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halfbaked
LIF Adult
Member since 8/12 6937 total posts
Name:
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Buying a Home- 1,001 questions and issues.
So my DH and I just found out that the house we rent will be sold in 2013. We've lived there for about 5 years now and just signed a lease in November of this year. Our landlady wasn't even the one who told us, we found out from someone else, but that's a different story altogether.
For the first 2 years we were there, we were wedding planning so most of our money went into that. My DH was supposed to be setting aside money into our savings account for the past two years while I paid all the bills. Somehow, some way this didn't happen. Needless to say, I'm furious and disappointed. I'm trying VERY hard right now not to flip my ish on him.
Anyway, we really don't want to continue to rent. We have two large dogs and I KNOW it would be difficult to rent in that situation. Really, we SHOULD be in a position to put a down payment on a house, but we're not. Full disclosure: We have about $10k in our savings account. I have about $26k in my 401k, so I suppose about $13k to borrow (or withdraw? Can I do that since it's for a down payment?). DH's parents have also agreed to match whatever money we put up for a down payment to help with our future mortgage.
I don't know what to do. Houses in our area run about $350- $400k. (We're in Queens.) I know they really look for about 20% for a down payment, which we won't be able to afford right now, even WITH my ILs help.
We're hoping that this house will take awhile to sell. It's in VERY poor condition- 2 family house with ancient plumbing, electricity, leaky windows, right between the LIRR and LIE... I mean it's a convenient location, but that's about it. Even if we could afford this house, we wouldn't WANT it. We've set up a reasonable budget for ourselves that would allow us to save $24k by the end of 2013.
My question is.... well.... what else can we do? What are our options? DH doesn't have very good credit and I have ZERO credit, meaning I've never owned a credit card in my life. 
We're going to meet with an accountant after the new year, but it's just wearing on me. My DH is flipping out that we're going to be "homeless" and "living in the neighbor's basement" and he's really grating on my nerves. I'm furious at him and I'm really not in the mood to join in on his pity party. I want to be moving, to be doing, to be making a plan. Even when we found out, he just sat around and moped while I fumed and tried to come up with a plan of action at the very least.
Any help or advice or even just a hug would be appreciated. TIA. 
Message edited 12/17/2012 1:14:06 PM.
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Posted 12/17/12 1:13 PM  |
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nraboni
Uggh...
Member since 10/09 6905 total posts
Name:
Nicole
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Buying a Home- 1,001 questions and issues.
It will all work out. You can most likely get an FHA mortgage and with that you only have to put 3.5% down. Sometimes you can find a conventional mortgage which will allow you to put 5% down.
As for credit, you need to get a credit card. I would suggest a card with rewards points. Put it in your name only and pay off 95% of the balance each month so you can start to establish your credit.
Pull your DH's credit report and take care of anything outstanding. When we were looking for a house my DH's credit sucked and mine was good and we were able to go with an FHA mortgage.
Most 401K's allow you to take out a loan to purchase a primary residence. Those loans are different than the typical loan because I think they have a lower interest rate, allow you to take more than that 50% available, and allow you to extend the repayment time past 5 years. Check with your 401k plan administrator.
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| Posted 12/17/12 1:30 PM |
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chilltocam
LIF Adult
Member since 11/11 9141 total posts
Name:
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Buying a Home- 1,001 questions and issues.
I don't have a whole lot of info, but I know for a conventional mortgage you need 20% downpayment. For an FHA loan (? I think that's what it is), you only need about 3-5% down. I don't know what the qualifications are for that kind of loan. As far as your 401K, you can borrow up to 50% when its for a down payment on a primary residence (I think you need to send them a copy of the contract of sale). Good luck. I hope it all works out
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| Posted 12/17/12 1:31 PM |
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AScottWolf
I <3 our squish!
Member since 11/10 2237 total posts
Name:
Adriana
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Re: Buying a Home- 1,001 questions and issues.
Dh and I purchased a home this past May and only put 10% down and have a conventional mortgage though Wells Fargo. We still have PMI but the difference is once we have 20% in the house the PMI goes away. With an FHA I believe you still have to pay PMI even after you pay 20% in for 5 years.
