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

Post by TheBogleWay »

Hey BH,

Long time member here. 11 year investor, lazy 3 fund portfolio. I've been renting forever, and casually looking at homes for sale for years/viewing/touring them. By random chance, one house came up a few days ago that is sincerely my/our dream home. It checks every single box I could imagine, even the boxes that are far out stretches you can't expect to check. 10/10 location, 10/10 layout, 10/10 size, 10/10 neighborhood/school district, 10/10 view, etc. just unbelievable. I felt underpriced.


So before I ask, I have to thank you all. You've all been a huge part of my good luck and life's success so far. Sincerely, thank you to this forum. I've made many threads here and I even recognize frequent usernames. It's my first home and it's actually odd how lucky I am to have found this house.


I wasn't prepared to make an offer, wasn't pre-approved (again was casually looking) but we applied and they accepted our offer, it was on the market maybe 24 hours, I'm in a hot market/HCOL growing area. I admit, we went big. It's $1.5m and 5k sq feet, but that price range was heavily considered for a long time, I'll spare you the details but I'm ok with the cost. It's location is "home" to me, I could really see myself living there 15+ years raising a family easily. This new potential reality brought me to tears, I grew up in a low income apartment just a mile down the road. So, thank you to the posters of this forum. This is a life-changer, and I want to get the finances correct.


Now for the questions with the question part highlighted:
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. We're around age 30 with an income fluctuating around 340k annually combined, with occasional outliers in income higher or lower, and excluding rent our cost of living was about $72k/year in our HCOL area.




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, but my knowledge so far tells me to look at a few big providers such as Bank of America, Quicken Loans, Charles Schwab via Quicken Loans, Wells Fargo. So far, BoA with a "relationship loan" may get me to around 2.8%, and Quicken Loans seems to be offering 2.75% for a 30 year for me. TD Ameritrade is out they don't do lending in my state. 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. So far, I've found that Bank of America does this (over $500k in investments moved to them reduced interest by .25%) and it sounds like Charles Schwab may do this through Quicken, I'm waiting on their callback. Can you tell me who else does this? I currently have about $1,150,000 at Vanguard outside of IRAs that I could move somewhere. Here are my multiple questions here.
A). Can you recommend any lenders that offer this relationship pricing outside of the ones I mentioned?
B) Any reason NOT to do this?
C) I believe I've heard that you can usually transfer the funds (non-taxable event), and then once you secure the loan, you can basically move it right back. I'm used to Vanguard, I use Vanguard funds, so I think I want to transfer my funds back to Vanguard. Can you confirm this is possible?
D) Any general things to be aware of as I pursue this route? It seems better to me.



5. Last, any general advice you can give me about this process?


Again, thank you to this forum for being life changing. Finding it when I was young, learning to invest is one of my main advantages in life.
Last edited by TheBogleWay on Sun Aug 30, 2020 2:56 am, edited 1 time in total.
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 »

$300k income
-$100k taxes
-$40k 401ks
-$70k living expenses
-$90k PITI & maintenance
= $0 buffer

Are you sure you can afford this house?
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 2:34 am $300k income
-$100k taxes
-$40k 401ks
-$70k living expenses
-$90k PITI & maintenance
= $0 buffer

Are you sure you can afford this house?
Oops, I forgot to factor her income in. We're guessing on the pretty conservative end here. On the conservative end, factoring in her not working some years, average income should provide us with $23,000 per month after taxes. Our cost of living, factoring in this mortgage and taxes (6k/mo) our cost of living will be about $12,300/month. That should leave us with a surplus, after taxes, of a little over $10,000 every single month. Let me know if I mistyped something in the OP.

edit: just to work out the numbers more accurately:

Monthly cost of mortgage + taxes + insurance: $6,100
401ks - $35,000 but that's not an expense, that goes towards our net worth
cost of living NOT including the mortgage/tax/insurance cost - about $7k/mo ish
total monthly spending around $12.5k/mo ish
Total income after taxes on the safe conservative end: $23,000
Annual savings over $100k with this new mortgage
Not factoring in a $1m portfolio

Should be good to go!
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 »

Then you should probably edit your OP to say that your conservative gross income is $400-500k.

That’s a much different picture.

