Just found my dream home/offer accepted, need lending ASAP and have important questions, you're my main resource

Non-investing personal finance issues including insurance, credit, real estate, taxes, employment and legal issues such as trusts and wills.
Topic Author
TheBogleWay
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Re: Just found my dream home/offer accepted, need lending ASAP and have important questions, you're my main resource

Post by TheBogleWay »

000 wrote: Sun Aug 30, 2020 4:54 pm
Good. Feel free to post back here if you can't find how to do it.
I found it! Done. So tomorrow morning, I'll call them, and basically ask a rep to help me sell stocks, prioritizing any with a loss first and then the ones with the lowest gains yet over 1 year next. Then in a few weeks I probably change it back to what it was, right?

Thanks for your help. I'm getting nervous about finding the best lender right now. I guess the part that is making me nervous is I don't quite understand the point system and paying more for a lower interest rate, as in I'm unsure how to tell if it's worth it. I'm also a bit unsure how to negotiate lower points between different lenders. The interest rate seems easy to understand, it's just a percentage, but I guess the point system is the one I'm still learning.
000
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Re: Just found my dream home/offer accepted, need lending ASAP and have important questions, you're my main resource

Post by 000 »

TheBogleWay wrote: Sun Aug 30, 2020 5:02 pm
000 wrote: Sun Aug 30, 2020 4:54 pm
Good. Feel free to post back here if you can't find how to do it.
I found it! Done. So tomorrow morning, I'll call them, and basically ask a rep to help me sell stocks, prioritizing any with a loss first and then the ones with the lowest gains yet over 1 year next. Then in a few weeks I probably change it back to what it was, right?
I have always done all my sell transactions online myself. With SpecID enabled you should be able to see (it may have already taken effect, but I would hope at the latest you will be able to see tomorrow morning) the specific tax lots and the amount of gain/loss per lot. You can find this under Cost Basis >> Unrealized Gains. Then you can pick whichever lots you want to sell. If SpecID is selected, the trade window will prompt you to pick lots while submitting the sell order.

If you call for a broker-assisted trade, Vanguard will charge you :greedy
Last edited by 000 on Sun Aug 30, 2020 5:08 pm, edited 1 time in total.
000
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Re: Just found my dream home/offer accepted, need lending ASAP and have important questions, you're my main resource

Post by 000 »

Another thing to consider is how soon you need the down payment money. You may want to think about having Vanguard wire the money to your bank instead of using ACH. I've never done this before, maybe others know the best/fastest way to actually move the money from the stock sales.
Topic Author
TheBogleWay
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Re: Just found my dream home/offer accepted, need lending ASAP and have important questions, you're my main resource

Post by TheBogleWay »

Tingting1013 wrote: Sun Aug 30, 2020 5:02 pm
You can afford it comfortably if your take-home is $23k per month. But here’s the disconnect— if that is true there is no way your gross income is only $340k. Whatever calculator you are using to come up with that number is wrong.

Your actual gross income to generate $23k monthly after tax is likely $400k to $500k. Which is fine, but you seem to be anchored on $340k as the “conservative” scenario.

If your gross income actually dropped to $340k your after tax take home would be nowhere near $23k/month. You would basically not have any of the $10k leftover money that is giving you so much comfort. And so in your conservative scenario the math breaks. You can’t afford the house.

Also, the fact that two adults with no kids are spending $7k/month excluding housing is kind of ridiculous. I live in San Francisco with two kids and we don’t spend that much.
With $340,000 income per year, the effective tax rate according to calculators for my state right now (remember each state is different) is 22.96%. This is somewhere around $21k/month takehome, but it's more if you factor in 401k. Now, you don't "take home" 401k, but it goes into investments. Given that I have a large surplus of income compared to cost of living, my spare money also goes into investments, so you count 401k as new investments, call it $23k/month.

Last year, we actually took home a combined $600k before tax, and the year before $500k. I have enough in investments to essentially pay off this house. Even with this house, I literally pocket six figures every single year. I can absolutely afford this house, and I can afford this house plus another house if needed. It falls within the rule of thumb for housing costs, and that's not even factoring in the fact that we have a high income so the rule of thumb is even better for us.

Regarding your criticism of our $70k cost of living excluding house, I don't care if you think it's ridiculous nor is it worth anybodies time for you to post that opinion here. For a couple that made over half a million last year in income, and makes six figures from interest annually, I think we can swing $70k/year cost of living. If you need to know, my cost of living is so high because I send money to needy people and family members. Without that it's about $50k/year excluding housing.

Now, you're confused, and I'd like to ask you to stop posting in my thread as you're not helping whatsoever and you don't have a strong understanding of this topic.
Last edited by TheBogleWay on Sun Aug 30, 2020 5:14 pm, edited 1 time in total.
Topic Author
TheBogleWay
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Re: Just found my dream home/offer accepted, need lending ASAP and have important questions, you're my main resource

Post by TheBogleWay »

000 wrote: Sun Aug 30, 2020 5:06 pm
TheBogleWay wrote: Sun Aug 30, 2020 5:02 pm
000 wrote: Sun Aug 30, 2020 4:54 pm
Good. Feel free to post back here if you can't find how to do it.
I found it! Done. So tomorrow morning, I'll call them, and basically ask a rep to help me sell stocks, prioritizing any with a loss first and then the ones with the lowest gains yet over 1 year next. Then in a few weeks I probably change it back to what it was, right?
I have always done all my sell transactions online myself. With SpecID enabled you should be able to see (it may have already taken effect, but I would hope at the latest you will be able to see tomorrow morning) the specific tax lots and the amount of gain/loss per lot. You can find this under Cost Basis >> Unrealized Gains. Then you can pick whichever lots you want to sell. If SpecID is selected, the trade window will prompt you to pick lots while submitting the sell order.

If you call for a broker-assisted trade, Vanguard will charge you :greedy
Awesome. I think I understand a bit, but I don't have the confidence to comfortably do it the first time my own. Do you have any idea what they'd charge to help me with this?

Hopefully it's not too high...
onourway
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Re: Just found my dream home/offer accepted, need lending ASAP and have important questions, you're my main resource

Post by onourway »

TheBogleWay wrote: Sun Aug 30, 2020 5:02 pm Thanks for your help. I'm getting nervous about finding the best lender right now. I guess the part that is making me nervous is I don't quite understand the point system and paying more for a lower interest rate, as in I'm unsure how to tell if it's worth it. I'm also a bit unsure how to negotiate lower points between different lenders. The interest rate seems easy to understand, it's just a percentage, but I guess the point system is the one I'm still learning.
Points are quite simple - you bring additional cash to closing in exchange for a lower interest rate. The calculation is simply how much that lower rate reduces your payment divided by the extra cash paid up front with your answer expressed in a number of months to payoff. People here don’t generally seem a fan of this because you are paying a non-refundable lump sum. If you need to move before the payoff period, or want to refinance, etc. that money is lost.

Additionally, I know you don’t want to hear about whether you can afford this house, but the disconnect between what you think you bring home and what you actually bring home seems enormous, and is a big red flag when buying something like this on the outer edge of affordability.
Topic Author
TheBogleWay
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Re: Just found my dream home/offer accepted, need lending ASAP and have important questions, you're my main resource

Post by TheBogleWay »

onourway wrote: Sun Aug 30, 2020 5:14 pm
TheBogleWay wrote: Sun Aug 30, 2020 5:02 pm Thanks for your help. I'm getting nervous about finding the best lender right now. I guess the part that is making me nervous is I don't quite understand the point system and paying more for a lower interest rate, as in I'm unsure how to tell if it's worth it. I'm also a bit unsure how to negotiate lower points between different lenders. The interest rate seems easy to understand, it's just a percentage, but I guess the point system is the one I'm still learning.
Points are quite simple - you bring additional cash to closing in exchange for a lower interest rate. The calculation is simply how much that lower rate reduces your payment divided by the extra cash paid up front with your answer expressed in a number of months to payoff. People here don’t generally seem a fan of this because you are paying a non-refundable lump sum. If you need to move before the payoff period, or want to refinance, etc. that money is lost.