We had a decent amont of savings left after the downpayment but still decided to borrow a little from my 401k. Each 401k is different but I took out a loan against my 401k which means I still have the full amount in my 401k and the interest I'm paying from the loan goes into my 401k. So I'm basically paying myself for taking out this loan.
You guys know your financial situation the best. Keep in mind that aside from the downpayment there are TONS of other costs that go into home purchase and living in your new home.
- closing costs
- inspection
- moving fees
- purchasing new stuff for the home (furniture, paint, lawn care stuff, snow removal stuff, blinds)
- Any work that needs to be done on the house and basic upkeep.
DH and I moved from a 1 br apartment so we had nothing and had to buy furniture for most of the rooms (a few which are still empty) as well as rakes, shovels, dirt, snowblower, yard waste bags, landscaping plants, blinds, and floors for 1 room. This is all basically small stuff but adds up after awhile.
As for a credit, get yourself a credit card asap. Even if you only use it for gas and groceries you need to build your credit.
HTH and good luck.
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| Posted 12/17/12 1:53 PM |
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halfbaked
LIF Adult
Member since 8/12 6937 total posts
Name:
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Re: Buying a Home- 1,001 questions and issues.
Thank you all so much for your responses. It's talked me off the ledge a bit. I've been fuming at DH and giving him the silent treatment and I know that's not going to help anything. I've heard a lot about FHA loans but I have NO idea what the requirements for it are. That's definitely going to be a question for our accountant when we meet with them. I just don't know how to go about getting a credit card. They always seem to be where you pay cash up front and then use it as a credit card. I'm fine with that, but that sounds almost like a debit card. Does it actually BUILD your credit? As for rewards cards, you mean like a store rewards card? I could do that- maybe to Target or something? I do a lot of my grocery shopping there.
Another thing I have no idea about is PMI. I understand what it is, but how much is it? A monthly fee?
We have calculated how much we can afford and it seems like we'd be able to afford a mortgage/insurance pretty comfortably- it wouldn't be MUCH higher than what we pay in rent.
As for the regular house stuff, we have all that. We rent the first two floors (including the garage and front and back yards) of a 2 family house so we've really been getting that stuff all along. Plus we have MORE than enough furniture for the time being (too much if you ask me) and DH always seems to come across free furniture (barely used!) in his line of work. Aside from that, DH and FIL are VERY handy and would be able to help with most if not all repairs. We've just been dragging our feet on the rental house because.... well... it's a rental. We weren't going to break our heads to fix it up knowing that in a few years we'd be moving. We just didn't think it'd be this soon, especially after signing the lease.
I'm going to share all this information with DH and hopefully he'll snap out of it. Being all doom and gloom is doing nothing but stressing us both out even more. Once again, thank you all so much for your responses! Keep 'em coming, I need alllllllllll the information I can get.
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| Posted 12/17/12 2:11 PM |
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AScottWolf
I <3 our squish!
Member since 11/10 2237 total posts
Name:
Adriana
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Re: Buying a Home- 1,001 questions and issues.
I have an idea about what you're talking about regarding adding cash to a card and using it as a credit card but no, I don't think that's what everyone is talking about. And although store cards like Target do effect your credit (either good or bad) store cards typically have the highest interest rates around.
I think we're talking about credit cards through banks such as Capital One or directly through American Express etc. As for rewards, I have a capital one cc and it's a rewards card where I get 1% back on certain purchases etc. Keep in mind, a debit card that's linked up to a checking account, even when used as a credit card in a store doesn't build credit.
PMI private mortagage insurance is applied automatically to your mortgage when put down less then 20% on a home. It's a certain % and not a flat fee.
I think speaking to an accountant is a great idea but I think it might benefit you guys even more (regarding house buying) if you speak to an actual mortgage consultant.
You mentioned you're in Queens so taxes won't be like LI but keep in mind that that's typically added to your mortgage/insurance and can increase it a decent amount. My mortgage/insurance is only about 600 more then what we were paying for rent, but taxes raise my monthly payment by almost 1k.
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| Posted 12/17/12 2:27 PM |
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MrsG823
Just call me Mommy.