Also you are ignoring annual maintenance on the house. Eventually the appliances need replacing, new roof, regular landscaping, etc.
Last edited by Tingting1013 on Sun Aug 30, 2020 2:54 am, 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 »

Tingting1013 wrote: Sun Aug 30, 2020 2:51 am Then you should probably edit your OP to say that your conservative gross income is $400-500k.

That’s a much different picture.
I'll edit it, but conservative income guesstimate is $340k/year. That amounts to $23k after taxes per month in my area. It was only $40k off, but will go edit it. Regardless, we can afford it with a surplus of $10k/month, the question is more around lending not can we afford it, offer is already accepted. Thanks for pointing out the error though.

edit: It's a relatively new house. Maintenance won't be too bad. Yard maintenance is roughly $1.5k/year, nothing changing the picture. Again, this thread isn't about can we afford it, we can with a large monthly surplus.
mortfree
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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 mortfree »

#3 Is 285k the deposit or the 20% down?

20% down isn’t due until closing.

Deposit is usually good faith money that the seller can walk away with if something goes wrong/violate the agreement.
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 »

mortfree wrote: Sun Aug 30, 2020 2:59 am #3 Is 285k the deposit or the 20% down?

20% down isn’t due until closing.

Deposit is usually good faith money that the seller can walk away with if something goes wrong/violate the agreement.
$285k is the full 20% down, which you're correct is due in about 30 days. Actually... you just triggered me to remember to add one more question to the list. My logic tells me we're lucky for stocks to be high right now, it's probably in my interest to sell now, I'd hate to have the market randomly crash in two weeks and try to sell then. My question will be if people agree. Actually... I won't even add it to the OP, I just think it's smart to begin the sale now.

The money (earnest? spelling?) that is due now is $30k. I need that asap and only have about $25k handy so I'll be selling a few stocks to get the rest.

edit: I'm also assuming that the $30k is included in the 20% down, but I guess I can confirm that soon, no biggie if it's not.
mortfree
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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 mortfree »

The 30k will be included in the 20% down.

For selling stocks:
Any tax lots with a loss? Sell those first.

Then look at your tax lots that are older than 1-year. Start with the ones that have the lowest capital gains and sell those.

Assuming you have chosen SpecID for your account.
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 »

mortfree wrote: Sun Aug 30, 2020 3:12 am The 30k will be included in the 20% down.

For selling stocks:
Any tax lots with a loss? Sell those first.

Then look at your tax lots that are older than 1-year. Start with the ones that have the lowest capital gains and sell those.

Assuming you have chosen SpecID for your account.
I've heard the term SpecID that's about as far as my knowledge on selling goes. I use Vanguard, should I expect they have it, and can make selling easy for me?

I'd say it's unlikely that I have any losses given the state of the market right now but I'll check. However, just so I understand, here's the order of what to sell.

1. Anything with a loss
2. Anything that was purchased over 1 year ago, but also has the smallest amount of "gain", likely stocks that were just barely over 12 months ago.

Am I understanding this?
mortfree
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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 mortfree »

TheBogleWay wrote: Sun Aug 30, 2020 3:21 am
mortfree wrote: Sun Aug 30, 2020 3:12 am The 30k will be included in the 20% down.

For selling stocks:
Any tax lots with a loss? Sell those first.

Then look at your tax lots that are older than 1-year. Start with the ones that have the lowest capital gains and sell those.

Assuming you have chosen SpecID for your account.
I've heard the term SpecID that's about as far as my knowledge on selling goes. I use Vanguard, should I expect they have it, and can make selling easy for me?

I'd say it's unlikely that I have any losses given the state of the market right now but I'll check. However, just so I understand, here's the order of what to sell.

1. Anything with a loss
2. Anything that was purchased over 1 year ago, but also has the smallest amount of "gain", likely stocks that were just barely over 12 months ago.

Am I understanding this?
Yes to all - and we know if something is incorrect someone will correct me.

Vanguard has SpecID and you should be able to see that setting for your investments if you click around on the website. Not sure if that is in the app too.