Additionally, I know you don’t want to hear about whether you can afford this house, but the disconnect between what you think you bring home and what you actually bring home seems enormous, and is a big red flag when buying something like this on the outer edge of affordability.
Then help me understand what I'm missing. Last year we made $600k, I'm saying $340k to be conservative plus that will be closer to average if she takes years off.

I'm using online current calculators to calculate effective tax rates for married filing status, given that my state has no state income tax, it's showing me that I'm correct that I have about $23,000/month brought to me every month after taxes. Now, a few grand of that goes into 401k but that's ok because I basically don't spend another $7k of that $23k and that $7k also goes into investments.

So, can you tell me what I'm missing?


Let me put this another way. This house only increases my cost of living by $2,500/month. I've made $340k combined before and we pocket over $10,000/mo after taxes. Sure, this reduces that to about $7,500/mo after taxes that goes towards our investments, but then again we're finally gaining equity so in essence that evens out some of the loss. Help me understand what we could be missing if you really think it's off, despite me using online calculators.
Last edited by TheBogleWay on Sun Aug 30, 2020 5:19 pm, edited 1 time in total.
Bobby206
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Re: Just found my dream home/offer accepted, need lending ASAP and have important questions, you're my main resource

Post by Bobby206 »

I would suggest picking two mortgage brokers (not 10) to compare. You can look online to know roughly where you will end up. Don't waste a bunch of your time and other's time. Pick a couple reputable ones. Since you picked a big bank first (B of A) maybe choose an independent broker or local bank/CU second. I think you'll get distracted comparing all these different loan options. I don't expect you will find huge differences but you will waste a lot of time. You might start applying with two and see which is easiest and then stick with them. You also might ask your Realtor for a mortgage referral as that person will want to do right by your Realtor.

I also think home ownership will be more expensive than you expect. Even brand new houses have repairs and costs that you don't anticipate. I am not saying you can't afford it but you might feel a little house poor. Might need to cut some other expenses like travel, cars, etc.... Just a thought.

Good luck.
onourway
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Re: Just found my dream home/offer accepted, need lending ASAP and have important questions, you're my main resource

Post by onourway »

TheBogleWay wrote: Sun Aug 30, 2020 5:17 pm Help me understand what we could be missing if you really think it's off, despite me using online calculators.
That is the problem right there. You should know by means of a careful accounting of your income vs. expenditures, and know exactly what is going to be cut in order to make up the difference. Not relying on off-the-cuff numbers placed into an online calculator.

There will also be considerably more ongoing expense than the cost of the mortgage.
Topic Author
TheBogleWay
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Re: Just found my dream home/offer accepted, need lending ASAP and have important questions, you're my main resource

Post by TheBogleWay »

onourway wrote: Sun Aug 30, 2020 5:24 pm
TheBogleWay wrote: Sun Aug 30, 2020 5:17 pm Help me understand what we could be missing if you really think it's off, despite me using online calculators.
That is the problem right there. You should know by means of a careful accounting of your income vs. expenditures, and know exactly what is going to be cut in order to make up the difference. Not relying on off-the-cuff numbers placed into an online calculator.

There will also be considerably more ongoing expense than the cost of the mortgage.
There's two arguments being made in this thread.

1. One person (the ticktick poster) saying I can't afford this house, which is blatantly wrong and I'm sure most would agree.

2. People saying I don't understand what my take-home pay is. I'm literally using the most up to date calculators which agree with me, every month I have about $22k ish per month. Now, some of that is going into my 401k but that's fine because I don't spend anywhere near 22k/month anyway, so a big chunk goes into stock investments anyway. So far, nobody has been able to explain what they mean. History, as well as calculators point out with specific numbers how I'm right. My state doesn't have state income tax, maybe they assumed it does.

So... can you tell me what you're saying? If you're saying that my cost of living might be higher than I expect, that's fine. Even still, with this house, I'm still pocketing over $100,000/year towards investments, and I don't see the logic in shifting the threads focus to that. Most people don't make $100,000/year, if I can have this house and still save over $100,000/year, I am certainly doing ok, especially at my age with no other debt, an investment portfolio over one million, I'm doing plenty fine and I see this as less than helpful towards my questions asked. Please, if I'm wrong, use some detail or logic I understand to tell me why we're derailing the thread.
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ResearchMed
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Re: Just found my dream home/offer accepted, need lending ASAP and have important questions, you're my main resource

Post by ResearchMed »

.
Several REALLY important concerns have been raised above.

First is that 30-day timeline if you weren't already pre-approved (and preferably, for next time, not just pre-qualified).
Did you make an offer with *both* financing and inspection contingencies? (I hope so.)

Question: Were you or were you not "pre-approved"? You seem to have said your weren't, but also mention a lender who did pre-approve you...??
TheBogleWay wrote: Sun Aug 30, 2020 2:17 am ...I wasn't prepared to make an offer, wasn't pre-approved (again was casually looking)...
TheBogleWay wrote: Sun Aug 30, 2020 2:17 am ...I'll likely not use the lender that pre approved me...
[I really do understand finding THE dream house, even if most people warn against ever "falling in love with a house". We had been looking for almost 4 years. There was always something that DH didn't like. Then one day, he said he "might" stop off at a particularly intriguing Open House en route to the office (yes, on a Sunday afternoon; he likes his work). Bottom line, he called me at the end of the Open House, he "loved the house", and when I asked, "So, what do you want to do?", he replied, "Buy it!". They were taking "best offer" at 7pm that evening. At about 10pm, we got the call that the house was ours. :happy
I had kept getting the pre-approval up-dated every 6 months or so, and it was an easy qualification anyway, so we had that pretty well covered, although the final approval wasn't yet a "done deal", of course.
Importantly, we both still absolutely LOVE the house, almost 20 years later. It was indeed "THE house of his dreams," and later that same day, I fell in love with it too!
So it can happen.]

OP: You have a very tight time schedule. What is the "Wednesday" deadline about, to get a lender? Is that your financing contingency deadline? We've usually had something like 7 days for financing, and about 10 for inspection, but that may differ elsewhere in the country.

I'll assume that the costs and your income do "work out", but DO double check that, and also double check ALL likely carrying costs (insurance, utilities, upkeep, routine maintenance plus the occasional biggie (e.g., new roof), plus there is almost always *something* that crops up no matter how good the inspection, and sometimes several thing later - or sooner - crop up. "It goes with the territory" of owning a house. That is a big house for your first, so try *very* hard not to underestimate the assorted cost.
Plan on a good size pot o' money for those extra things early on.
(That price may/may not be sky high, depending upon where you live. Where we are, a large and nice 3-bedroom *condo* in a renovated walkup 3-family in a good neighborhood/school district can easily cost between $1m and 1.5m (which still astonishes us).

I would STRONGLY urge you to consider using a mortgage broker, given the timing, even though I've never recommended that before.
You probably want a reasonably low interest rate with LOW or NO closing costs (or roll them into the loan in this case) and NO or minimal/short-lived prepayment penalty. *After* you've closed and caught your breath, you'll have the time to search around to refinance for a lower rate if possible, which is mostly what matters if you'll be in the house long-term.
Even moderate closing costs will average out okay when considered for the number of years you live there. If you roll the closing costs into a loan that you might not keep long - if you later find a better rate - then you aren't actually paying all of the costs up front, which could be important in your situation. But just get a reasonable mortgage locked in asap, and yes, LOCK that rate if at all possible. With a jumbo, even small percentage fractions can add up, month after month...
And consider applying with TWO lenders, especially given the tight schedule, in case one has some sort of unexpected delay. This will add a bit to the closing costs, e.g., more than one application fee, more than one appraisal, and such. Just do it, to be safe -- so you "get" the house and importantly do NOT lose any of the earnest money! (This can also end up being helpful in terms of negotiating for a better rate prior to closing. We unexpectedly learned that when we checked with 3 lenders for this dream house, which we did so we would NOT risk the financing falling through, etc.).
Or lock with one lender and not the other.
We also did the purchase in 30 days, and that was part of the reason we worked with more than one lender. We could not risk having the financing fall through, etc. (The sellers were diplomats re-posted overseas on short notice, and they wanted the sale completed before they got on that plane.)