Member since 1/11 5570 total posts
Name:
S
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Buying a Home- 1,001 questions and issues.
Take a look at FHA loans. They have MIP instead of PMI but it is for a set period of 5 years unless you refinance to a conventional loan before the five years are up. This is actually a great time to buy bc the mortgage rates are so low. You may want to talk to a mortgage broker to examine your options. Your credit scores also impact the type of loans you can take out.
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| Posted 12/17/12 3:29 PM |
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MrsG823
Just call me Mommy.
Member since 1/11 5570 total posts
Name:
S
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Buying a Home- 1,001 questions and issues.
http://www.fha.com/fha_loan_requirements.cfm
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| Posted 12/17/12 3:29 PM |
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ElizaRags35
My 2 Girls
Member since 2/09 20494 total posts
Name:
Me
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Buying a Home- 1,001 questions and issues.
We didn't have much more than you do in Savings (like relatively the same amount). We got an FHA mortgage, put the minimum down, did a seller's concession. It IS possible.
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| Posted 12/17/12 4:55 PM |
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JandJ1224
Member since 6/06 5911 total posts
Name:
Jannette
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Re: Buying a Home- 1,001 questions and issues.
I would suggest meeting with a mortgage professional who can go over your income and expenses with you to help you figure out what you can afford payment wise and that will help you set a budget and help you to make a plan for your new home or you might find renting would be a better option for another year.
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| Posted 12/17/12 5:29 PM |
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cateyemm
Twins!
Member since 7/10 8027 total posts
Name:
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Re: Buying a Home- 1,001 questions and issues.
You're talking about a secured cc and yes its a good option if you cannot get a traditional cc. Its basically like a debit card but it will help you establish credit since you're starting from 0. Im not sure if youd automatically be denied applying for a traditional cc or if you should give it a shot or if you should just go straight to a secured, maybe someone else has that advice.
No advice about the home stuff but good luck!!!
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| Posted 12/17/12 9:31 PM |
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nraboni
Uggh...
Member since 10/09 6905 total posts
Name:
Nicole
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Buying a Home- 1,001 questions and issues.
Go to Citibank.com and apply for one of their thank you points cards. You get points for purchases and you can use those points for so many different things.
Eta: look in to a target mastercard or visa but not the debit one. That way you get 5% off your purchases at target and establish credit through a major creditor.
Message edited 12/17/2012 10:14:56 PM.
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| Posted 12/17/12 10:12 PM |
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Re: Buying a Home- 1,001 questions and issues.
Is there any way you would consider renting for another 2-4 years while saving more $$ for a downpayment? Based on your finances, you would have to take a 401K loan which should really be a last resort. If you lose your job, you have a certain amount of time to pay it all back...that's a lot of pressure... I paid PMI for my property a few years back and it's about an extra $100/month and won't go away until around 2021, I regret having put down less than 20%. I would just keep renting and take over the finances since your DH didn't save a dime toward housing the past 2 years, but that's just me.
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| Posted 12/18/12 8:03 AM |
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MrsDrMatt
Live and RUN like a Ninja!
Member since 5/06 3104 total posts
Name:
MrsDrMatt
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Re: Buying a Home- 1,001 questions and issues.
Is your husband ready for the financial responsibility? Based upon what you wrote, i would question his ability.
I would rent until you save more money.
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| Posted 12/18/12 8:56 AM |
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MandJZ
Time for Baby #2!
Member since 8/10 4194 total posts
Name:
M
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Re: Buying a Home- 1,001 questions and issues.
When we were thinking of buying and we didn't think my credit would help us (also because I had very little credit history as an immigrant) DH's parents were willing to co-sign on our FHA loan. That could help with the credit situation as well as the downpayment/loan amount since their income would be factored in as well. If this is something you think they would be willing to do it may be worthwhile to talk to them about it.
Good luck! It will all work out!
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| Posted 12/18/12 9:25 AM |
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halfbaked
LIF Adult
Member since 8/12 6937 total posts
Name:
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Re: Buying a Home- 1,001 questions and issues.
