Separating to Regional: Mortgage concerns
 

I'm 99% decided on accepting a position at a regional once my separation is finalized. Will be moving to Ft. Worth to be in base, looking at buying a house there. Does anyone have experience with applying for a mortgage pre-approval as they separated, and whether it's Kosher to use military income for that? I intend to buy a house in the price range I can afford even on 1st-2nd year FO salary, but I imagine the odd nature of that pay structure and not having a pay stub yet would complicate things with a lender.

Thanks for any input!

Try National Bank of Kansas City (NBKC). I'm still in and refinanced recently, their customer service is amazing. Some of my Bro's, in your same shoes, are having success there once they separate.

I'm going through National Bank of Kansas as well and they are bending over backwards to make it happen for me. I suggest you buy the house while still on active duty. If not you will have to use your monthly guarantee at first year pay at your regional and will be very difficult to get approved. They can take you up to 60% debt to income ratio on a VA loan though which is super high, but in my case I make way more every month at Southwest than my min monthly guarantee so it helps to account for that.

Helped many people in your situation
 

Hello! I work for NBKC, and my husband is retired Air Force and flies for Delta. I have helped many people in your exact situation. Send me a PM if I can be of any help!

i did this and went through NBKC. They will figure it out, but you might have to put a bunch of money down.

I am putting zero down on my VA and show a high debt to income ratio due to first year guarantee and they are making it happen.

It will be on terminal leave when I get down there, I'm not going to buy a house until everything is nailed down with the transition. I have a couple of months of time building before we buy, would a pre-approval while on terminal leave be enough, or at that point would I have to show airline pay?

FWIW credit is great, will be downgrading vehicles to lose the car payment, only have wife's student loan that I'm debating about paying off with the bonus. She does a sort of sales business from home but I'm not banking on that just yet. It's just a nice to have.

Thanks for the replies.

If you change employment your pre-approval based on your old job will be worthless. You have to complete the transaction prior to seperation or start from scratch after new eomployment.

Much easier to do while on AD than after a job change (regional, major, or any other job).

There is no sort of accountability for what happens to your financial situation AFTER the loan is issued, so nothing to worry about if the papertrail did not exist before the loan. Just because you might have been thinking about maybe leaving AD when you took the loan is irrelevant.

If you had a documented separation date when you qualified for a loan using AD payscale, and later defaulted on the loan it's hypothetically possible that there could be blowback regarding taking a loan under fraudulent circumstances. But that's pretty unlikely as far as I know, and as long as you don't default then it's moot.

I did exactly what you're talking about; bought a house on a VA loan while separating with my follow-on employment at a regional.

It was a bit of a pain to show the loan guy what my income was going to actually be. I sent them a copy of the contract for the regional I was going to be working at, which showed both the pay scale as well as monthly hourly pay guarantees, etc. I created a spreadsheet that showed what my minimum annual income was going to based on the contract, but the bank wasn't satisfied with it.

I eventually had to contact the regional itself, which had a contractor they employed to verify employment. That contractor was able to produce a document that said basically the same thing I had previously done, showing the minimum income that the contract guaranteed for the first year, second year, third year of employment. Since it was on company letterhead, I guess, the bank accepted it and I got the loan.

Of note: I closed on the house before I left active duty and it didn't make a difference in the process. The bank wanted documentation of continued service if I was going to claim my military income in obtaining the loan. This isn't their first rodeo.

This is kinda what I was afraid of happening if I tried to do that. I talked to the guy from NBKC yesterday, he mentioned manual underwriting but didn't sound like it should be a problem. He seemed to agree that 150K was a reasonable target home price on first year regional pay, and Zillow has a good number of ok houses in that range in North Ft. Worth where we're looking.

Interesting point, he said that despite the bonus, they can't count that toward your pay unless there is proof of it continuing, which obviously can't be done unless the regionals change something. So I plan on discussing it with a financial advisor, but plan to use the bonus to pay off wifey's student loan and eliminate monthly debt payments since TX is a community property state and that $250 a month would count against our debt/income ratio.