And get a good inspection; do NOT skimp here. That "price is too good" feeling you mention is a bit worrisome. IS there something "wrong"?
==>> If you can't change the 30 day deadline now, then USE the inspection contingency time frame. That's usually a good "extra fail safe" protection. YOU get to decide what "inspection problems" are "more than you want to deal with", etc., and not something(s) that you "only" want extra financial consideration for.

Yes, on Monday/tomorrow, *sell* whatever stocks will be needed for the full down payment plus assorted expenses (including moving, but also any new furniture 'needs', although much can wait) or quickly needed fixes, expected or not. These can add up.
Just make sure that you don't incur unnecessary costs (e.g., no *short* term gains, only LONG term gains, and the lower the total of those now, the better).

Are you working with a real estate agent? Or a real estate attorney for the closing?
Ditto for all subsequent documents, given this is a first purchase (and also given the timing now).

And remember: The enemy of a good plan is trying for a perfect plan...
You want "a good plan" here.

I hope this all works out and you are as happy in your new home as we have been in ours. :happy

RM
This signature is a placebo. You are in the control group.
onourway
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Re: Just found my dream home/offer accepted, need lending ASAP and have important questions, you're my main resource

Post by onourway »

TheBogleWay wrote: Sun Aug 30, 2020 5:29 pm
onourway wrote: Sun Aug 30, 2020 5:24 pm
TheBogleWay wrote: Sun Aug 30, 2020 5:17 pm Help me understand what we could be missing if you really think it's off, despite me using online calculators.
That is the problem right there. You should know by means of a careful accounting of your income vs. expenditures, and know exactly what is going to be cut in order to make up the difference. Not relying on off-the-cuff numbers placed into an online calculator.

There will also be considerably more ongoing expense than the cost of the mortgage.
There's two arguments being made in this thread.

1. One person (the ticktick poster) saying I can't afford this house, which is blatantly wrong and I'm sure most would agree.

2. People saying I don't understand what my take-home pay is. I'm literally using the most up to date calculators which agree with me, every month I have about $22k ish per month. Now, some of that is going into my 401k but that's fine because I don't spend anywhere near 22k/month anyway, so a big chunk goes into stock investments anyway. So far, nobody has been able to explain what they mean. History, as well as calculators point out with specific numbers how I'm right. My state doesn't have state income tax, maybe they assumed it does.

So... can you tell me what you're saying? If you're saying that my cost of living might be higher than I expect, that's fine. Even still, with this house, I'm still pocketing over $100,000/year towards investments, and I don't see the logic in shifting the threads focus to that. Most people don't make $100,000/year, if I can have this house and still save over $100,000/year, I am certainly doing ok, especially at my age with no other debt, an investment portfolio over one million, I'm doing plenty fine and I see this as less than helpful towards my questions asked. Please, if I'm wrong, use some detail or logic I understand to tell me why we're derailing the thread.
I do not know how to state it any more clearly. An online calculator is not the same thing as knowing what your real income vs. expenditures are.

FWIW we also save about $100k/year on about half your income. There appears to be a huge amount of variable spending in your budget that you can’t quantify or account for. If your income drops back to ~$340k (as you yourself stated) and you haven’t dealt with this, things could become uncomfortable.
Last edited by onourway on Sun Aug 30, 2020 5:36 pm, edited 1 time in total.
000
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Re: Just found my dream home/offer accepted, need lending ASAP and have important questions, you're my main resource

Post by 000 »

TheBogleWay wrote: Sun Aug 30, 2020 5:12 pm
000 wrote: Sun Aug 30, 2020 5:06 pm
TheBogleWay wrote: Sun Aug 30, 2020 5:02 pm
000 wrote: Sun Aug 30, 2020 4:54 pm
Good. Feel free to post back here if you can't find how to do it.
I found it! Done. So tomorrow morning, I'll call them, and basically ask a rep to help me sell stocks, prioritizing any with a loss first and then the ones with the lowest gains yet over 1 year next. Then in a few weeks I probably change it back to what it was, right?
I have always done all my sell transactions online myself. With SpecID enabled you should be able to see (it may have already taken effect, but I would hope at the latest you will be able to see tomorrow morning) the specific tax lots and the amount of gain/loss per lot. You can find this under Cost Basis >> Unrealized Gains. Then you can pick whichever lots you want to sell. If SpecID is selected, the trade window will prompt you to pick lots while submitting the sell order.

If you call for a broker-assisted trade, Vanguard will charge you :greedy
Awesome. I think I understand a bit, but I don't have the confidence to comfortably do it the first time my own. Do you have any idea what they'd charge to help me with this?

Hopefully it's not too high...
https://investor.vanguard.com/investing ... tual-funds

My info may have been outdated. Maybe phone trades are free now? Anyway, you can look through the tabs on that page.
Tingting1013
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Re: Just found my dream home/offer accepted, need lending ASAP and have important questions, you're my main resource

Post by Tingting1013 »

$340k MFJ income
-$35k 401k
-$5k other above the line deductions for health insurance premiums, etc
-$25k standard deduction
= $275k taxable income

Which incurs $54k Federal income tax and $15-$20k payroll tax (depending on how the income is split between the two of you)

So your $340k income is now $200k takehome after taxes and 401k savings.

That’s $16,666 per month in take home.

You spend $7k on expenses
You spend another $6k on the house. And you should probably earmark another $1k per month for deferred maintenance.

Which leaves you with $2,666 per month.
Topic Author
TheBogleWay
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Re: Just found my dream home/offer accepted, need lending ASAP and have important questions, you're my main resource

Post by TheBogleWay »

ResearchMed wrote: Sun Aug 30, 2020 5:31 pm .
Several REALLY important concerns have been raised above.

First is that 30-day timeline if you weren't already pre-approved (and preferably, for next time, not just pre-qualified).
Did you make an offer with *both* financing and inspection contingencies? (I hope so.)

Question: Were you or were you not "pre-approved"? You seem to have said your weren't, but also mention a lender who did pre-approve you...??
So... lol. I agree, I wish it was more than 30 days but I get the impression I can get it done in 30, just have to move fast and have to use a fast moving lender. I wasn't pre-approved, but it only took me about 3 hours to get pre-approved with a well known reputable lender in my area. So I got pre-approved quickly, and made an offer same day, using an experienced RE agent. Also yes, I am appraising the house and getting it inspected, both of those contingencies accepted.
ResearchMed wrote: Sun Aug 30, 2020 5:31 pm OP: You have a very tight time schedule. What is the "Wednesday" deadline about, to get a lender? Is that your financing contingency deadline? We've usually had something like 7 days for financing, and about 10 for inspection, but that may differ elsewhere in the country.
Supposedly I have 3 business days from the pre-approval to find a new lender if I want, and that leads to Wednesday. So I do have one lender but I didn't shop around, I simply got pre-approved asap, and now I'm going to find the best one.

ResearchMed wrote: Sun Aug 30, 2020 5:31 pm I'll assume that the costs and your income do "work out", but DO double check that, and also double check ALL likely carrying costs (insurance, utilities, upkeep, routine maintenance plus the occasional biggie (e.g., new roof), plus there is almost always *something* that crops up no matter how good the inspection, and sometimes several thing later - or sooner - crop up. "It goes with the territory" of owning a house. That is a big house for your first, so try *very* hard not to underestimate the assorted cost.
Plan on a good size pot o' money for those extra things early on.
(That price may/may not be sky high, depending upon where you live. Where we are, a large and nice 3-bedroom *condo* in a renovated walkup 3-family in a good neighborhood/school district can easily cost between $1m and 1.5m (which still astonishes us).

