Financial Advice RE:Home Finance

[Breadman03]

I'm going to lay it all out there for R2R.

TLDR: Want to buy house, but price is too low for banks to finance. Home needs roof and windows, current owner can't afford to replace. Home price plus repairs could be mortgaged. How to proceed?

Goal: Purchase home currently renting

Background: Wife's industry had a downturn and she went from making really good money to about $40k. The problem is that we have to pay back taxes which makes the budget really tight. We own two cars, with payments on one. We have about $8k in credit card balances from a trip right before her job tanked, then mostly groceries and home repairs while we adjusted our budget to our new income. Our current budget is balanced but tight.

Current moves: I got a new credit card with much higher limit for two reasons: improve debt utilization ratio for a better credit score and a much lower interest rate on the balance transfer. This should allow me to pay down about $800 or so more on the principle during the first year. I have about $600/month less about $150 that covers my monthly fuel expense and maybe buying dinner at work 1-2 times per month. I empty my account every month to maximize my payment, which usually ends up being about $100 over the minimum payment and will probably be $150 extra when the balance transfers to my new card. We are looking to refinance my car to reduce our payment by about $150/month since our credit has improved quite a bit since we purchased it. These moves will leave us a max budget of about $600/month for the mortgage alone. An online calculator suggests that mortgage, PMI, insurance and taxes altogether will be about $580/month so it fits well inside our budget.

Challenge: Our house is worth about $78k per Zillow. Per our rent to own agreement, we will purchase for $40k. The house needs a new roof and windows. A decent estimate for those projects is $11k. The banks we have talked to have all said that the least they will mortgage is about $53k.

One potential solution is to have the current owner replace the roof and windows, then pay her $53k, but she doesn't have the money to do so and her idea of repairs is barely rigging things together.

Option 1: Max out the credit card on fish stuff and eat Ramen Noodles until I die.

Option 2: Ask R2R since some folks on here have surely dealt with interesting finance situations and might have some useful suggestions. Does anyone have experience that may help us structure things to enable us to purchase?

Thanks for the advice!

 

[tangtime]

One advice, Zillow, is a HORRIBLE to base any kind of appraisal on and it isn’t an accepted value by any mortgage company.

Pay for a professional appraisal on your home to know it’s true value.

 

[KJAG]

Another tip. Don’t just rely on one appraisal if the numbers don’t add up. Those people are placed with a lot of power to either hook you up or make your life miserable. Example: we were going to refi since our neighborhood skyrocketed since we purchased our place in 2013. Got the refi appraisal and his number came in at like 60k over what we paid. Turns out he was incompetent of course and was using old comps: The loan company wouldn’t agree to a re-apparasial so we had to pull the cord completely with them, start a re-fi with another company, and get another appraisal which came in at just about double what we paid for the house. In short, pay close attn to your appraisal process.

 

[tangtime]

Ya and have the company pay for the appraisal lol. I know here in FL they are around $500.

 

[norfolkgarden]

Is this your first house?
There are first time home buyers programs in most states that help a lot both with financial breaks and a better understanding of the process.

What part of the country? State and county.
$50K for a single family home sounds small if you live on either coast.
How does the neighborhood compare on Trulia?

Looks like you already found the house, have a reasonable seller and some idea about what you need to do credit wise.

Am I right in guessing that you need to know the person who knows the more creative financial loan people?

That is usually the real estate agent desperate to sell a home.
But you already have the house and the seller so paying out a commission isn't so great.
Do you know any title insurance people?
Or mortgage loan people?
Usually the real estate agent or their broker knows all these people.
They do do something for the commission.
[emoji6]

You will need title insurance anyway.
Lol, let me repeat that.
You will need title insurance anyway.

Pretty impossible to get a loan from anyone without a clear title that is free of mechanics liens.

Maybe researching that is your first move and network through them?

If any of these words are new to you pick up a copy of real estate for dummies.

Not trying to be rude. It's a rewarding but slightly insane process.
Just trying to get a feel for where you are on the learning curve.

I'm old.
Living in house #3 currently.
Always an adventure.

