Any mortgage experts on here?

[lokiju]

The wife and I are looking to buy a home if at all possible for many reasons such as getting out of the renting life, starting a family, etc...

In the past two years I totally f'ed up my credit after being in a wreck and losing my income but that's a whole other story.

Now we're both working at decent paying jobs and easily make the dough to cover a mortgage but since my credit score is so crappy I can't get approved for anything and her income alone isn't enough to get us approve for a FHA loan that'd be enough money.

We're looking to get around a $180k loan and since FHA is out of the question since my credit has "dings" on it within the past 12 months, I was thinking maybe we'd have better luck with a 80/20 loan but don't know if there's some other kind of loan that'd be better for our situation.

Again, we could easily afford a payment on even a $200,000 loan but due to my credit history and score, it makes it difficulty (read: seemingly impossible) to use my income to our advantage, when I actually bring in more than my wife.

Any mortgage people on here have any suggestions?

 

[CPA]

with the subprime market in the tank right now, you might find it hard to secure a mortgage without anything down, which I assume you meant with the "80/20" reference. If you meant you will put down 20%, you should be able to find someone to float you the mortgage. How may brokers/banks have you contacted?

 

[lokiju]

Originally posted by: CPA
with the subprime market in the tank right now, you might find it hard to secure a mortgage without anything down, which I assume you meant with the "80/20" reference. If you meant you will put down 20%, you should be able to find someone to float you the mortgage. How may brokers/banks have you contacted?

I've tried Lending Tree so far which has put us in touch with 3 different companies.

One so far said he can't do anything for us after looking into everything but they were FHA only. I should be hearing back from another later today and she said she'll check both FHA and other types of loans for us and the 3rd hasn't given me any info yet.

We'd be able to come up with some money down but I don't think 20% now matter how hard we tried unless we waited two or more years. That'd be $36,000 on a $180k loan, we'd be able to come up with more like $5k or a little more.

With the amount of time it'd take to save up that 20%, I'd fear the prices would have gone up as well and that $180k wouldn't cut it at that point

 

[LegendKiller]

Originally posted by: CPA
with the subprime market in the tank right now, you might find it hard to secure a mortgage without anything down, which I assume you meant with the "80/20" reference. If you meant you will put down 20%, you should be able to find someone to float you the mortgage. How may brokers/banks have you contacted?

Just to back up what CPA said, the "silent second" 20% mortgage is pretty much dead right now. There are some programs you might be able to find that'll finance one, but you're going to be looking at a pretty high interest rate, especially with dinged credit.

Right now the credit market has contracted significantly. It is much more costly for anybody without prime credit and without something to put down, to find a cheap or any mortgage at all.

Seeing that you are near Atlanta, I do know from a coworker that has recently moved from there and another that is moving, that the Atlanta market is feeling a lot of price pressure right now. Prices have come down a little but there has been recent support for prices coming into the spring months. Even though Atlanta has a large base of middle-income people, I still expect it to face further price pressures. I would consider what area you are looking at and how prices have moved in the recent months to determine further exposure.

The last thing you want to do is to move into a house with low/no-down in a depreciating market with an expensive mortgage. If you and you wife's job are anything but rock solid I would also consider that.

It's not the most ideal time to buy a house right now unless you have money to put down and great credit and you can find an awesome deal.

 

[LegendKiller]

Originally posted by: lokiju
$36,000 on a $180k loan, we'd be able to come up with more like $5k or a little more.

With the amount of time it'd take to save up that 20%, I'd fear the prices would have gone up as well and that $180k wouldn't cut it at that point

You're going to have a hard time finding a cheaper loan with 2.5% down. As far as prices going up, that isn't going to happen by a lot for the next few years. If anything, you should be worried about prices going down, since that's the overall trend.

 

[IceBergSLiM]

why don't you work with a mortgage broker.

 

[dullard]

0) For more information, see the housing thread or the collapsing mortgage market thread.

1) CPA was correct, the mortgage industry is just in the beginnings of a massive termoil. The *&^% is just starting to hit the fan. Many companies related to mortgages are folding and many more will go out of buisness shortly. There are serious problems at the top (expensive home values are falling, people can't afford them, and if they foreclose the house is worth less than the mortgage amount). And there are serious problems at the bottom (subprime, bad credit scores, liar loans, etc). The number of foreclosures is going to skyrocket right around Oct of this year.

2) So, that means you need to get in right now when you can still have an opening or wait it out. I really think getting a mortgage in the next 12 months will be difficult for anyone with bad credit. Luckilly, if you choose the wait it out strategy, your credit score should really increase and you'll have a better downpayment to work with. I'd probably go with the wait strategy if I were you. But if not, you better get going quick before anything worse happens to the mortgage industry.

3) Atlanta area prices are not increasing. They've been fluctuating around $170k for two years now. You don't have to "fear the prices would have gone up." Now, interest rates may go up substantially. Often when rates go down prices go up, or when rates go up prices go down (because it is the combination that matters to most buyers, not the individual number). But, if you can get your credit in shape while waiting you might have a double bonus. Home prices will likely be steady or fall, while you might actually get a better interest rate if your credit score rises.