I would STRONGLY urge you to consider using a mortgage broker, given the timing, even though I've never recommended that before.
You probably want a reasonably low interest rate with LOW or NO closing costs (or roll them into the loan in this case) and NO or minimal/short-lived prepayment penalty. *After* you've closed and caught your breath, you'll have the time to search around to refinance for a lower rate if possible, which is mostly what matters if you'll be in the house long-term.
Even moderate closing costs will average out okay when considered for the number of years you live there. If you roll the closing costs into a loan that you might not keep long - if you later find a better rate - then you aren't actually paying all of the costs up front, which could be important in your situation. But just get a reasonable mortgage locked in asap, and yes, LOCK that rate if at all possible. With a jumbo, even small percentage fractions can add up, month after month...
And consider applying with TWO lenders, especially given the tight schedule, in case one has some sort of unexpected delay. This will add a bit to the closing costs, e.g., more than one application fee, more than one appraisal, and such. Just do it, to be safe -- so you "get" the house and importantly do NOT lose any of the earnest money! (This can also end up being helpful in terms of negotiating for a better rate prior to closing. We unexpectedly learned that when we checked with 3 lenders for this dream house, which we did so we would NOT risk the financing falling through, etc.).
Or lock with one lender and not the other.
We also did the purchase in 30 days, and that was part of the reason we worked with more than one lender. We could not risk having the financing fall through, etc. (The sellers were diplomats re-posted overseas on short notice, and they wanted the sale completed before they got on that plane.)

And get a good inspection; do NOT skimp here. That "price is too good" feeling you mention is a bit worrisome. IS there something "wrong"?
==>> If you can't change the 30 day deadline now, then USE the inspection contingency time frame. That's usually a good "extra fail safe" protection. YOU get to decide what "inspection problems" are "more than you want to deal with", etc., and not something(s) that you "only" want extra financial consideration for.

Yes, on Monday/tomorrow, *sell* whatever stocks will be needed for the full down payment plus assorted expenses (including moving, but also any new furniture 'needs', although much can wait) or quickly needed fixes, expected or not. These can add up.
Just make sure that you don't incur unnecessary costs (e.g., no *short* term gains, only LONG term gains, and the lower the total of those now, the better).

Are you working with a real estate agent? Or a real estate attorney for the closing?
Ditto for all subsequent documents, given this is a first purchase (and also given the timing now).

And remember: The enemy of a good plan is trying for a perfect plan...
You want "a good plan" here.

I hope this all works out and you are as happy in your new home as we have been in ours. :happy

RM
Thanks for your quality advice! Noted all of it. So I can basically continue with two lenders as if I was going through it all, and cancel one last minute without any penalty? Regarding my impression of it being underpriced, the RE agent doesn't think so, I'm likely wrong and it is comparable to other houses, it's just flawless for me. My ideal design, a view, a very sentimental location for reasons I won't get into, etc. We love it.
Topic Author
TheBogleWay
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Re: Just found my dream home/offer accepted, need lending ASAP and have important questions, you're my main resource

Post by TheBogleWay »

Tingting1013 wrote: Sun Aug 30, 2020 5:38 pm $340k MFJ income
-$35k 401k
-$5k other above the line deductions for health insurance premiums, etc
-$25k standard deduction
= $275k taxable income

Which incurs $54k Federal income tax and $15-$20k payroll tax (depending on how the income is split between the two of you)

So your $340k income is now $200k takehome after taxes and 401k savings.

That’s $16,666 per month in take home.

You spend $7k on expenses
You spend another $6k on the house. And you should probably earmark another $1k per month for deferred maintenance.

Which leaves you with $2,666 per month.
Again, since I do have a surprlus of income and spare money goes into income, it's not a cashflow issue. Therefore, all the spare money goes into investments. For that reason, you realize that 35k into a 401k is basically just more money going into investments. If you're adding an additional $35k into your 401k annually, that's all the more reason to say you're doing good financially and can afford something. You're using generalized numbers, for my state, the effective tax rate means we're taking home about $21k/month and adding a few thousand per month to our 401k as well. I've made this income and the effective tax rate is accurate, so unless somebody is sneaking money into my account, I think your generalized numbers don't apply to my state and location. Your quote of saying I can't afford this home is just simply wrong.
Tingting1013
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Re: Just found my dream home/offer accepted, need lending ASAP and have important questions, you're my main resource

Post by Tingting1013 »

TheBogleWay wrote: Sun Aug 30, 2020 5:43 pm
Tingting1013 wrote: Sun Aug 30, 2020 5:38 pm $340k MFJ income
-$35k 401k
-$5k other above the line deductions for health insurance premiums, etc
-$25k standard deduction
= $275k taxable income

Which incurs $54k Federal income tax and $15-$20k payroll tax (depending on how the income is split between the two of you)

So your $340k income is now $200k takehome after taxes and 401k savings.

That’s $16,666 per month in take home.

You spend $7k on expenses
You spend another $6k on the house. And you should probably earmark another $1k per month for deferred maintenance.

Which leaves you with $2,666 per month.
Again, since I do have a surprlus of income and spare money goes into income, it's not a cashflow issue. Therefore, all the spare money goes into investments. For that reason, you realize that 35k into a 401k is basically just more money going into investments. If you're adding an additional $35k into your 401k annually, that's all the more reason to say you're doing good financially and can afford something. You're using generalized numbers, for my state, the effective tax rate means we're taking home about $21k/month and adding a few thousand per month to our 401k as well. I've made this income and the effective tax rate is accurate, so unless somebody is sneaking money into my account, I think your generalized numbers don't apply to my state and location. Your quote of saying I can't afford this home is just simply wrong.
You really should learn how taxes work (hint, no one uses the “effective rate” for anything).

With a $1.2M mortgage and property taxes >$10k with no state income tax, you are going to be itemizing deductions for the first time. Which opens up lots of tax savings strategies for you, but only if you understand the tax math.
Topic Author
TheBogleWay
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Re: Just found my dream home/offer accepted, need lending ASAP and have important questions, you're my main resource

Post by TheBogleWay »

Tingting1013 wrote: Sun Aug 30, 2020 5:48 pm
You really should learn how taxes work (hint, no one uses the “effective rate” for anything).

With a $1.2M mortgage and property taxes >$10k with no state income tax, you are going to be itemizing deductions for the first time. Which opens up lots of tax savings strategies for you, but only if you understand the tax math.
So... in your scenario, I can have this home, and I would still add:

$32,000 per year in investments
$35,000 per year in 401k contributions
$35,000 per year in equity in the home (estimated)

Amounting to $102,000 in investments added annually.

In addition to an existing ~$1,000,000 investment portfolio at age ~30, earning an estimated $80,000/year in interest.

Amounting to owning this home and growing my net worth by an exponentially increasing $182,000 every single year using your math.. while owning this home...

and your comment is that I can't afford this? You think you're right? I think you're causing unnecessary stress and misleading me.

Though, if my use of the effective tax rate is wrong, I'll kick myself and take my loss on the debate on that one. I'm surprised, I thought these calculators would accurately tell me what my take home pay is. After all, they do narrow it down by state and seem to account for the details. They were provided by mega-institutions and imply they're accurate. But... if you're saying these mega bank provided calculators are wrong, well... that wouldn't be good. Feel free to educate me more.
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ResearchMed
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Re: Just found my dream home/offer accepted, need lending ASAP and have important questions, you're my main resource

Post by ResearchMed »

TheBogleWay wrote: Sun Aug 30, 2020 5:38 pm So... lol. I agree, I wish it was more than 30 days but I get the impression I can get it done in 30, just have to move fast and have to use a fast moving lender. I wasn't pre-approved, but it only took me about 3 hours to get pre-approved with a well known reputable lender in my area. So I got pre-approved quickly, and made an offer same day, using an experienced RE agent. Also yes, I am appraising the house and getting it inspected, both of those contingencies accepted.
Sounds good. But it seems that you got "pre-qualified", not really pre-approved, if such a short time.
Note that this may well not make any difference at all at this point, but I'm mentioning it to you for the future (in case this doesn't work out somehow, or someday in the future you are looking to buy your dream "retirement home" or such!).