 

[4FordFamily]

FHA 203B is your only option. Lenders nor Uncle Sam want to insure or lend on a home that is in a state of disrepair or incomplete — it’s a risky investment, statistically.

https://www.afrwholesale.com/fha-203b-repair-escrow/

Having the very low loan amount adds to the dissuasion as sub 100k houses are not profitable for most lenders/brokers. Sub 50k even worse.

Unfortunately, few lenders do FHA 203b, fewer still deal with smaller loan amounts like that. I do have a couple connections that may be able to help but as well-versed as I am with mortgage lending (been in the industry a while) I’ve never worked for one that did them.

I now focus on reverse mortgages for wealthy clients to be used as financial tools. Really cool stuff out there these days.

 

[norfolkgarden]

Do you have any recent 'comps' (comparison homes with similar number of bedrooms and bathrooms and roughly the same square footage in similar condition) within a few blocks?
Less than 2 years. Preferably less than 6 months.

What they *sold* for.
NOT what they listed for. List price is a fantasy depending on the location and current market.

Remax real estate agents are usually some of the more experienced agents in the local market.
Most of them moved to Remax for a better commission split between them and what their broker receives.

If you ask really nice, one of them may be willing to help you out in terms of pointing you in the right direction with just a few names of some of the financial people they normally work with.
They never know who can give them a valuable referral and are usually willing to go for a little good will.
Shepherding you through the whole fun process is how they make their living and why they get paid a commission.

 

[Breadman03]

Is this your first house?
There are first time home buyers programs in most states that help a lot both with financial breaks and a better understanding of the process. Not the first home. We lost that in the housing market crash.

What part of the country? State and county.
$50K for a single family home sounds small if you live on either coast.
How does the neighborhood compare on Trulia?

Luzerne County, PA. Recent comps sold from $35k to $400k within 1/10 of a mile. Narrowing comps to similar age, but within about a mile puts value of $75-100k.

Looks like you already found the house, have a reasonable seller and some idea about what you need to do credit wise.

Am I right in guessing that you need to know the person who knows the more creative financial loan people?

That is usually the real estate agent desperate to sell a home.
But you already have the house and the seller so paying out a commission isn't so great.
Do you know any title insurance people?
Or mortgage loan people?
Usually the real estate agent or their broker knows all these people.
They do do something for the commission.
[emoji6]

You will need title insurance anyway.
Lol, let me repeat that.
You will need title insurance anyway.

Pretty impossible to get a loan from anyone without a clear title that is free of mechanics liens.

Maybe researching that is your first move and network through them?

I don't know any of those people for certain, but surely know quite a few through work at Wawa.

If any of these words are new to you pick up a copy of real estate for dummies.

I completed all prerequisites to become a Realtor in CA in 2003-4, but my unit denied me leave to sit for the state exam. With a kid on the way, we couldn't afford to sit in CA with no income, so we came back near our families.

Not trying to be rude. It's a rewarding but slightly insane process.
Just trying to get a feel for where you are on the learning curve.

Rude? Far from it. I'm just looking to get myself set up to complete a transaction. Ideally, the Powerball ticket I bought a few months ago won something. I'll probably get around to checking it the next time the jackpot hits a few hundred million. Yeah, I blow about $10/year on it.

I'm old.
Living in house #3 currently.
Always an adventure.

FHA 203B is your only option. Lenders nor Uncle Sam want to insure or lend on a home that is in a state of disrepair or incomplete — it’s a risky investment, statistically.

https://www.afrwholesale.com/fha-203b-repair-escrow/

Having the very low loan amount adds to the dissuasion as sub 100k houses are not profitable for most lenders/brokers. Sub 50k even worse.

Unfortunately, few lenders do FHA 203b, fewer still deal with smaller loan amounts like that. I do have a couple connections that may be able to help but as well-versed as I am with mortgage lending (been in the industry a while) I’ve never worked for one that did them.

I now focus on reverse mortgages for wealthy clients to be used as financial tools. Really cool stuff out there these days.

I'll look into the 203b.

Do you have any recent 'comps' (comparison homes with similar number of bedrooms and bathrooms and roughly the same square footage in similar condition) within a few blocks?
Less than 2 years. Preferably less than 6 months.

What they *sold* for.
NOT what they listed for. List price is a fantasy depending on the location and current market.

Answered at top of this post.