Posted by MandJZ
When we were thinking of buying and we didn't think my credit would help us (also because I had very little credit history as an immigrant) DH's parents were willing to co-sign on our FHA loan. That could help with the credit situation as well as the downpayment/loan amount since their income would be factored in as well. If this is something you think they would be willing to do it may be worthwhile to talk to them about it.
Good luck! It will all work out!
I was thinking of this. I'm just super afraid to ask. That's DH's job anyway. My parents, unfortunately, are not in a position to help us financially.
I know we'd probably be better off renting, but I just know we'll be paying way more than what we pay now to find a place that will accept our two dogs. We are holding off for as long as possible though. This is all just preliminiary leg work. We're hoping we have until about June until we have to start looking. As for my DH being ready? I'm taking the decision out of his hands. I opened a joint savings and checking account and all his checks will be directly deposited. I HATE having to be this way. I'm not his mom, I'm not his boss, I'm his equal. But I gave him every opportunity to do this himself and he didn't. It's my fault for not looking at it too closely, too. But I think this was a major wake-up call for the both of us.
I know it's going to be a struggle, trust me, it's not ideal. But what can ya do? These were the cards we were dealt, now we just have to make them work. Thank you all for your great advice though. You guys have given me plenty to do and think about. We're going to meet with a mortgage consultant right after the new year so hopefully we'll get a little more insight into our situation then. Thank you so much for giving me some hope at least!
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| Posted 12/18/12 10:54 AM |
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DumpsterBaby
My compass when I'm lost
Member since 5/11 2210 total posts
Name:
My anchor when I get tossed
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Re: Buying a Home- 1,001 questions and issues.
Posted by ElizaRags35
We didn't have much more than you do in Savings (like relatively the same amount). We got an FHA mortgage, put the minimum down, did a seller's concession. It IS possible.
Same with us. The house fell through on the sellers part, but we know it's possible and plan to go the same route when we start looking again after the holidays.
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| Posted 12/18/12 11:14 AM |
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halfbaked
LIF Adult
Member since 8/12 6937 total posts
Name:
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Re: Buying a Home- 1,001 questions and issues.
Posted by DumpsterBaby
Posted by ElizaRags35
We didn't have much more than you do in Savings (like relatively the same amount). We got an FHA mortgage, put the minimum down, did a seller's concession. It IS possible.
Same with us. The house fell through on the sellers part, but we know it's possible and plan to go the same route when we start looking again after the holidays.
Thank you! You have no idea how good it is to hear that... well, yeah, you probably do. 
We've been looking into foreclosed homes in our area, or even pre-foreclosures. I know there's some pros and cons to this. My understanding is this: Pros: Cheaper, sellers are more aggressive since they need to pay back their loans; Cons: Can get stuck with extra costs after closing, can get stuck trying to evict previous tenants.
Again, this is all just preliminary work. We're not actively looking yet, just getting a feel for the market in our area. Thanks again everyone!
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| Posted 12/18/12 11:40 AM |
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ElizaRags35
My 2 Girls
Member since 2/09 20494 total posts
Name:
Me
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Re: Buying a Home- 1,001 questions and issues.
Posted by halfbaked
Posted by DumpsterBaby
Posted by ElizaRags35
We didn't have much more than you do in Savings (like relatively the same amount). We got an FHA mortgage, put the minimum down, did a seller's concession. It IS possible.
Same with us. The house fell through on the sellers part, but we know it's possible and plan to go the same route when we start looking again after the holidays.
Thank you! You have no idea how good it is to hear that... well, yeah, you probably do.
We've been looking into foreclosed homes in our area, or even pre-foreclosures. I know there's some pros and cons to this. My understanding is this: Pros: Cheaper, sellers are more aggressive since they need to pay back their loans; Cons: Can get stuck with extra costs after closing, can get stuck trying to evict previous tenants.
Again, this is all just preliminary work. We're not actively looking yet, just getting a feel for the market in our area. Thanks again everyone!
Once you get pre-approved, you can get a better understanding of what you can or cannot do in terms of purchasing. Good luck!
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| Posted 12/18/12 12:16 PM |
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halfbaked
LIF Adult
Member since 8/12 6937 total posts
Name:
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Re: Buying a Home- 1,001 questions and issues.
