Quote:
Originally Posted by skyguy79
Since what you've stated above is contrary to what I had stated prior to your post, I went and double checked my paperwork and found that I was correct in saying that the bond was not included in calculating how much of a mortgage I qualified for.
My mortgage is with Citizens First and I received my Pre-approval Certificate and Estimated Cash to Close Worksheet (had no mention of bonds) about a week before chosing our property and placing an offer on it. Therefore it was not possible for the bond to be included since bond requirements/amounts were yet to be known at the time of the qualification.
With that stated, I cannot say that you are wrong in what you stated since I don't know where you applied for a mortgage or how your process may have gone down. So could there be more than one correct answer? Don't know! Guess the prospective buyer needs to pose that question directly to their lending institution if they want to know for sure!
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I would also recommend speaking with your mortgage broker about any qualification process. However a borrowers ability to be approved by an underwriter for a mortgage takes the following into consideration. Credit history (credit score), acceptable verification of downpayment and remaining assets, and ability to repay the loan. The ability to repay the is based on the borrowers stable monthly income versus their total outstanding monthly debt. That debt would be principal and interest on the amount of money they are borrowing, 1/12 of the real estate taxes, 1/12 of the homeowners insurance (even if paid yearly) any required monthly fees and 1/12 of the yearly bond payment. Because the bond is a required payment I would think that a lender would be considering that amount in the qualifying process if it is not going to be paid in full. If a borrower has monthly credit card debt or a car payment, etc that monthly payment is also used in the calculation. For a pre approval or prequalification letter usually I will used an "estimate" for taxes, insurance, condo fee, etc since I do not have that exact figure prior to the borrower finding a home. Knowing that a bond payment could be necessary I would think that an "estimated" amount for that would be used in the calculation before issuing a prequalification letter. But the bottom line is that you will be paying these amounts and you have to be comfortable with the on going payments.
Increasing your mortgage amount by the bond payment and then paying off the bond might be a good option especially if the interest rate you are getting on money borrowed is less than the bond interest rate (a good point offered by someone else on the forum). I agree that the bottom line regarding paying off the bond may depend on how long you will be staying in that home. I have to admit when looking thru the resales and seeing that a bond is paid off makes me take a second look at that home. I am not saying that a seller can ask more for their home but just like other "amenities" in a home it can make it more attractive for sale when all else about two homes is basically equal.