Pre-approval usually (?) means that the lender has gone ahead and checked your income history (pay stubs, bank records, etc.) and may even have verified employment. Pre-qualifying has, in our experience been more like taking on faith all the numbers that you provide, but not *yet* checking/verifying all of it (or maybe not any of it). Often they both lead to the same place, a nicely completed mortgage and a new house :happy
But the "pre-approval", perhaps complete with letter from lender, could mean more to a seller who really wants to be sure that the buyer WILL get that mortgage, or trying to choose among similar bidders, etc. (In our case, the seller did not have much leeway at all, given the flight to the next diplomatic posting were already in hand when they listed the property. Yes, an unusual situation, but one we were able to take advantage of in several ways, including no need to sell a property, etc., and a few other specifics.)
TheBogleWay wrote: Sun Aug 30, 2020 5:38 pm Supposedly I have 3 business days from the pre-approval to find a new lender if I want, and that leads to Wednesday. So I do have one lender but I didn't shop around, I simply got pre-approved asap, and now I'm going to find the best one.
Okay... so that 3 day deadline is only to avoid not "wasting" money on some early fees or appraisal costs with the first lender.
Others may disagree, but if you have this deadline, and really want this house (and we are among what may be very few who do understand that), then you should plan to over-correct, and be willing to duplicate at least a few of the early expenses so you get a fast start with more than one lender. In that case, the "3 day deadline" is probably mostly meaningless, yes?

Put it this way, and especially for a house in the $1-1.5M range: If you somehow missed out on the house, and later found out that IF you had just spent maybe a couple of thousand more (at maximum, maybe much less, maybe several hundred to one thousand), would you be kicking yourself or what?
TheBogleWay wrote: Sun Aug 30, 2020 5:38 pm Thanks for your quality advice! Noted all of it. So I can basically continue with two lenders as if I was going through it all, and cancel one last minute without any penalty? Regarding my impression of it being underpriced, the RE agent doesn't think so, I'm likely wrong and it is comparable to other houses, it's just flawless for me. My ideal design, a view, a very sentimental location for reasons I won't get into, etc. We love it.
We did full applications with three lenders, one of them being that first one who had kept redoing the pre-approval (yes, we paid some modest fees each time, but really not much at all, not even in total; we hadn't yet gotten to any appraisal fees as it was all at that stage "anticipatory", etc.)
We then chose two others, pretty quickly, based upon competitive rates and also assumed closing times, etc.

Part way, we dropped one; the other two had better rates and better communication, etc.

And at the end, when it was "time to close", we told the Lender A (the first one, with the pre-approvals) that we had a better rate from someone else. Yes, he seemed annoyed, BUT... he also called us back promptly with "a better offer". We had truly not expected that (but now... we know more about how some of this works!). So we went back to Lender B, and told them that another lender had just matched them, and made it better, etc. Same drill: a bit annoyed, and immediately asked, "What rate/terms did they give you?" And B made it even "better yet"!
We chose B, with a few days to go, and were stunned when they called us again, unsolicited, to tell us they were able to get us another 1/4 percent lower.
(Yes, we have re-financed with them several times over the past almost 20 years, as rates went lower. The most recent time, when we told them what rate we had for a re-fi with a new lender, B said, quite frankly, that if we really good get that rate/those costs, to "grab it". So we did.)

Good luck and hope it works out for you!

BTW, regarding something in an earlier reply you just made, please do NOT expect some sort of 8% return on investments into the future. You cannot possibly predict this accurately, and it could even be a loss for several years running, and that means that the next gains would only get you back to the starting point.
Try to be ultra-conservative when guesstimating such things, to be safe. MUCH better a nice surprise later, than... possible disaster, okay?

RM
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Topic Author
TheBogleWay
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Re: Just found my dream home/offer accepted, need lending ASAP and have important questions, you're my main resource

Post by TheBogleWay »

ResearchMed wrote: Sun Aug 30, 2020 6:20 pm
Sounds good. But it seems that you got "pre-qualified", not really pre-approved, if such a short time.
Note that this may well not make any difference at all at this point, but I'm mentioning it to you for the future (in case this doesn't work out somehow, or someday in the future you are looking to buy your dream "retirement home" or such!).

Pre-approval usually (?) means that the lender has gone ahead and checked your income history (pay stubs, bank records, etc.) and may even have verified employment.
I was pre-approved, not pre-qualified. Just have a really fast working lender here with relationships, etc. But I appreciate you clarifying!
e5116
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Re: Just found my dream home/offer accepted, need lending ASAP and have important questions, you're my main resource

Post by e5116 »

You can use a wholesale mortgage broker as well. United Wholesale Mortgage (which announced 1.99% 30-year rates but definitely costs points, and no idea if they do jumbo loans), Guaranteed Rate, etc. They basically do the search for you and get wholesale rates that often aren't available. Worth the call. I went that route five years ago and was happy with the outcome and got great service (depends on your individual broker). I agree though that with a 30-day close, I'd go with the one that you think will close the deal, so good service is important.

As to whether paying points to get a lower rate is a good idea, nobody knows. Nobody knows what rates will do in the future or how long you'll stay in your house. Given you said you'll stay a long time and rates are currently low, I might suggest an emotional hedge to pay down like 1/8 -1/4 percentage, but probably wouldn't fork over cash for more than that. That way you can still feel you got a deal but not have to bring so much cash to the table/have an inflexible position.

Good luck!!
Bobby206
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Re: Just found my dream home/offer accepted, need lending ASAP and have important questions, you're my main resource

Post by Bobby206 »

TheBogleWay wrote: Sun Aug 30, 2020 6:01 pm
In addition to an existing ~$1,000,000 investment portfolio at age ~30, earning an estimated $80,000/year in interest.
That sounds a good investment. Is this your forecast for growth? You say "interest." Are you getting 8% interest? Sounds high, no!?

Also, you sound sort of defensive/aggressive. Maybe you are just excited!? Just remember anybody taking the time to comment is only trying to help you think about things that you might not while you are in blinded lust with this house. Plus, you acknowledge you don't have experience with buying a house. I have bought many houses and was recently in contract on another but knew loans are taking extra long right now so had a 45 day window so I wasn't running around crazy. You might ask the seller to push it back to 45 because 30 days, at least in my area, is very hard to do right now. Good luck to you friend.
Topic Author
TheBogleWay
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Re: Just found my dream home/offer accepted, need lending ASAP and have important questions, you're my main resource

Post by TheBogleWay »

e5116 wrote: Sun Aug 30, 2020 8:12 pm You can use a wholesale mortgage broker as well. United Wholesale Mortgage (which announced 1.99% 30-year rates but definitely costs points, and no idea if they do jumbo loans), Guaranteed Rate, etc. They basically do the search for you and get wholesale rates that often aren't available. Worth the call. I went that route five years ago and was happy with the outcome and got great service (depends on your individual broker). I agree though that with a 30-day close, I'd go with the one that you think will close the deal, so good service is important.

As to whether paying points to get a lower rate is a good idea, nobody knows. Nobody knows what rates will do in the future or how long you'll stay in your house. Given you said you'll stay a long time and rates are currently low, I might suggest an emotional hedge to pay down like 1/8 -1/4 percentage, but probably wouldn't fork over cash for more than that. That way you can still feel you got a deal but not have to bring so much cash to the table/have an inflexible position.

Good luck!!
After breaking down the math with a lender I just talked to, that's what I decided on. I'll probably pay a few grand up to $5k to get some lower interest but won't go all the way. So... nice, thanks!

Feeling a bit better about my knowledge now.
Topic Author
TheBogleWay
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Re: Just found my dream home/offer accepted, need lending ASAP and have important questions, you're my main resource

Post by TheBogleWay »

Bobby206 wrote: Sun Aug 30, 2020 8:27 pm
TheBogleWay wrote: Sun Aug 30, 2020 6:01 pm
In addition to an existing ~$1,000,000 investment portfolio at age ~30, earning an estimated $80,000/year in interest.
That sounds a good investment. Is this your forecast for growth? You say "interest." Are you getting 8% interest? Sounds high, no!?