Yep finding a loss can be hard these days.
minimalistmarc
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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 minimalistmarc »

If you need money then now is a much better time to sell equities than March.
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 »

minimalistmarc wrote: Sun Aug 30, 2020 3:35 am If you need money then now is a much better time to sell equities than March.
No kidding right. I swear, it's just weird how the stars aligned for this opportunity. Stocks at record highs so I'm OK selling... I only checked housing apps once every week or two, happened to see this one an hour after it was posted. The location is.. sparing you the details, my ideal location I think. Best I could imagine I'd say. It has a view. The fact that they accepted our offer, yeah it's just crazy. I'm very thankful and got lucky.
minimalistmarc
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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 minimalistmarc »

TheBogleWay wrote: Sun Aug 30, 2020 3:45 am
minimalistmarc wrote: Sun Aug 30, 2020 3:35 am If you need money then now is a much better time to sell equities than March.
No kidding right. I swear, it's just weird how the stars aligned for this opportunity. Stocks at record highs so I'm OK selling... I only checked housing apps once every week or two, happened to see this one an hour after it was posted. The location is.. sparing you the details, my ideal location I think. Best I could imagine I'd say. It has a view. The fact that they accepted our offer, yeah it's just crazy. I'm very thankful and got lucky.
If you are sure this is the one then I’d go for it.

However, have seen many people buy houses that are “the one” because they let their hearts rule their minds and they end up disappointed. Doesn’t seem like that is the case here, but do lots of drive bys at various times of day in the very least.
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celia
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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 celia »

You can use the internet to help find the best mortgages faster, instead of calling random places. For example, google:
best mortgage rates for <zipcode>
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 »

celia wrote: Sun Aug 30, 2020 4:20 am You can use the internet to help find the best mortgages faster, instead of calling random places. For example, google:
best mortgage rates for <zipcode>
Weird. I used all 4 top results on Google with this just now, they all came back saying they can't find any rates. Filled it all out correctly. That's odd.




Off topic, but for anyone reading, the answers in the original post still haven't been answered yet.
runner540
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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 runner540 »

1. Who can get you the pre-approval letter by your deadline? That’s all that matters right now. You are looking for a jumbo loan, right?
2. Need the actual quotes
3. Sell the stock and pay estimated taxes for the capital gains.
4. Don’t know. I got a small conforming mortgage.
5. Hopefully you are working with a good real estate agent that can guide you through the next 30 days according to your state/local process. You’ll also need a good inspector. Why are you getting a deal? ( “I feel underpriced”)
catlady
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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 catlady »

TheBogleWay wrote: Sun Aug 30, 2020 2:54 am I'll edit it, but conservative income guesstimate is $340k/year. That amounts to $23k after taxes per month in my area.
Are you already making this income? Is the $340k gross? How accurate is the $23k/mo after taxes? We make more than $340k gross and our net is significantly lower.
bluebolt
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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 bluebolt »

I might also reach out to a mortgage broker, who can take some of the work off your plate. You may not get the best rate from them, but you will likely get a decent rate without much hassle. Recently, some of the online mortgage providers have had the best rates, but years ago, my mortgage broker was able to get me better rates.

You mentioned 30 days. Is that when your closing is? Because of all the volume with historically low interest rates, the priority will be finding someone who can close in that timeframe.
ZMonet
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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 ZMonet »

First off, congrats on the house. Your euphoria will probably wane a little bit but it sounds like you have found what you want.

In terms of selling stocks, sell ASAP as money that was presumably needed 5+ years from now has now suddenly become money that is needed immediately. Yes, you are fortunate that stocks are at all time highs and not at the March lows but who knows what the future brings -- up or down.

It sounds like you have some very competive rates, especially for a jumbo mortgage. You might check out some of the lenders listed in the refinance thread (viewtopic.php?f=2&t=289559&start=5750) and see what rates they can provide. But for frame of reference, the best refinance rates people are getting there are 2.5% on a 30 year loan with no loan costs. And speaking of loan costs, keep in mind that what you want to compare is not juust the rate but the costs . In theory a lender could give you a rate of 1.75% on a 30 year loan but charge you tens of thousands for that rate (points, origination, etc). The key thing to look at is the loan estimate (LE), the APR and, based on your time in the home, what your time to break even is. If you want the most competitive loan, you'll need to play each lender off each other -- sharing the loan estimate from one with the other and asking them to beat it. As a general rule of thumb, people generally don't want the lowest rate at the lowest cost so that they can refinance in the future if rates drop further.