Posted by ElizaRags35
Once you get pre-approved, you can get a better understanding of what you can or cannot do in terms of purchasing. Good luck!
Thank you!!!
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| Posted 12/18/12 12:23 PM |
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Re: Buying a Home- 1,001 questions and issues.
Posted by halfbaked
Posted by DumpsterBaby
Posted by ElizaRags35
We didn't have much more than you do in Savings (like relatively the same amount). We got an FHA mortgage, put the minimum down, did a seller's concession. It IS possible.
Same with us. The house fell through on the sellers part, but we know it's possible and plan to go the same route when we start looking again after the holidays.
Thank you! You have no idea how good it is to hear that... well, yeah, you probably do.
We've been looking into foreclosed homes in our area, or even pre-foreclosures. I know there's some pros and cons to this. My understanding is this: Pros: Cheaper, sellers are more aggressive since they need to pay back their loans; Cons: Can get stuck with extra costs after closing, can get stuck trying to evict previous tenants.
Again, this is all just preliminary work. We're not actively looking yet, just getting a feel for the market in our area. Thanks again everyone!
As far as foreclosures, they are bank owned (REO) properties, and most of the times the banks prefer to sell them to investors and specific clients in the REO network instead of a typical buyer. It is usually more advantageous for banks to sell them that way, as they can sometimes sell them in "blocks" rather than individually. Many REO properties are in very rough condition, having been long neglected, abandoned, vandalized, etc. They wouldn't be mortgageable unless you went for a rehab loan, such as a 203(k) loan. Many REO properties sell to cash buyers. There's usually less flexibility in terms of price with an REO/foreclosure -- the bank has already incurred all of the expense of foreclosing on the home, so there's no incentive tro take less than market value at that point.
By pre-foreclosures, I think you mean short sales. In that scenario, they are still owned by the individual seller, but the seller owes more on the home than they can sell it for. So the seller's lender will have to agree to take less than what is owed. The seller doesn't really care what price they are getting -- in any case, they are walking away with no proceeds. But the bank (and the underlying investors) care, and they need to approve the sale. The pros of a short sale is that in many cases, the bank will be willing to take a bit less than market value to kind of cut their losses and avoid the time/expense of a foreclosure. But the cons, from a buyer's standpoint, is that the process can be long and frustrating, and there are a lot of factors out of the buyer's control. There is no standard short sale -- every lender has their own requirements and procedures. How smoothly a short sale goes depends a lot on the seller's situation and cooperation with the bank, the bank (or banks) holding the loans, and who is dealing with the bank and how experienced with short sales they are (it can be the listing agent, an attorney, a short sale processing company, etc.). Short sales can be good for someone who doesn't have a set time frame in which they need to be in a home, and who understands and is prepared for the process. But it also helps to do your due diligence on the short sale upfront -- does the bank know it's on the market? is the listing price realistic? (A bank may take 10% less than market value on a short sale, but won't let the seller sell it for 50% less) who is going to be talking to the bank? is the seller cooperating? etc.
I echo the advice of an earlier poster -- the best thing for you to do at this point is to consult with a mortgage professional There is really no downside -- you won't be locked in to anything, but you NEED to get information on (i) whether you qualify for a loan, and (ii) if not, what you need to do to qualify.
There is a lot of misinformation out there about real estate purchases and mortgages. For example, you do NOT need 20% down for a conventional loan. You can go as low as 5% in rare cases (you would need stellar credit, great debt-to-income ratio). You can do as little as 3.5% down with an FHA loan, and do a seller's concession (up to 6% of the purchase price) to roll in the closing costs associated with the loan. With a conventional loan, you can do 3% to 6% seller's concession for closing costs, depending on how much you put down. FHA v. conventional have different rules re: gifts for down payments (you mentioned getting money from parents). Mortgage insurance works differently for both FHA and conventional loans... you will pay pmi with a conventional loan if you put down less than 20%, but FHA's mortgage insurance is usually more costly, both in terms of the monthly payment, and because there is an upfront mortgage insurance premium (I believe it's now 1.25%) that gets rolled into your loan. Mortgage insurance stays on an FHA loan for a minimum of 5 years regardless of how much equity you have in a house (but after 5 years, you can apply to get it removed if you can show you have 22% equity). FHA = lower interest rate, which sometimes offsets the higher mortgage insurance payments.