Also, you sound sort of defensive/aggressive. Maybe you are just excited!? Just remember anybody taking the time to comment is only trying to help you think about things that you might not while you are in blinded lust with this house. Plus, you acknowledge you don't have experience with buying a house. I have bought many houses and was recently in contract on another but knew loans are taking extra long right now so had a 45 day window so I wasn't running around crazy. You might ask the seller to push it back to 45 because 30 days, at least in my area, is very hard to do right now. Good luck to you friend.

Well historically my style portfolio would earn about a 9% return per year, I just didn't factor in inflation. I usually use about 6.5% real return when I want a real return, that's about historically normal. Some people say things are high right now, but there's no crystal ball. The last 10 years of performance is actually relatively close to "normal" as well, it's not as if the last decade has been some outrageous performance.

[OT comments removed by admin LadyGeek]
Bobby206
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Re: Just found my dream home/offer accepted, need lending ASAP and have important questions, you're my main resource

Post by Bobby206 »

TheBogleWay wrote: Sun Aug 30, 2020 8:54 pm
Bobby206 wrote: Sun Aug 30, 2020 8:27 pm
TheBogleWay wrote: Sun Aug 30, 2020 6:01 pm
In addition to an existing ~$1,000,000 investment portfolio at age ~30, earning an estimated $80,000/year in interest.
That sounds a good investment. Is this your forecast for growth? You say "interest." Are you getting 8% interest? Sounds high, no!?

Also, you sound sort of defensive/aggressive. Maybe you are just excited!? Just remember anybody taking the time to comment is only trying to help you think about things that you might not while you are in blinded lust with this house. Plus, you acknowledge you don't have experience with buying a house. I have bought many houses and was recently in contract on another but knew loans are taking extra long right now so had a 45 day window so I wasn't running around crazy. You might ask the seller to push it back to 45 because 30 days, at least in my area, is very hard to do right now. Good luck to you friend.

Well historically my style portfolio would earn about a 9% return per year, I just didn't factor in inflation. I usually use about 6.5% real return when I want a real return, that's about historically normal. Some people say things are high right now, but there's no crystal ball. The last 10 years of performance is actually relatively close to "normal" as well, it's not as if the last decade has been some outrageous performance.

[OT comments removed by admin LadyGeek]
Ok. Your reply says a lot. Even if you don't like the answer you should know people are trying to help you. There are very few trolls on BH. Things are pretty tight around here. So you might not find every reply helpful but remember people are taking their precious time to help a total stranger so you might re-read people's posts before dismissing them. The most "quality feedback" might be the posts that you are ignoring because they are "ignorant." It's possible!
soxfan10
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Re: Just found my dream home/offer accepted, need lending ASAP and have important questions, you're my main resource

Post by soxfan10 »

TheBogleWay wrote: Sun Aug 30, 2020 8:54 pm
Bobby206 wrote: Sun Aug 30, 2020 8:27 pm
TheBogleWay wrote: Sun Aug 30, 2020 6:01 pm
In addition to an existing ~$1,000,000 investment portfolio at age ~30, earning an estimated $80,000/year in interest.
That sounds a good investment. Is this your forecast for growth? You say "interest." Are you getting 8% interest? Sounds high, no!?

Also, you sound sort of defensive/aggressive. Maybe you are just excited!? Just remember anybody taking the time to comment is only trying to help you think about things that you might not while you are in blinded lust with this house. Plus, you acknowledge you don't have experience with buying a house. I have bought many houses and was recently in contract on another but knew loans are taking extra long right now so had a 45 day window so I wasn't running around crazy. You might ask the seller to push it back to 45 because 30 days, at least in my area, is very hard to do right now. Good luck to you friend.

Well historically my style portfolio would earn about a 9% return per year, I just didn't factor in inflation. I usually use about 6.5% real return when I want a real return, that's about historically normal. Some people say things are high right now, but there's no crystal ball. The last 10 years of performance is actually relatively close to "normal" as well, it's not as if the last decade has been some outrageous performance.

[OT comments removed by admin LadyGeek]
People are trying to be helpful. You were the one who said $340k in income is your downside case. That is very tight to buy the house you have an accepted offer on. 401k contributions do add to net worth, but cant pay for life's expenses. As was noted upthread, even in no income tax state, your cash in the door, assuming 401k max, is ~17k. The house plus your expenses puts you at $13-14k.

Are kids in the future? HCOL areas - childcare starts at about $2k a month. You can afford the house, but it is a choice that involves risk. I dont have your level of assets, but am relatively the same age and have total comp that is only slightly under $340k. We stayed under $750k in a HCOL. That allowed us to hire a nanny instead of sending our 4 month old to daycare when COVID started (were always planning to send to daycare) and still have breathing room.

Life is all about choices, just understand what the risk is that your compensation is going to be at the mid 300k level and what your actual cash flow will be.
random_walker_77
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Re: Just found my dream home/offer accepted, need lending ASAP and have important questions, you're my main resource

Post by random_walker_77 »

TheBogleWay wrote: Sun Aug 30, 2020 2:17 am
Relevant facts: Wife and I have credit that according to Credit Karma is about 800 each, and maybe only $15k total in auto-loan debt. Assets are all stocks, about $1.6m combined. Probably $1.2m available in non-401k or IRA accounts. Seeking 30 yr loan, 20% down.

1. I have until Wednesday to figure out my lender. I'll likely not use the lender that pre approved me. I'm doing 20% down and a 30 year term in order to keep as much in stocks as I can, loan of maybe $1.2 million ish. I'm drinking through a firehose learning the process... Are there any lenders you'd recommend I add to my list above to call and get rates from?

2. I'm learning lenders often have different interest rates, you can "pay more" with points, to get a lower interest rate. Given that it's a big $1.2m loan and I'll live there long, it's probably in my interest to pay for the lowest interest rate they can give me, am I correct?

3. I didn't have a down deposit in a checking account, the deposit will be about $285,000, and I need to sell my stocks to get this. Fortunately, the stars aligned, and stocks are up right now so while I've never sold a stock in my life, I guess I'm comfortable with this. I'm going to call Vanguard first thing Monday and sell stocks. Two questions here.
A) am I making any major mistake, such as should I seek a loan against my equities instead?
B) Should I simply sell $285,000 of stocks (starting from the oldest first for tax purposes) or should I sell more for any reason like taxes? Though, I imagine taxes could be handled like 6 months from now.


4. I've heard some lenders will lower your interest rate EVEN FURTHER if you move X number of assets over to them. I've confirmed this to be true.
A). Can you recommend any lenders that offer this relationship pricing outside of the ones I mentioned?

5. Last, any general advice you can give me about this process?
It's a 1.5M house, and you've got 1.6M, pre-tax. I'll skip the nitpicking about the income numbers, but given the high income, I think most would agree that if you sold the 1.2M, paid your taxes, and took out a mortgage of < 2x annual gross income, that is definitely affordable. (To be clear, I'm not suggesting that you sell that much!)

Q1) yes, contact a reputable local broker. Yelp & google reviews might even be fine, or you might get recs from neighbors/colleagues/nextdoor. You need someone who can tell you if you can close in 30 days, which seems like a very tight timeline. Presumably your realtor wrote up 30 days in the offer contract because they believe the current conditions allow for such fast financing? When I bought, where I've bought, 45 days was standard and in some cases was creeping upwards (during busy times). When you talk to the broker, make sure they know your timeline, and do seek their opinion on whether they can meet this timeline.

Q2) I'd recommend against buying points. Most people move within 10 years. Rates might drop further. If you prepay by buying points now, you're giving up the ability to benefit from refinancing if rates drop more. Of course, whatever you decide, you'll want to do an apples-to-apples comparison between lenders, which I thought was easier when looking at the 0 points option.

Q3) Sell and secure the downpayment cash asap. Borrowing against equities is really aggressive and I wouldn't do it -- the potential downsides don't outweigh the risks in my opinion. Sell to minimize taxes without screwing up your asset allocation. Don't let the (tax) tail wag the dog. Do sell enough to cover the taxes, probably between 20 and 24% at your income level (capital gains for married couples jumps to 20% for the amount over $496K, plus the 3.8% NIIT). That tax money is what you owe -- if you make the necessary estimated tax payments to meet the safe harbor requirements, you could do something risky like gamble with Uncle Sam's money and invest it until April. Safer is to put it away in a high yield savings, but do make sure your estimated taxes are enough so that you don't have to pay the IRS interest on underpayment.