Finally, know that loans will incur an additional .5% charge starting in December. If you get a good interest rate at a decent price, lock your rate. Also, since this is a home purchase, make sure the lender will be able to meet your timeline to close.
av111
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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 av111 »

OP

Your house is affordable when you look at the income. Your expenses of 7k per month for two people appear to be very high so what is included?

Re mortgage - try to get lowest rate with 0 costs and fees. Closing the loan in time is more important than the rate. Costs paid at this time are basically lost if you refinance. So better to keep costs low at the beginning because you may not get the best rate right now in the hurry to close the escrow
AV111
WhyNotUs
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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 WhyNotUs »

Given the timing, I think Quicken loans is a good first step.

Do you have a tax advisor? I would work with them on how to best fund your downpayment. You want to try to optimize tax implications.

You can look at things like 401k loans, possible CARES act benefits, etc. to minimize taxes paid on non-retirement assets. May not be anything there for you but worth a look once you get a lender.
I own the next hot stock- VTSAX
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 »

catlady wrote: Sun Aug 30, 2020 7:39 am
TheBogleWay wrote: Sun Aug 30, 2020 2:54 am I'll edit it, but conservative income guesstimate is $340k/year. That amounts to $23k after taxes per month in my area.
Are you already making this income? Is the $340k gross? How accurate is the $23k/mo after taxes? We make more than $340k gross and our net is significantly lower.
I’ll put it charitably- OP doesn’t know how much money he is making.
theta
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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 theta »

One suggestion that I haven’t seen mentioned.

Use bankrate.com to find the best rate. Even if you don’t use it, it might give you some negotiating leverage with your chosen lender.
tingles
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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 »

Tingting1013 wrote: Sun Aug 30, 2020 9:46 am
catlady wrote: Sun Aug 30, 2020 7:39 am
TheBogleWay wrote: Sun Aug 30, 2020 2:54 am I'll edit it, but conservative income guesstimate is $340k/year. That amounts to $23k after taxes per month in my area.
Are you already making this income? Is the $340k gross? How accurate is the $23k/mo after taxes? We make more than $340k gross and our net is significantly lower.
I’ll put it charitably- OP doesn’t know how much money he is making.
Agreed - this was the most confusing part of OP’s post. We make 300k gross, but only net about 12k a month after you take into account 401k, HSA contributions etc etc.
PoppyA
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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 PoppyA »

Keep in mind, over the life of your loan it will likely be sold, and resold to other lenders over the years. You have no say in this, but your original terms will follow. So getting the best rate is your main concern.

Also, if it were me I would be sure to include a “no prepayment penarly” clause. That way you can pay it off if you want.

I’m happy for you!
trees
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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 trees »

I’ve found the best rates (and often but not always better lenders) by using zillow’s rate finder. That allows you to search tens to hundred of lenders at once, then reach out to the ones that are best option for you. They often have much better rates than the big banks.
hookemhorns
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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 hookemhorns »

To answer OP's questions:

1. Are there any lenders you'd recommend I add to my list above to call and get rates from?

The list you mentioned is good. The main challenge will be finding a lender that can close on a relatively short timeline. You might end up paying a slightly higher rate to accomplish this. As another poster mentioned, a mortgage broker might be able to help with this.

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?

It's a pretty simple calculation to figure out how long it will take you to break even on points. Generally, it takes several years and it's not the best investment, but it depends upon what the lender offers. The average homeowner does not live in the same house for >15 years, so I wouldn't make that assumption.

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.


I could be wrong, but I don't think most lenders will allow you to fund a downpayment with another loan (even if collateralized).

Simplistically, you should sell enough to fund your down payment starting with the stocks that have the lowest unrealized gain first. You might consult a tax advisor about this if you're not familiar enough with it.


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. So far, I've found that Bank of America does this (over $500k in investments moved to them reduced interest by .25%) and it sounds like Charles Schwab may do this through Quicken, I'm waiting on their callback. Can you tell me who else does this? I currently have about $1,150,000 at Vanguard outside of IRAs that I could move somewhere. Here are my multiple questions here.
A). Can you recommend any lenders that offer this relationship pricing outside of the ones I mentioned?
B) Any reason NOT to do this?
C) I believe I've heard that you can usually transfer the funds (non-taxable event), and then once you secure the loan, you can basically move it right back. I'm used to Vanguard, I use Vanguard funds, so I think I want to transfer my funds back to Vanguard. Can you confirm this is possible?
D) Any general things to be aware of as I pursue this route? It seems better to me.