Remax real estate agents are usually some of the more experienced agents in the local market.
Most of them moved to Remax for a better commission split between them and what their broker receives.

If you ask really nice, one of them may be willing to help you out in terms of pointing you in the right direction with just a few names of some of the financial people they normally work with.
They never know who can give them a valuable referral and are usually willing to go for a little good will.
Shepherding you through the whole fun process is how they make their living and why they get paid a commission.

I'll give that a shot. I'm not against paying a commission but also don't feel like wasting their time. The current homeowner is...interesting and freaks out about pretty much anything. I feel obligated to have all my ducks in a row before beginning the formal process.

Thanks for the advice. I'll be digging in today.

 

[Mark Gray]

I'm going to lay it all out there for R2R.

TLDR: Want to buy house, but price is too low for banks to finance. Home needs roof and windows, current owner can't afford to replace. Home price plus repairs could be mortgaged. How to proceed?

Goal: Purchase home currently renting

Background: Wife's industry had a downturn and she went from making really good money to about $40k. The problem is that we have to pay back taxes which makes the budget really tight. We own two cars, with payments on one. We have about $8k in credit card balances from a trip right before her job tanked, then mostly groceries and home repairs while we adjusted our budget to our new income. Our current budget is balanced but tight.

Current moves: I got a new credit card with much higher limit for two reasons: improve debt utilization ratio for a better credit score and a much lower interest rate on the balance transfer. This should allow me to pay down about $800 or so more on the principle during the first year. I have about $600/month less about $150 that covers my monthly fuel expense and maybe buying dinner at work 1-2 times per month. I empty my account every month to maximize my payment, which usually ends up being about $100 over the minimum payment and will probably be $150 extra when the balance transfers to my new card. We are looking to refinance my car to reduce our payment by about $150/month since our credit has improved quite a bit since we purchased it. These moves will leave us a max budget of about $600/month for the mortgage alone. An online calculator suggests that mortgage, PMI, insurance and taxes altogether will be about $580/month so it fits well inside our budget.

Challenge: Our house is worth about $78k per Zillow. Per our rent to own agreement, we will purchase for $40k. The house needs a new roof and windows. A decent estimate for those projects is $11k. The banks we have talked to have all said that the least they will mortgage is about $53k.

One potential solution is to have the current owner replace the roof and windows, then pay her $53k, but she doesn't have the money to do so and her idea of repairs is barely rigging things together.

Option 1: Max out the credit card on fish stuff and eat Ramen Noodles until I die.

Option 2: Ask R2R since some folks on here have surely dealt with interesting finance situations and might have some useful suggestions. Does anyone have experience that may help us structure things to enable us to purchase?

Thanks for the advice!

I read this really fast but if you are paying the government for back taxes, take out a loan, the IRS interest will kill you. Good luck

 

[Breadman03]

I read this really fast but if you are paying the government for back taxes, take out a lown, the IRS interest will kill you. Good luck

We'll be done paying them off in about 12 months, but we did look into that.

I did find the FHA 203(k) rehab loan that looks interesting. We fall well within the upper limit, but I don't see a lower limit published. The median price for Luzerne County, PA is $161k.

 

[norfolkgarden]

I'll look into the 203b.



Thanks for the advice. I'll be digging in today.

Lol, sorry about the newbie level advice.
Next time mention you are almost a realtor.
[emoji23]
Please keep us posted.
I would enjoy learning more about this.

Hope it works out great!

 

[Tuffyyyyy]

Am I correct that you’re currently renting the house you want? Or are you trying to move in and then rent to own? If you’re already there, is the landlord in a rush to sell? Just given your credit card debt, car loan, and backed taxes, I don’t think I’d be in a rush to add to that.

It does seem like you’ve got a good head on your shoulders, but I’d hate to see you get stretched too thin. Especially in our hobby.

 

[Breadman03]

Lol, sorry about the newbie level advice.
Next time mention you are almost a realtor.
[emoji23]
Please keep us posted.
I would enjoy learning more about this.

Hope it works out great!

I certainly don’t claim to be an expert. Most of what I learned back in ‘03 has changed, but I know enough to not be lost.