Q4) see the thread "Relationship mortgage discounts for moving a million assets"

Q5)

a) Your realtor's interests aren't necessarily aligned with yours. Hopefully you have a buyer's agent, but even then, they get paid by the seller only if the deal closes. You should strongly consider finding a well-regarded home inspector other than the one suggested by your agent. Realtors aren't terribly motivated to keep recommending inspectors whose reports break too many deals...

b) For the home inspection, make sure you go to the house and shadow the inspector. If nothing else, it's an invaluable education and introduction to your home. As a first time home buyer, this is even more so. In my experience, inspectors will also give you a lot more info verbally than they would be willing to put down in writing. Especially when it comes to judgements regarding equipment condition and/or opinions on the seriousness or risky of defects.

c) Harder to do now in these strange pandemic times, but make sure you understand the traffic patterns and commute patterns around this house. Maybe not as applicable since you already have an accepted contract, but you still have ways to dodge out of the contract right now.

d) I'd strongly suggest reading the Nolo guide to buying your first home

e) 5000 ft^2 is awfully big for a couple... that's a lot of house to clean, or you need to be ok with hiring help to enter your space and clean it for you.

f) On a different note, it's hard to describe, but my life feels like there was this phase pre-children, and then there was a completely different life post-children. Your priorities change. The things you value and the ways you spend your time change. Think hard and carefully, but be warned that your idea of a "perfect house" could very well change after having kids. Or, believe it or not, those "perfect" schools might not be such a great match for your child.
harrychan
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Re: Just found my dream home/offer accepted, need lending ASAP and have important questions, you're my main resource

Post by harrychan »

Don't be so fixated on your loan and its terms. We had our home for 10 years this month and we're on our 3rd going 4th lender due to refinancing as of July.
This is not legal or certified financial advice but you know that already.
Topic Author
TheBogleWay
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Re: Just found my dream home/offer accepted, need lending ASAP and have important questions, you're my main resource

Post by TheBogleWay »

random_walker_77 wrote: Sun Aug 30, 2020 9:38 pm
It's a 1.5M house, and you've got 1.6M, pre-tax. I'll skip the nitpicking about the income numbers, but given the high income, I think most would agree that if you sold the 1.2M, paid your taxes, and took out a mortgage of < 2x annual gross income, that is definitely affordable. (To be clear, I'm not suggesting that you sell that much!)
Thanks!
random_walker_77 wrote: Sun Aug 30, 2020 9:38 pm Q1) yes, contact a reputable local broker. Yelp & google reviews might even be fine, or you might get recs from neighbors/colleagues/nextdoor. You need someone who can tell you if you can close in 30 days, which seems like a very tight timeline. Presumably your realtor wrote up 30 days in the offer contract because they believe the current conditions allow for such fast financing? When I bought, where I've bought, 45 days was standard and in some cases was creeping upwards (during busy times). When you talk to the broker, make sure they know your timeline, and do seek their opinion on whether they can meet this timeline.
Understood and good to know.
random_walker_77 wrote: Sun Aug 30, 2020 9:38 pm Q2) I'd recommend against buying points. Most people move within 10 years. Rates might drop further. If you prepay by buying points now, you're giving up the ability to benefit from refinancing if rates drop more. Of course, whatever you decide, you'll want to do an apples-to-apples comparison between lenders, which I thought was easier when looking at the 0 points option.
So if I "buy" points now, they are less likely to refinance? Is wanting to spend money on points to lower the rate part of the justification for refinancing? Either way, I think I've come to the same conclusion. I may do just a few points like a few grand down to get something low-ish, but won't go for the more aggressive options.
random_walker_77 wrote: Sun Aug 30, 2020 9:38 pm Q3) Sell and secure the downpayment cash asap. Borrowing against equities is really aggressive and I wouldn't do it -- the potential downsides don't outweigh the risks in my opinion. Sell to minimize taxes without screwing up your asset allocation. Don't let the (tax) tail wag the dog. Do sell enough to cover the taxes, probably between 20 and 24% at your income level (capital gains for married couples jumps to 20% for the amount over $496K, plus the 3.8% NIIT). That tax money is what you owe -- if you make the necessary estimated tax payments to meet the safe harbor requirements, you could do something risky like gamble with Uncle Sam's money and invest it until April. Safer is to put it away in a high yield savings, but do make sure your estimated taxes are enough so that you don't have to pay the IRS interest on underpayment.
Just curious, taxes for 2020 aren't due for over 6 months. Why sell stocks for the tax money now? I can just save it up as it gets closet to tax season and let my invested money rest. My income should provide me with extra I can just continue to grow my checking until then. I actually think the second half of your post may have answered your mindset on this, I'm typing as reading :)
random_walker_77 wrote: Sun Aug 30, 2020 9:38 pm Q4) see the thread "Relationship mortgage discounts for moving a million assets"
Nice, I'm investigating this.
random_walker_77 wrote: Sun Aug 30, 2020 9:38 pm Q5)

a) Your realtor's interests aren't necessarily aligned with yours. Hopefully you have a buyer's agent, but even then, they get paid by the seller only if the deal closes. You should strongly consider finding a well-regarded home inspector other than the one suggested by your agent. Realtors aren't terribly motivated to keep recommending inspectors whose reports break too many deals...
Yeah, I've heard that from someone else too. However I also had one person tell me the opposite - inspectors will be more likely to make issues out of nothing because that's what they're paid to do. Though, logically I seem to agree with you more, they probably don't want to ruin deals. I may find somebody to tag along.

random_walker_77 wrote: Sun Aug 30, 2020 9:38 pm b) For the home inspection, make sure you go to the house and shadow the inspector. If nothing else, it's an invaluable education and introduction to your home. As a first time home buyer, this is even more so. In my experience, inspectors will also give you a lot more info verbally than they would be willing to put down in writing. Especially when it comes to judgements regarding equipment condition and/or opinions on the seriousness or risky of defects.
Ok, thanks. I wasn't actually sure if I should go or not, but now I know I will. Appreciate that, I'll tag along with a notepad! It's Wednesday.
random_walker_77 wrote: Sun Aug 30, 2020 9:38 pm c) Harder to do now in these strange pandemic times, but make sure you understand the traffic patterns and commute patterns around this house. Maybe not as applicable since you already have an accepted contract, but you still have ways to dodge out of the contract right now.
I've lived and grown up around here. It's a nice commute area.
random_walker_77 wrote: Sun Aug 30, 2020 9:38 pm d) I'd strongly suggest reading the Nolo guide to buying your first home
I'll open this now!
random_walker_77 wrote: Sun Aug 30, 2020 9:38 pm e) 5000 ft^2 is awfully big for a couple... that's a lot of house to clean, or you need to be ok with hiring help to enter your space and clean it for you.
Yes it is ;) that being said, the intent is to live here the next 10+ years (maybe a lot more?) and ideally, we'll be filling the house. I currently live in a big house, and it's actually surprisingly easy to clean. Possibly even easier due to the size actually, but it's not a big task. That being said, sure, one day I'll hire help.
random_walker_77 wrote: Sun Aug 30, 2020 9:38 pm f) On a different note, it's hard to describe, but my life feels like there was this phase pre-children, and then there was a completely different life post-children. Your priorities change. The things you value and the ways you spend your time change. Think hard and carefully, but be warned that your idea of a "perfect house" could very well change after having kids. Or, believe it or not, those "perfect" schools might not be such a great match for your child.
I've heard this and did my best to prioritize kids as one of the main factors. It's a fantastic area, school district, and family-friendly house with a good neighborhood. Plenty of room for kids and even a decent yard. Not sure what else I could prioritize for them haha, they'll live!
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Lee_WSP
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Re: Just found my dream home/offer accepted, need lending ASAP and have important questions, you're my main resource

Post by Lee_WSP »