Yes this is a common practice and you should definitely ask every lender about it. Schwab lists their relationship discounts on their website. Wells and BofA also offer discounts.

There is no reason NOT to do it. Definitely ask about it.

You can usually transfer (not SELL) your investments tax-free to a brokerage account at the lender you decide to use. Make sure the lender's broker can accept the securities. If it's truly individual stocks they will accept it. They may not accept some mutual funds though. Ask.

5. Last, any general advice you can give me about this process?

The main challenge will be finding a lender that can close on such a tight timeline. You need to be clear about your timeline when speaking with all of the loan officers. Lenders are slammed with refi applications right now, so some lenders may not be able to turnaround your application in the timeframe you need. This is where a good mortgage broker could help.
quantAndHold
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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 »

1/2. Given the time constraints, I would just go with a mortgage broker. You can make yourself crazy and still not get the best rate trying to do it yourself. As far as paying points, every points/rate trade off has a breakeven point. The longer you’re planning on holding the loan, the more paying points helps. You’re probably not going to refinance and you’re planning on keeping this house forever.” Tell that to your mortgage broker and enlist their help picking the best deal.

3. Sell stocks. Monday, if possible. You don’t want a potential market drop hanging over your head while you’re going through the loan process. Other people in this thread have described how to choose what to sell.

4/5. Keep it simple. You have limited time to find a lender and get the process going. Just find someone and get a loan.
Yes, I’m really that pedantic.
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 »

Tingting1013 wrote: Sun Aug 30, 2020 9:46 am
catlady wrote: Sun Aug 30, 2020 7:39 am
TheBogleWay wrote: Sun Aug 30, 2020 2:54 am I'll edit it, but conservative income guesstimate is $340k/year. That amounts to $23k after taxes per month in my area.
Are you already making this income? Is the $340k gross? How accurate is the $23k/mo after taxes? We make more than $340k gross and our net is significantly lower.
I’ll put it charitably- OP doesn’t know how much money he is making.
The math doesnt make sense $23k a month is $275k net a year. Youre talking at least $50k in federal income tax another$15k in payroll taxes. Thats $340k already. Where's the 401k contribution, any other pre-tax deductions from the paychecks? This also assumes zero income tax state and $1.5M is a ton of house in any no state income tax market.
TallBoy29er
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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 TallBoy29er »

Re Lenders, try Ally Bank. They have a very easy online lending platform. You can also change the inputs...how much you put down, your mortgage type, points you pay, etc.

I had a very good experience with them. They do jumbos no problem.

Edited to add:. Ally was able to pre approved me in a very short amt of time. That is why i throw them out there.
catlady
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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 catlady »

soxfan10 wrote: Sun Aug 30, 2020 10:46 am
Tingting1013 wrote: Sun Aug 30, 2020 9:46 am
catlady wrote: Sun Aug 30, 2020 7:39 am
TheBogleWay wrote: Sun Aug 30, 2020 2:54 am I'll edit it, but conservative income guesstimate is $340k/year. That amounts to $23k after taxes per month in my area.
Are you already making this income? Is the $340k gross? How accurate is the $23k/mo after taxes? We make more than $340k gross and our net is significantly lower.
I’ll put it charitably- OP doesn’t know how much money he is making.
The math doesnt make sense $23k a month is $275k net a year. Youre talking at least $50k in federal income tax another$15k in payroll taxes. Thats $340k already. Where's the 401k contribution, any other pre-tax deductions from the paychecks? This also assumes zero income tax state and $1.5M is a ton of house in any no state income tax market.
My guess is OP is looking at their current net and assuming it was flat throughout the year. Our net has noticeable jumps when each of us hit the SS max income and 401k contribution limits. Given OP was recently married they may not be withholding enough now and will be hit with a large tax bill in April.
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 »