Note: your particular subburb might not reflect exactly what the Atlanta metro area does. But I have no data on it.

 

[lokiju]

Originally posted by: dullard
1) CPA was correct, the mortgage industry is just in the beginnings of a massive termoil. The *&^% is just starting to hit the fan. Many companies related to mortgages are folding and many more will go out of buisness shortly. There are serious problems at the top (expensive home values are falling, people can't afford them, and if they foreclose the house is worth less than the mortgage amount). And there are serious problems at the bottom (subprime, bad credit scores, liar loans, etc). The number of foreclosures is going to skyrocket right around Oct of this year.

2) So, that means you need to get in right now when you can still have an opening or wait it out. I really think getting a mortgage in the next 12 months will be difficult for anyone with bad credit. Luckilly, if you choose the wait it out strategy, your credit score should really increase and you'll have a better downpayment to work with. I'd probably go with the wait strategy if I were you. But if not, you better get going quick before anything worse happens to the mortgage industry.

3) Atlanta area prices are not increasing. They've been fluctuating around $170k for two years now. You don't have to "fear the prices would have gone up." Now, interest rates may go up substantially. Often when rates go down prices go up, or when rates go up prices go down (because it is the combination that matters to most buyers, not the individual number). But, if you can get your credit in shape while waiting you might have a double bonus. Home prices will likely be steady or fall, while you might actually get a better interest rate if your credit score rises.

Note: your particular suburb might not reflect exactly what the Atlanta metro area does. But I have no data on it.

Well My wife does have good credit (score is 770) but when trying to get a home loan for $200k on her income alone, it just isn't enough to cut it, it causes her debt to income ratio to be to great for anything above $150k.

What about something like coming up with the 20% via a bank loan or personal lone or something of that nature and then getting the remaining 80% through a FHA loan?

Are there any reasons that wouldn't work?

 

[lokiju]

Originally posted by: IcebergSlim
why don't you work with a mortgage broker.

Just want to learn what my options are before going further.

 

[Vette73]

Yea as others have kinda said, you need to wait.

Time, and of course if you have fixed your crdit problems, will make your credit much better. Also start saving for a better down payment. And waiting right now might get you a better house if your area is like most.

Even if you do get a loan the rate will be very high and it will hurt more in the long run.

Save for another 6-12 months at least and i mean save. no more extra or anything. SAVE and take your time!!

 

[tfinch2]

Originally posted by: lokiju

Originally posted by: CPA
with the subprime market in the tank right now, you might find it hard to secure a mortgage without anything down, which I assume you meant with the "80/20" reference. If you meant you will put down 20%, you should be able to find someone to float you the mortgage. How may brokers/banks have you contacted?

I've tried Lending Tree so far which has put us in touch with 3 different companies.

One so far said he can't do anything for us after looking into everything but they were FHA only. I should be hearing back from another later today and she said she'll check both FHA and other types of loans for us and the 3rd hasn't given me any info yet.

We'd be able to come up with some money down but I don't think 20% now matter how hard we tried unless we waited two or more years. That'd be $36,000 on a $180k loan, we'd be able to come up with more like $5k or a little more.

With the amount of time it'd take to save up that 20%, I'd fear the prices would have gone up as well and that $180k wouldn't cut it at that point

Serious question for the uninformed (me): Will putting down 5k even matter?

 

[vi edit]

Originally posted by: tfinch2

Originally posted by: lokiju

Originally posted by: CPA
with the subprime market in the tank right now, you might find it hard to secure a mortgage without anything down, which I assume you meant with the "80/20" reference. If you meant you will put down 20%, you should be able to find someone to float you the mortgage. How may brokers/banks have you contacted?

I've tried Lending Tree so far which has put us in touch with 3 different companies.

One so far said he can't do anything for us after looking into everything but they were FHA only. I should be hearing back from another later today and she said she'll check both FHA and other types of loans for us and the 3rd hasn't given me any info yet.

We'd be able to come up with some money down but I don't think 20% now matter how hard we tried unless we waited two or more years. That'd be $36,000 on a $180k loan, we'd be able to come up with more like $5k or a little more.

With the amount of time it'd take to save up that 20%, I'd fear the prices would have gone up as well and that $180k wouldn't cut it at that point

Serious question for the uninformed (me): Will putting down 5k even matter?

$5k on a $100k house, yes. $5k on a $200k house, no. $10k would be more appropriate.

There are still quite a few lenders out there that will do 5% down approval. 100% is getting very, very hard. As far as your payment goes, it make a minimal difference in monthly payments over 30 years of amortization.

 

[IceBergSLiM]

Originally posted by: lokiju

Originally posted by: IcebergSlim
why don't you work with a mortgage broker.

Just want to learn what my options are before going further.

yes exactly why I would recommend a mortgage broker.

 

[Blieb]

As far as I know, you're limited to:

[*]Owner financing
[*]No-doc loan

Your credit history woes have you caught in a bind ...

