner occupy ?

I suggest going to each lenders website.....and check the REO depts....to see about any short sales.....or bank owned property.

 

[nontrdgsbuiucmd]

I've owned a home for many yrs and done a handful of refinances + relocated to a new house once.

Last refi I did on this house (1+ yrs ago when lending rules were different) was done based on an offer letter for a new job. The bank accepted this as it was in the same "industry" as my previous position, which I'd been in for several years, just like you.

I did this because I did not have several months' pay stubs yet, as it was a new job. Salary was higher at new job than old one, which is why I wanted to do this, and the bank accepted it.

I'd speak with mortgage lenders now; yes 20% down will put them at lower risk, 25% is better than that, 30% is better than that, etc. Presuming you have decent credit and 10-15% down, your chances of this working out are good, depending on your market. I've generally had more luck with mortgage brokers than banks, and typically found these through friends' referrals.

 

[2ez]

I agree with above...

Brokers usually have access to more products and different lenders which means more borrowing options.

And yes....if you are pursuing the same type of job as previous....they will consider this during the process. I have heard cases where someone was not approved by the automated system.......but passed through manually. A good broker is ideal.


But be careful, my good friend (a broker) had his door knocked down at midnight by the Feds for Mortgage fraud. They are checking all mortgages approved by his office now.

 

[AllDoctorLoans]

There are still SPECIAL loan programs for either graduating Medical Students, current Residents and Fellows, as well as doctors.

Due to the declining real estate market in many parts of the country there are limitations on the Maximum Loan-to-Value. If the area is Not Classified as a Declining Market, you could qualify for 100% financing.

They will do loans based upon a hire letter for new residents, fellows and 4th year residents and any other doctor changing employment. They do not count student loans for residents.

The program is also available to Doctors who are now working and paying on their student loans. These payments will be considered when qualifying for a home loan.

If you are a new resident or a resident now interested in purchasing or refinancing a home, DO NOT add new debts such as a auto loan.

Check the accuracy of your credit history at the truly free website

WWW.ANNUALCREDITREPORT.COM

Get your credit score. That does cost extra, but you need to know what it is. You need a credit score for the 100% loans of 700 or better.

There are two loan limits $417,000 and $1,000,000.

The rates and programs are significantly different for each level.

Besure that your Student Loans are or will be in the deferred status on your credit report. If they are not, you need to work on that with your lenders and the credit agencies.

 

[doctorloans]

Hi MDK2000,

The doctor's loan definitely still exists, and in my opinion would be the best bet for you given your circumstances. I don't think you should have any problems at all. Here is a one of the FAQ questions from our site:

Q: Can I get the doctor loan as an M4 before I start residency?
A: It is possible, but you will have to provide your signed residency contract before you close. You will usually receive your contract 3-4 weeks after match day. You must also have enough funds to cover the mortgage payments until you start receiving income from residency. This may differ among various lenders, so it is always recommended you ask your loan officer before making plans.

Of course you should shop around, but there are a few different lenders that still offer this. PM me if you need more info...

Thanks & good luck!

 

[dragonfly99]

Can one get a better mortgage rate if the credit score is high (say 854)?
Or is there just one generic rate for all the "doctor loans" offered by these types of companies?