TheBogleWay wrote: Mon Aug 31, 2020 12:07 am
random_walker_77 wrote: Sun Aug 30, 2020 9:38 pm a) Your realtor's interests aren't necessarily aligned with yours. Hopefully you have a buyer's agent, but even then, they get paid by the seller only if the deal closes. You should strongly consider finding a well-regarded home inspector other than the one suggested by your agent. Realtors aren't terribly motivated to keep recommending inspectors whose reports break too many deals...
Yeah, I've heard that from someone else too. However I also had one person tell me the opposite - inspectors will be more likely to make issues out of nothing because that's what they're paid to do. Though, logically I seem to agree with you more, they probably don't want to ruin deals. I may find somebody to tag along.

random_walker_77 wrote: Sun Aug 30, 2020 9:38 pm b) For the home inspection, make sure you go to the house and shadow the inspector. If nothing else, it's an invaluable education and introduction to your home. As a first time home buyer, this is even more so. In my experience, inspectors will also give you a lot more info verbally than they would be willing to put down in writing. Especially when it comes to judgements regarding equipment condition and/or opinions on the seriousness or risky of defects.
Ok, thanks. I wasn't actually sure if I should go or not, but now I know I will. Appreciate that, I'll tag along with a notepad! It's Wednesday.
Home inspections are a weird beast. They're really just there to make sure nothing major is undisclosed.

You should definitely go. It's your only opportunity to ask the inspector whether he/she thinks its a major repair or just wear & tear.

I'd also recommend HVAC, plumbing, termite, roofing, and electrical contractors. A home inspector just looks at everything and kind of just gives you a "honey do" list. I might even recommend foregoing the home inspector and going with specialists.
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I removed some off-topic comments and several posts. As a reminder, see: General Etiquette
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Re: Just found my dream home/offer accepted, need lending ASAP and have important questions, you're my main resource

Post by BillWalters »

The jumbo market is very challenging right now, and a lot of banks have exited the jumbo market entirely.

Big banks take forever. You need to get the underwriting process done yesterday and if there is anything unique about your income the 30 day closing is highly unlikely to happen. Your best bet is a good mortgage broker but even with this approach it will be tough.
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Post by Bobby206 »

BillWalters wrote: Mon Aug 31, 2020 7:31 am The jumbo market is very challenging right now, and a lot of banks have exited the jumbo market entirely.

Big banks take forever. You need to get the underwriting process done yesterday and if there is anything unique about your income the 30 day closing is highly unlikely to happen. Your best bet is a good mortgage broker but even with this approach it will be tough.
I do agree with this as I have had good luck with mortgage brokers over the years. Agreed 30 days is tight right now. Mortgage processors are really busy.

Another option that I recently did, when shopping for a jumbo mortgage, was went with the bank recommended by my Realtor. Turned out the bank was a portfolio lender. This worked well for me as we have assets but business owner and income is not good this year. Portfolio lenders, for those that don't know, are lending their own money. They generally keep the paper in-house rather than re-selling it.
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Re: Just found my dream home/offer accepted, need lending ASAP and have important questions, you're my main resource

Post by knowledge »

I would have kids first, before making the commitment. I know, it's the path that I took, but it's the sensible one. Until you actually have and experience the kids, you won't know what you'll prioritize.
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Re: Just found my dream home/offer accepted, need lending ASAP and have important questions, you're my main resource

Post by quantAndHold »

You say you’re working with an experienced realtor. I’ve never met a good realtor who didn’t know a good mortgage broker who could get this done on your timeframe. Have you asked your realtor for a referral?
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Re: Just found my dream home/offer accepted, need lending ASAP and have important questions, you're my main resource

Post by random_walker_77 »

TheBogleWay wrote: Mon Aug 31, 2020 12:07 am Just curious, taxes for 2020 aren't due for over 6 months. Why sell stocks for the tax money now? I can just save it up as it gets closet to tax season and let my invested money rest. My income should provide me with extra I can just continue to grow my checking until then. I actually think the second half of your post may have answered your mindset on this, I'm typing as reading :)
To reiterate, I say this because of Murphy's Law, which always seems to get me. If you sell now to lock in the cash, of course the market goes up 20% between now and tax day. If you don't sell and try to reap investment gains between now and tax day, the market will crash 30% in the meantime...

I'll tell you a story. Around 2007, I bought a house and took out a mortgage I didn't need, figuring I'd get the investment gains. Then 2008 happened. Fine, I knew that was a possibility and even rebalanced into stocks. In 2010, reading about the lost decade and realizing that all my investments in 2000 basically hadn't made any money and I'd have been better off in bonds was a little depressing.

By 2011, after years with low interest rates, the prospect of a guaranteed 4% return by paying off the mortgage sounded good. It sounded real good. I wanted the mortgage gone to help my spouse sleep better at night, and I was tired of getting little return on my bonds. So I started aggressively paying down the mortgage with cashflow and selling employer stock. That was basically "capitulation" where I'd been worn down by lackluster returns. History shows that was the exact wrong time to pay off the mortgage. Holding it and investing the money (i.e. my original intent) would've turned out better. Murphy's Law got me. Alternatively framed, I tried to arbitrage to reap the benefits of stock's higher historical returns, but life and human emotion caused me to take actions that effectively equaled timing the market with awful timing and suboptimal results.

Recommendation: It's good to have cash and equity. Keep your stocks. But investing Uncle Sam's money for 6 months -- that's too short of a timescale and you're asking to get burned. (Did you already forget about March 2020? It could happen again)
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remove
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Are the investments you’re selling for the down payment from a retirement account or a normal taxable account?
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Post by TheBogleWay »

000 wrote: Sun Aug 30, 2020 4:47 pm Log on to vanguard.com right now to change cost basis to SpecID.
Funny, your advice was good. I'm finally on the phone with them after a 90 minute hold today, and the SpecID still hasn't updated. They're telling me to call back tomorrow. So thanks, I'm at least glad I did it yesterday!
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Re: Just found my dream home/offer accepted, need lending ASAP and have important questions, you're my main resource

Post by TheBogleWay »

tingles wrote: Mon Aug 31, 2020 11:15 am Are the investments you’re selling for the down payment from a retirement account or a normal taxable account?
Yes.

I do have money in a Roth IRA and 401k, but I heard it's not a good idea to look at funding from those? So assuming that's correct I'm using my regular taxable account.
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Re: Just found my dream home/offer accepted, need lending ASAP and have important questions, you're my main resource

Post by ResearchMed »

TheBogleWay wrote: Mon Aug 31, 2020 1:28 pm
tingles wrote: Mon Aug 31, 2020 11:15 am Are the investments you’re selling for the down payment from a retirement account or a normal taxable account?
Yes.

I do have money in a Roth IRA and 401k, but I heard it's not a good idea to look at funding from those? So assuming that's correct I'm using my regular taxable account.
Wait... you have the cash (or equivalent) available in a Roth IRA?
I'm not entirely sure if Roth IRA's have the same rules as plain vanilla Traditional IRA's, but IF they do, then you can remove the cash and put it back WITHIN 60 DAYS (DO NOT BE EVEN ONE MINUTE LATE!), and you've got yourself a home-made loan. The costs would only be whatever you'd have earned if the money remained in the Roth, but if it's in cash/equivalent, then little would be lost.

NOTE: There is ZERO flexibility in getting that money back in, and this little round-trip process can be done only ONCE per year, per Social Security number.

You may not have an emergency after all :wink:

Well, of course, you'd still need to get the money out of the Roth, but maybe no selling involved?

RM
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Re: Just found my dream home/offer accepted, need lending ASAP and have important questions, you're my main resource

Post by tingles »

TheBogleWay wrote: Mon Aug 31, 2020 1:28 pm
tingles wrote: Mon Aug 31, 2020 11:15 am Are the investments you’re selling for the down payment from a retirement account or a normal taxable account?
Yes.

I do have money in a Roth IRA and 401k, but I heard it's not a good idea to look at funding from those? So assuming that's correct I'm using my regular taxable account.
Correct - you should use your regular taxable account. So, when you say you have $1 million in investments, how much is in the taxable account space? That is, after you take money out for down payment, how much money will you have left in the non-retirement accounts?
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