Am I correct that you’re currently renting the house you want? Or are you trying to move in and then rent to own? If you’re already there, is the landlord in a rush to sell? Just given your credit card debt, car loan, and backed taxes, I don’t think I’d be in a rush to add to that.

It does seem like you’ve got a good head on your shoulders, but I’d hate to see you get stretched too thin. Especially in our hobby.

We’re already here. The owner would like to complete the sale, but isn’t in a rush because we pay for it and keep it maintained. We’re not in a rush to complete the sale, but want to get ourselves set up for it. I figure maybe 18 months until we can do it comfortably. This is all about planning.

 

[Sipec]

Advice: buy as much coral and fish as possible, then move in with parents.




























....just kidding lol

 

[fish farmer]

That's great that you don't have to rush. If you have 18 months or more to pay current debt off that is great.

I though my budget was going to be tight as a single guy with a new truck payment, reef tank and a $800 mortgage, but it all worked out.

The funny thing about appraisals, my house was appraised at $125,000(the buying price...with similar comps). Three years later in 2008, town reappraises at $105,700. My neighbor's house was appraised at $80,000. He died and the house gets listed. It needed major work, leaky roof, rotten sill, old windows, ceiling issues, etc. It sat on the market for couple of years, eventually getting sold for around $30,000. New owner fixed it up and sells it for around $70,000.

 

[Sarah24!]

Hello,

So, I bought a new home last year and did an FHA loan. The issues that I had was that, I had all education and basically no work experience. What really saved me, was that I had close to 30% down, and my credit was in the low 800s, and I only have one credit card (which I barley use as is) with a limit of 9,000.

When my loan lady helped me, I had maybe 1,000 give or take a month in bills. (That’s phone, gas, food etc). I had already had my credit card for about 3 years and at the time lol they actually owed me. (Them calling me and bugging me to use became annoying). But, anyway if you have about 10-20% down, that really motivates lenders. I would also suggest that you raise your dynamic budget headroom some. (Sorry it was a term my lender used, I was what the heck is that). In short if I read your post correctly, your mortgage budget is 600 a month, and your at 580. Suggestion try and make your budget for a mortgage to be 900. (Now, I’m not saying buy a house w a 900 montage, but set aside 900) If you plan for that, with a 580 mortgage you have a 320 headroom for error and emergencies.

When I did my loan, I set aside 2,000 a month for a mortgage payment. Lol I sure the heck didn’t want one that high though. So when we looked at homes, I told
Then I wanted a mortgage between 750-1200 a month. When they asked me what’s going to happen if we get
You a home and your at your max budget amount of 1200 or close to it, and expenses go up? Can you still do 1200, because most said we would feel more comfortable if you only did a 700 mortgage a month. Then lol once I showed them I was putting 2,000 a month just in an account for my home loan they sang a different song. I was able to show 2,000 a month the same time of month for 12 months. Plus I had money to put down, which lowered my financial burden. But having a larger headroom or I guess debt to income ration (but that covers everything as well), will open a lot more doors.

In addition as some have posted lenders are not found of homes under 100,000 roughly. They are kinda gready lol but stick to your guns. Overall they want money, if you have the money, and you want that home, they will make it work or someone will. It’s not an ideal situation, however if you and your wife can open up larger cushion in your budget then awesome. Before, you have your credit pulled, (it’s a hard hit on it) make sure the IRS is completely paid off). From family experience, my other brother ( the reliable one lol, owed the IRS $17 dollars roughly, he had excellent credit, money down etc, and not one lender would even touch him until he had something from the IRS showing he paid them their $17 dollars lol. Even if your making payments and on time it’s a huge huge red flag.

I really wish your family well, and hope it works out, and remember time and money are your best weapons.

Sincerely
Sarah

 

[NeddieTone]

Keeping a personal budget is vital if you want to instill financial discipline and save money. Every company and every state has its own budget.

 

[NeddieTone]

Also, every person should know how to manage their money and keep track of their income and expenses for a month, a year, or a long period. In addition, structuring a personal budget helps to reduce expenses and instill financial discipline. For example, make less emotional purchases and reduce credit. All of these criteria began to be obtained after seeking advice from Mortgage Broker Tamworth. Where they helped me put together a plan that allowed us to raise money for our new home, plus all sorts of other expenses like taxes.