catlady wrote: Sun Aug 30, 2020 10:59 am
soxfan10 wrote: Sun Aug 30, 2020 10:46 am
Tingting1013 wrote: Sun Aug 30, 2020 9:46 am
catlady wrote: Sun Aug 30, 2020 7:39 am
TheBogleWay wrote: Sun Aug 30, 2020 2:54 am I'll edit it, but conservative income guesstimate is $340k/year. That amounts to $23k after taxes per month in my area.
Are you already making this income? Is the $340k gross? How accurate is the $23k/mo after taxes? We make more than $340k gross and our net is significantly lower.
I’ll put it charitably- OP doesn’t know how much money he is making.
The math doesnt make sense $23k a month is $275k net a year. Youre talking at least $50k in federal income tax another$15k in payroll taxes. Thats $340k already. Where's the 401k contribution, any other pre-tax deductions from the paychecks? This also assumes zero income tax state and $1.5M is a ton of house in any no state income tax market.
My guess is OP is looking at their current net and assuming it was flat throughout the year. Our net has noticeable jumps when each of us hit the SS max income and 401k contribution limits. Given OP was recently married they may not be withholding enough now and will be hit with a large tax bill in April.
Yeah, that makes sense. If they are both working, the payroll tax is going to be in excess of $15k - $15k is one max Social security plus medicare (including surtax) at ~340k level. Its also likely more than $50k on the federal side - that is what we paid with MFJ of ~300k last year.

OP - you have a lot of assets, so you can probably make it work, but a $1.5M house on $350k (or even $400k) of income is a ton of house. Just P&I will be $5k so youll probably be close to $6.5-$7k a month in housing costs. Up to you if its worth it for you, but I would recommend figuring out your actual cash flow and that you're sure $23k is the right net number to be budgeting off of because it seems really high for a mid $300k income. We're a bit above $300k ourselves and dont come close to $19k a month net after 401k/insurance/HSA/tax (closer to 15k).
orhkaf
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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 orhkaf »

Despite what others are saying, I think you can buy the house and probably be okay. There’s no point to hoarding cash your whole life. Enjoy!
jucor
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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 jucor »

Just wondering if you've fully calculated the costs of this home.

If you've been renting an average sized apartment moving into a 5k sq foot home (which, IMHO, is HUGE) will require quite a lot of spending up front in furniture and trimmings (I'm guessing flea markets and thrift stores are not even remotely up your alley) -- assuming you make no changes to bathrooms, kitchens, flooring, etc. It will also cost a lot to heat/cool that much space -- will you realistically even use most of it?

Have you accurately assessed your property tax liability? If you're in an area with property tax freezes that will reset with your purchase, so what the PO is paying might be fraction of what you'll be paying.

What about insurance? If you've been renting rental insurance is really cheap -- good insurance on a $1.5m home is going to be many multiples higher, esp. if you're in an area prone to fires or floods -- and you'll likely want to up your umbrella, too.

You say the home is fairly new, so won't need much in updates soon -- how new is fairly new? 2 years? 10? 15? If towards the higher end of that you might be surprised by needs for mechanical systems or structural updates or repairs -- and on a house that big in a HCOL those are not going to be cheap -- think 50k + for a roof, 100k+ for kitchen, 20k+ for HVAC, etc., etc.

Home ownership can be grand, and it's great you've found your "dream home" -- but it seems it's at the high end of affordability for you, which is not a no-go -- but be darn sure you really know what you're getting into -- the euphoria and the rushed timeline might be clouding your vision a bit.

Good luck!
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 »

A local broker is probably going to get you through closing on time vs a large national bank. Less bureaucracy to go through. Plus the rates are negotiable, so they'll usually try to get at least close to BoA's rate.
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celia
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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 celia »

You are probably "pushing it" to close in a month. Is it possible to extend closing for a couple of weeks? Then, some of the stress won't be so bad. You can't make lenders move any faster than they do. As my realtor who help me sell property in another state earlier this year, said to me (upon a delayed closing): "He who holds the gold, makes the rules."
chrisam314
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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 chrisam314 »

Well you kind of shot yourself in the foot by agreeing to close in 30 days and now you barely have any time for due diligence. Hopefully the home inspection comes back clean (certainly not a guarantee even if its a newer house). The lender will require an appraisal and if the home doesn't appraise you're going to be in a bit of a pickle.

