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Posted by Jeff Strickland on November 11, 2005, 7:48 pm
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> Grover C. McCoury III wrote:
>
>> With a true "no-doc" loan, the lender is qualifying you based
>> upon your
>> credit report alone - you do not have to show an employer nor do you
>> have to
>> show assets/income on the loan application. Therefore, all information
>> on
>> your credit report, including any existing mortgages, will be
>> considered
>> during the qualification process. "No-doc" loans are
>> generally only
>> available to those with excellent credit scores/reports.
>
>> Your options are as follows:
>
>> 1) Apply for the new home as an investment property - must qualify to
>> carry
>> both mortgages
>> 2) Apply for the new home as a primary residence and rent the one that
>> you
>> currently own showing a lease/first rent payment as evidence - *some*
>> of the
>> rental income will be used to offset your current mortgage payment
>> 3) Apply for the new home as a primary residence and sell the one that
>> you
>> currently own before closing on the new home
>> 4) Apply for the new home as a primary residence, get a
>> construction/permanent loan and agree to sell your primary residence
>> before
>> you take possession of the newly constructed home. You must deliver a
>> HUD1(settlement) statement before modification from a construction to
>> permanent mortgage (i.e., when house is completed).
>
> Thank you for suggestions, Grover.
>
> Let me re-phrase that: you are saying that no-doc mortgage IS NOT an
> option for me because the first mortgage will, obviously, show in my
> credit report. Is that correct?
>
> Also, this has been mentioned couple times here, but what is considered a
> good credit score in relation to no-doc mortgage application? I mean, it
> can go all the way up to mid 800s. Is 800+ what gets considered?
>
> And, lastly, if no-doc is not the option, applying for the new one as an
> investment property seems the way to go. Is the application process any
> different? I guess, I would have to say that in WILL NOT become my primary
> residence then. What would happen if I actually move in?
>
> Thanks!
>
> Cheers!
> D.
I don't understand your aversion to a No Doc Loan. It sounds to me like the
perfect solution for you. Get a 5/1 Interest Only with no prepayment
penalty. This gives you a 5-year fixed rate interest only loan that should
be more than managable even with your other mortgage. Once you move in, you
make double payments for a few months while your current house is for sale
and in escrow. Once that house is gone, then you have one payment, and some
extra cash flow that you can use for improvements -- landscaping and such.
When you get your house all worked into shape in a year or so, you will have
gained equity that will take your Loan To Value from somewhere in the range
of 80% down to 50% or 60% -- depending on market conditions in your area.
You don't need any of the cash out of the house, just a simple rate-and-term
refinance.
On a No Doc, the loan officer fills in your name on the form and sends it
in. It's much simpler than the Full Doc loan that most people get. To be
sure, the No Doc might come with a bit more interest, but as I outlined
above, you're gonna refi out of it in a year or so, so the interest isn't a
big deal, and it is required to avoid some other discomfort that you don't
want to deal with. While the No Doc has some short-term costs (higher
interest rate by a fraction of a percent), it also has huge benefits to your
personal situation.
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