Aside from FHA and conventional loans, there are other loan programs and products that you may be able to qualify for -- Sonyma, VA, etc.
But the bottom line is - there is a lot that goes into getting financing to buy a home. Rather than speculate, you definitely should sit down and talk to about your own personal situation and unique circumstances. They need to evaluate your credit (which you will definitely need to establish, and they can advise you on that), as well as income, assets, debt, etc. And then you can come up with a plan.
If you have questions about the buying process, or need recommendations for mortgage loan officers, feel free to FM me or contact me at [email protected] or (516) 587-7618.
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| Posted 12/18/12 12:25 PM |
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ALD618
LIF Infant
Member since 4/11 325 total posts
Name:
Ashley
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Re: Buying a Home- 1,001 questions and issues.
By pre-foreclosures, I think you mean short sales. In that scenario, they are still owned by the individual seller, but the seller owes more on the home than they can sell it for. So the seller's lender will have to agree to take less than what is owed. The seller doesn't really care what price they are getting -- in any case, they are walking away with no proceeds. But the bank (and the underlying investors) care, and they need to approve the sale. The pros of a short sale is that in many cases, the bank will be willing to take a bit less than market value to kind of cut their losses and avoid the time/expense of a foreclosure. But the cons, from a buyer's standpoint, is that the process can be long and frustrating, and there are a lot of factors out of the buyer's control. There is no standard short sale -- every lender has their own requirements and procedures. How smoothly a short sale goes depends a lot on the seller's situation and cooperation with the bank, the bank (or banks) holding the loans, and who is dealing with the bank and how experienced with short sales they are (it can be the listing agent, an attorney, a short sale processing company, etc.). Short sales can be good for someone who doesn't have a set time frame in which they need to be in a home, and who understands and is prepared for the process. But it also helps to do your due diligence on the short sale upfront -- does the bank know it's on the market? is the listing price realistic? (A bank may take 10% less than market value on a short sale, but won't let the seller sell it for 50% less) who is going to be talking to the bank? is the seller cooperating? etc.
As someone going through the short sale process right now, I honestly wouldn't recommend it to my worst enemy. Every time we take a step forward, it's like 2 more steps back. An emotional rollercoaster wouldn't even begin to describe it.
Good luck with your search. I hope it all works out for you! 
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| Posted 12/18/12 12:34 PM |
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halfbaked
LIF Adult
Member since 8/12 6937 total posts
Name:
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Re: Buying a Home- 1,001 questions and issues.
Christine- thank you so much!!! This was extremely informative. That's definitely our first step- meeting with a mortgage consultant. Thank you again for all your help! I truly appreciate it!
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| Posted 12/18/12 1:31 PM |
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Pomegranate5
LIF Adult
Member since 2/11 4798 total posts
Name:
Pomegranate5
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Re: Buying a Home- 1,001 questions and issues.
While it would be nice to have more in savings and more for a down payment, FHA loans are fairly easy to qualify for.
Just sit down with a mortgage professional, let them sort through your financial info and give you a better idea of what you can and cannot do. We walked into our local bank branch and made an appt with the guy there - he was very helpful and we didn't even end up using him for the mortgage. I think you'll be pleasantly surprised.
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| Posted 12/18/12 1:35 PM |
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halfbaked
LIF Adult
Member since 8/12 6937 total posts
Name:
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Re: Buying a Home- 1,001 questions and issues.
Posted by Pomegranate5
While it would be nice to have more in savings and more for a down payment, FHA loans are fairly easy to qualify for.
Just sit down with a mortgage professional, let them sort through your financial info and give you a better idea of what you can and cannot do. We walked into our local bank branch and made an appt with the guy there - he was very helpful and we didn't even end up using him for the mortgage. I think you'll be pleasantly surprised.
Everytime someone posts something like this, my heart lifts a little. Thank you so so much for your encouraging words. I feel like I'm learning and at least I'll be a little more prepared when we do sit down. Thanks again!
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| Posted 12/18/12 2:21 PM |
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