Since you don't have time to really shop around for mortgages I would look up a highly rated local mortgage broker. Jumbo loans are kind of the wild west and it could take weeks to really find the best deal. I am just reaching the end of negotiating with 8 different lenders. The companies you listed are all fine, and some (big banks) may offer a small discount for moving assets. But the thing I realized is that competition is what really drove down my rate and closing costs. In the end I'll be getting 2.625% and no closing costs (actually a credit to pre-paids) but it took me weeks of taking the best offer and sending it to the worst to see if they would beat, rinse and repeat. This was for a 30 year fixed conventional with 20% down, 2 income household, 800+ credit scores, and no other debt. Also, not all lenders allow you to waive escrow (which I wanted to do).

I started with better.com and while they ultimately didn't win my mortgage they're UI online is the best out there and they advertise ability to close quickly. If you don't want to go the mortgage broker route I would recommend at least starting there and comparing the rate for your zip code and jumbo amount to zillow.com/mortgage-rates. That would give you an idea quickly of how competitive it is.
catlady
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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 catlady »

orhkaf wrote: Sun Aug 30, 2020 11:33 am Despite what others are saying, I think you can buy the house and probably be okay. There’s no point to hoarding cash your whole life. Enjoy!
I didn’t see anyone say the OP couldn’t buy the house. My, and others, point was OP should make sure they understand their actual cash flow and expected expenses first. None of the numbers OP posted add up and I’d hate to tell someone, “yeah, go for it!” based on faulty math.
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NewMoneyMustBeSmart
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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 NewMoneyMustBeSmart »

TheBogleWay wrote: Sun Aug 30, 2020 2:17 am Are there any lenders you'd recommend I add to my list above to call and get rates from?
Contact *all* that you can. There should only be a one-time hit to credit, the 2nd tier lenders are likely to be much better than WF/BofA etc.
-- | Few are those who see with their own eyes and feel with their own hearts - Einstein
averagelonghorn
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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 averagelonghorn »

bluebolt wrote: Sun Aug 30, 2020 7:48 am I might also reach out to a mortgage broker, who can take some of the work off your plate. You may not get the best rate from them, but you will likely get a decent rate without much hassle. Recently, some of the online mortgage providers have had the best rates, but years ago, my mortgage broker was able to get me better rates.

You mentioned 30 days. Is that when your closing is? Because of all the volume with historically low interest rates, the priority will be finding someone who can close in that timeframe.
I agree wholeheartedly with this comment.... closing within the timing of your contract is very high on your priority list, even if it costs a little extra. Others on this forum will cringe, but I say DO ask your real estate agent which mortgage brokers they have on their list that have both decent rates, and a reputation for closing on time. Refi shopping is a great time to shop a lot and do everything you can to get the absolute best in rates and closing costs. When buying, you're a little more under the gun.

Large national banks do not necessarily have a great reputation for closing on time.

I'm not going to analyze whether the purchase is right for you, you've decided that and you're a grownup. (Of course all advice you're getting around that is well intentioned and reasonable, so don't discount the questions others are asking about that.)

Sell what you need to for smallest cap gains or a loss to get enough to cover your earliest costs (Earnest money, inspections, possibly appraisal fee) first (as in tomorrow.)

Once you get a lender, get a full estimate on closing costs; sell enough to cover that as soon as you know. (You point out yourself, so you know.... stocks could crash tomorrow, a week from now, or whenever before you need it.... the right time to sell stocks is when you need the money, not trying to squeeze every cent out of them.)
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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 Pacific »

orhkaf wrote: Sun Aug 30, 2020 11:33 am Despite what others are saying, I think you can buy the house and probably be okay. There’s no point to hoarding cash your whole life. Enjoy!
If he was hoarding cash he would not have to sell his investments to make the deposit and down payment.
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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 »

Original Poster here

Update:

I shouldn't have mentioned cost of the home, as it's distracting from the thread and I still am looking for help. However since the cost of the home to income is being discussed so much, I'll address that and hopefully we can move on.

I used the effective marriage tax rate for my state to find out the conservative combined income of $340k annually amounts to $23k pay per month. Obviously there's going to be a surplus, we can easily afford the home with thousands saved monthly, so i'm not sure why 401k is being discussed like a cost. 401k isn't a cost, it goes towards retirement, just as the other thousands saved would via investments. I'm currently in a big house so don't have expensive furniture needs yet. The total cost of the house (again) after taxes and insurance is $6,000/month or a hair under if I get better interest rates. I'm already paying $3,400/mo in rent and we still save well into six figures per year, this just adds about $2,500 to our expenses, but it also trades about $3k GAINED per month towards net worth and equity so it's nearly a wash.