Just an FYI, standard underwriting guidelines state we can only use incentive based income like commissions, bonuses, and OT if there is a 2 year's history with the same employer and confirmation that you are eligible to receive the same in the future. Hope this helps clarify!

Just an FYI, banks have to independently verify the income you will earn which is why they could not use the spreadsheet you created but could use the one the contractor generated. Frustrating when it is the same info, but hopefully helps explain why they could not use what you generated.

A down payment may or may not be required depending on the overall profile of your loan and how much of a purchase price the new home will be. I have had borrowers with only first year FO pay qualify for pricey homes, but they had very little other debt and a significant down payment. I have also qualified borrowers with 1st year FO pay with NO money down if the purchase price isn't too out of bounds and there isn't much other debt. General rule of thumb with VA financing is that the debt ratio (total debt including your mortgage payment principal + interest + taxes + insurance + any applicable HOA dues) does not exceed 55% of your gross income. You can qualify over 55%, but there need to be mitigating circumstances on the file (high credit scores, strong assets, selling a home which will drop the overall debt ratio, pay increase once hit 2nd year pay, etc..).

I can not recommend NKBC enough!!! They were fantastic!!! On the ball and impressed my realtor with their service.

I believe I worked with Pilotwife2, she was immense! Customer service through the roof!!!

I had originally went through a local mortgage company, they couldn't understand the way pilots are paid, they insisted I was only part time since I was only guaranteed 72 hours a month. NKBC made it happen!

For my next house, I'm going back to NKBC for my mortgage.

My God, I sound like a commercial, but they were great. This was my eighth house I've purchased, and they were easily the best mortgage company I've dealt with.

Same,

I worked with Dave Devine, and he was awesome. He knows the airline business and military and made the process easy. I highly recommend them.

I would absolutely RENT if I was in your shoes.

Wait until you have your dream job at a major, and are stable in domicile. Then buy.

Rent vs Buy Calculator | Zillow

At about 2.5 years it becomes better to buy vs. rent for me. It will be in domicile (DFW), and I expect to be at my regional for at least 6 years (I'll leave the upgrade/flow timeline debate for the Envoy thread...). I've rented for the past few years and I'm tired of p!ssing away money with no equity.

When I get my dream job at a major, we'll upgrade to a nicer house :) .

I think what people are trying to tell you is its going to be difficult buying right away leaving the Navy since your employment status will be in flux. You're not going to be an Envoy employee when you get out due to your side tour in SD in the training program. How long will it be between seperation and having an envoy employee number?

It will take a couple of months to do the time building. Wife and kid will stay with her parents in DFW during that time, and I'm anticipating staying with them until I get said employee # and contract to quote for the mortgage underwriting.

I agree that it will be difficult w/ the changes, but having the in-laws to lean on during the transition should make it doable.

Are you going to continue in the Guard or reserve? That can be a pretty helpful income in the first few years of a regional start. Many years ago, that income potential helped me in identical position your looking now.
Congrats

I've felt this way a different times in the past as well. I would be careful using the Zillow calculator as it does not take all the variables into account. These videos from the Khan Academy do a nice job of showing some other things to consider when trying to make the choice between renting or buying:

https://www.khanacademy.org/economic...-buying-a-home

https://www.khanacademy.org/economic...ailed-analysis

https://www.khanacademy.org/economic...-buying-a-home

I might lean towards renting, but your numbers might play out differently. Good luck either way.

Have you heard of Dave Ramsey? I highly suggest listening to a few of his shows and maybe reading one of his books before making this decision. Buying a home can be a great investment but it does not factor in risk. Do you have an emergency fund in place to take care of home issues?

Anyway, good luck with your decision!

Yes, big fan of Dave. We have a decent emergency fund in place, and have plans to minimize/eliminate debt as I take the pay cut to first year regional FO.

We were doing the snowball but put it on hold for now due to the uncertainties of separating and nailing down a job. Throwing everything extra we can for now into the emergency fund.

I'm glad I'm not the only one on here who is a Ramsey fan.

I was thinking the same exact thing when I read the OP's situation. But it seems he has a plan for the transition.

Personally, if I were in his shoes, I'd rent and wait for year two pay.