Excercise #2

Getting Started with AskChristee Buyer PreQual

In the first exercise, we reviewed the Quick PreQual module. Today, we will review the Buyer PreQual module. While the two modules are related, there are some differences between the modules. The Buyer PreQual module requires entry of income, monthly debts, and credit score.

The Buyer PreQual module is designed to provide an in-depth analysis of potential purchasing options based upon location, income, debts, credit score, loan type, and available cash.

The module provides great insight to all homebuyers including first-time homebuyers.

Loan officers can easily produce results based upon their Lending criteria with optional inputs.

The module will provide unique data for better communications and decision making; however, Christee does not issue mortgage loan approvals.

 

We appreciate some real estate agents are hesitant to get involved with buyers’ income and debts. We encourage to follow the below exercise, however, at the end we will show you how to get desired results without input of income or debts.

For assistance with the input fields, please see the Help File – Select kebob menu (three dots) in the top right corner to open file Help File.

Exercise in Best Utilization of Cash Options Buyer PreQual

Situation: A couple anticipates netting $100,000 from the sale of their current home. The $100,000 must cover down payment and closing cost. They have combined annual incomes of $125,000. Credit score of 715. Total Monthly debts of $650. They would like to limit the new mortgage payment to $3,600.

Monthly debts include:

Credit card payment of $50 balance of $3,000

Auto #1 payment of $250 with balance of $25,000

Auto #2 payment of $350 with a balance of $30,000

Our Goal is to determine most affordable price home with best utilization of cash.

Without Christee, this would involve a great deal of time and guesswork.

Christee will allow insight to our goal in minutes without guesswork.

 

Required Inputs: Please enter following required inputs:

Location: Anne Arundel County, Maryland.  

Interest Rate: For this exercise, we will use the default rates. (7.25)

Loan Type: Select Conventional and FHA.

Loan Term: 30 years

Income: $125,000

Monthly Debt Payment: $650

Credit Score: 715

Married: Check the box for ‘married’.

1st Time Buyer: Uncheck the box for 1st time homebuyer. (not 1st time buyers)

Optional Inputs:

Enter Cash Available of $100,000

Limit Monthly Payment of $3600

Submit Inputs for calculation by touching check mark in green circle.

Viewing Results: We will be viewing ‘Spending Cash Options’ for this exercise.

Minimum Cash Results show a purchase of $457,775 Spending cash of $37,908.

Spending cash results Shows a purchase of $523,250 Spending cash of $100,000.

The range is $457,775 to $523,350 with a payment of $3,600 depending cash.

We will now look at 3 scenarios for allocation of available cash:

Option 1. Use all cash for downpayment and closing cost

Option 2. Use a portion of cash to pay off monthly debts

Option 3. Utilize Less Cash and Put extra cash in the bank

Option 4. Eliminate Monthly PMI

 

Option #1 Utilization of $100,00 cash for down payment and closing cost Details

Conv Spending $100,000:

Purchase Price: $523,350

Loan Amount: $440,025

Mortgage Payment: $3,599.89

Other Debts: $650 (credit card and two auto loans)

Total Monthly Obligations: $4,250

Debt-to-Income ratio: 40.80% *

  • In the Conventional Loan Details Section: Debt-to-income ratio is 40.80%. Translated this means total monthly obligations of $3,600 mortgage payment plus existing debts of $650 equals 40.80% of gross monthly income.

Option #2. Lower cash by $25,000 and payoff auto debt of $250 per month.

Return to Input Screen.

Step 1. Reduce monthly debts from $650 to $400 (reduction is $250 car payment which in this scenario we will pay off).

Monthly Debts: Enter $400

Step 2. We will reduce available cash by $25,000 (auto loan balance)

Available cash: Enter $75,000

Step 3. We will also increase the allowable mortgage payment to $3,850 (3600 +250 car payment)

Limit Payment: $3,850

Step 4. Submit for results

Viewing results: Option 2 results – paying off car debt & $75,000 cash toward home purchase.

Purchase Price: $524,125

Loan Amount: $465,925

Mortgage Payment: $3,849.87

Other Debts: $400

Total Monthly Obligations: $4,250 (same)

Debt-to-Income ratio: 40.80% (same)

Option#2 allows for a reduction in personal debt (non-tax deductible) and higher mortgage payment and higher tax deduction.

Return to Input screen

Option #3 Spend $80,000 cash and bank $20,000

Step 1. Restore monthly debts to $650

Monthly Debts: $650

Step 2. Adjust available cash by $20,000

Available Cash $80,000

Step 3. Eliminate monthly payment cap of $3,850

Viewing results Option #3

Purchase Price: $525,875

Loan Amount $462,675

Mortgage Payment: $3,828.73

Other Debts: $650

Total Monthly Obligations: $4,478

Debt-to-Income ratio: 43% (increase)

This option increases monthly obligations; however, we have $20,000 in the bank.

Return to input screen.

Option #4 Determine price home and cash requirements to eliminate monthly mortgage insurance (PMI).

Step 1. Restore monthly debts to $650

Monthly Debts: $650

Step 2. Re-enter cash available

Available Cash Enter $100,000

Step 3. Establish desired monthly payment

Limit Payment: Enter $3,600

Step 4. Eliminate monthly PMI by entering 20% down payment in optional inputs

Down Payment Field: Enter 20

Viewing Results for Option #4. We will now look at both Minimum Cash Results and Spending cash results.

Minimum Cash Results

Purchase Price: $552,450

Loan Amount $441,950 (80% LTV no monthly PMI)

Mortgage Payment: $3,599.83

Cash Required: $127,940

Other Debts: $650

Total Monthly Obligations: $4,250

Debt-to-Income ratio: 40.80%

Notice the cash required has increase because Christee resolved the maximum price home to purchase with a payment cap of $3600 monthly and NO monthly PMI.

Spending cash results for option 4 – spending cash of $100,000 and no PMI.

Purchase Price: $430,400 (decreased due to cash of $100,000 and 80% LTV)

Loan Amount $344,300 (80% LTV no monthly PMI)

Mortgage Payment: $2,804.46

Cash Required: $100,000

Option # 4 allows for increase in purchase price to over $552,000 however an additional $25,000 cash is required.

Summary. In a few minutes we created four purchase options and utilization of cash. Of course, we could easily create several more scenarios with different utilization of cash. These are viable options to discuss with the Lender.

Please note your results may vary slightly due to closing cost. Closing cost are date sensitive. The above results are based upon a run date of 7/19/23 with closing date 30 days in the future.

Can you get same results with Quick PreQual without input of income or monthly debts? The simple answer is yes.

Step 1. Open Quick PreQual Module.

Step 2. Select Anne Arundel County Maryland as location

Step 3. Use 7.25% as conventional 30-year rate

Step 4. Select Conventional as loan type

Step 5. Select 30-year term

Step 6. Limit payment to $3,600

Step 7. In optional inputs Enter Cash $100,000

Step 8. Enter Credit score of 715

Viewing Results for $3,600 payment and $100,000 Cash Quick PreQual

Minimum Cash Results: Purchase Price $457,775

Spending Cash Results:

Price: $523,350

Loan Amount $440,025

Payment: $3,599.89

These are same results from Buyer PreQual where we entered income and monthly debts. Of course, you can continue the exercise with Quick PreQual by changing the amount of cash available.

In the above exercise, Christee provides additional data such as tax deduction, tax savings, net mortgage payment, and closing cost.

We hope you enjoy your Christee experience!