I already made threads here: viewtopic.php?f=2&t=320419 on this forum where I discussed in detail buying a big home and got the OK from the forum. In fact, this doesn't really change my retirement goals much compared to continuing to rent here. Last years combined income was near $600k and the year before was about $500k, so I'm being conservative with $340k and accounting for slower income years for me. I wish people weren't so easily distracted, affordability isn't the question here at all and I'm under a time crunch.

So, asked and answered, let's please move on.

I'm still hoping to get advice on a few things.

1) Can anybody recommend specific lenders to me that I should investigate as I get rates?

2) I could use a bit more guidance on paying fees (via points?) to secure the lower interest rate loan. One person responded to that saying it may be worth it, may be not, depends on how long you stay in the home. Let's assume I'm there over 10 years, given the loan amount, can anybody provide a little help there?
Last edited by TheBogleWay on Sun Aug 30, 2020 4:50 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 »

Log on to vanguard.com right now to change cost basis to SpecID.
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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 »

Lee_WSP wrote: Sun Aug 30, 2020 11:47 am A local broker is probably going to get you through closing on time vs a large national bank. Less bureaucracy to go through. Plus the rates are negotiable, so they'll usually try to get at least close to BoA's rate.
I found a guy who works for BoA and lives a mile down the street. Is that a "local broker"? Not sure the differences just yet.
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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 4:47 pm Log on to vanguard.com right now to change cost basis to SpecID.
I could probably do that tomorrow over the phone when I call in to sell, right?
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 4:49 pm
000 wrote: Sun Aug 30, 2020 4:47 pm Log on to vanguard.com right now to change cost basis to SpecID.
I could probably do that tomorrow over the phone when I call in to sell, right?
Please just do it now. Sometimes these things need to run overnight.
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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 »

catlady wrote: Sun Aug 30, 2020 1:00 pm I didn’t see anyone say the OP couldn’t buy the house. My, and others, point was OP should make sure they understand their actual cash flow and expected expenses first. None of the numbers OP posted add up and I’d hate to tell someone, “yeah, go for it!” based on faulty math.
The numbers add up, I'm not sure whats missing. Effective tax rates for my state amount to $23k/mo after tax. You're all doing me more harm than helping by distracting the thread so much with all of this. Yes, if I can buy this house and literally pocket over $10,000 every single month towards my net worth via investments, I can afford it comfortably. The average American brings home around $4k/mo, for perspective. Please, move on.
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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 4:51 pm
TheBogleWay wrote: Sun Aug 30, 2020 4:49 pm
000 wrote: Sun Aug 30, 2020 4:47 pm Log on to vanguard.com right now to change cost basis to SpecID.
I could probably do that tomorrow over the phone when I call in to sell, right?
Please just do it now. Sometimes these things need to run overnight.
I'm on it! Thanks for the advice.
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 4:52 pm
000 wrote: Sun Aug 30, 2020 4:51 pm
TheBogleWay wrote: Sun Aug 30, 2020 4:49 pm
000 wrote: Sun Aug 30, 2020 4:47 pm Log on to vanguard.com right now to change cost basis to SpecID.
I could probably do that tomorrow over the phone when I call in to sell, right?
Please just do it now. Sometimes these things need to run overnight.
I'm on it! Thanks for the advice.
Good. Feel free to post back here if you can't find how to do it.
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 4:52 pm
catlady wrote: Sun Aug 30, 2020 1:00 pm I didn’t see anyone say the OP couldn’t buy the house. My, and others, point was OP should make sure they understand their actual cash flow and expected expenses first. None of the numbers OP posted add up and I’d hate to tell someone, “yeah, go for it!” based on faulty math.
The numbers add up, I'm not sure whats missing. Effective tax rates for my state amount to $23k/mo after tax. You're all doing me more harm than helping by distracting the thread so much with all of this. Yes, if I can buy this house and literally pocket over $10,000 every single month towards my net worth via investments, I can afford it comfortably. The average American brings home around $4k/mo, for perspective. Please, move on.
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.
Last edited by Tingting1013 on Sun Aug 30, 2020 5:03 pm, edited 2 times in total.
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