 

[dullard]

Originally posted by: tfinch2
Serious question for the uninformed (me): Will putting down 5k even matter?

Try putting yourself in the position of a bank. Lets say today you open up the Bank of TFinch2. Lets say I come to you and want to buy a $180k house. I have no money to contribute right now, but I do have an income so I may be able to pay it off. Closing costs are say $3000, so I really need to borrow $183,000 for this house which is worth only $180k. Would you loan me the money?

Consider: (1) The loan is for more than the house is worth. So, if I bailed, you couldn't even sell the house and get all of your money back. (2) I have no interest in the deal, nothing of mine is there, so if I bail I'm not really affected. Your bank will be though. (3) Foreclosures are skyrocketting. (4) Other companies are not interested in buying that type of mortgage from you so your bank is stuck with it. (5) Housing prices may fall.

So if I bail, I lose nothing, and you might be able to sell the house for $170k. Loss to you: $13k + many thousands of dollars on foreclosure costs.

Are you still willing to loan money to me?

By putting some of my money into it (A) I have an interest in the house and something to lose. (B) At least you don't loan me more than the house is worth. Your chance of a loss is smaller and the amount you lose will be smaller. Is $5k enough to make a massive difference? No. But any amount will help someone who is struggling just to be able to obtain a mortgage.

 

[tfinch2]

Originally posted by: vi_edit

Originally posted by: tfinch2

Originally posted by: lokiju

Originally posted by: CPA
with the subprime market in the tank right now, you might find it hard to secure a mortgage without anything down, which I assume you meant with the "80/20" reference. If you meant you will put down 20%, you should be able to find someone to float you the mortgage. How may brokers/banks have you contacted?

I've tried Lending Tree so far which has put us in touch with 3 different companies.

One so far said he can't do anything for us after looking into everything but they were FHA only. I should be hearing back from another later today and she said she'll check both FHA and other types of loans for us and the 3rd hasn't given me any info yet.

We'd be able to come up with some money down but I don't think 20% now matter how hard we tried unless we waited two or more years. That'd be $36,000 on a $180k loan, we'd be able to come up with more like $5k or a little more.

With the amount of time it'd take to save up that 20%, I'd fear the prices would have gone up as well and that $180k wouldn't cut it at that point

Serious question for the uninformed (me): Will putting down 5k even matter?

$5k on a $100k house, yes. $5k on a $200k house, no. $10k would be more appropriate.

There are still quite a few lenders out there that will do 5% down approval. 100% is getting very, very hard. As far as your payment goes, it make a minimal difference in monthly payments over 30 years of amortization.

What's the point of putting down 5%? Wouldn't you still have to pay PMI? It seems that if you're hard up to put 5% down on a house, you shouldn't even really be purchasing one.

 

[dullard]

Originally posted by: tfinch2
What's the point of putting down 5%? Wouldn't you still have to pay PMI? It seems that if you're hard up to put 5% down on a house, you shouldn't even really be purchasing one.

There is a wise thought in your post. A wise thought that many people have forgotten in the recent housing frenzy. If you can barely afford to get 5% or even 10% of the house value, what makes you think you can afford to pay the remaining 95%?

The old 20% rule of thumb had a lot of wisdom behind it.

But, for someone who is set on getting a house and who is right on the approval/disapproval border, any amount even 5% will be an assest.

 

[vi edit]

Originally posted by: dullard

Originally posted by: tfinch2
What's the point of putting down 5%? Wouldn't you still have to pay PMI? It seems that if you're hard up to put 5% down on a house, you shouldn't even really be purchasing one.

There is a wise thought in your post. A wise thought that many people have forgotten in the recent housing frenzy. If you can barely afford to get 5% or even 10% of the house value, what makes you think you can afford to pay the remaining 95%?

The old 20% rule of thumb had a lot of wisdom behind it.

But, for someone who is set on getting a house and who is right on the approval/disapproval border, any amount even 5% will be an assest.

I understand the point, but I think there are a lot of exceptions. My wife and I for example. She went from a negative income (school) to a very large one by simply getting a degree. Between the two of us our mortgage payment is less than 14% of our gross income(Zero down, BTW). Not sweating us by any means what so ever.

But it would take us almost 3 years of saving every extra penny of expendible income we have to come up with the 20% downpayment on the home. There's a lot of other stuff we could have paid down with those three years of saving (including putting it back into the principal of the home)

Not having 20% down is not even close to strapping us financially.

 

[Reel]

Originally posted by: dullard

Originally posted by: tfinch2
Serious question for the uninformed (me): Will putting down 5k even matter?

Try putting yourself in the position of a bank. Lets say today you open up the Bank of TFinch2. Lets say I come to you and want to buy a $180k house. I have no money to contribute right now, but I do have an income so I may be able to pay it off. Closing costs are say $3000, so I really need to borrow $183,000 for this house which is worth only $180k. Would you loan me the money?

Consider: (1) The loan is for more than the house is worth. So, if I bailed, you couldn't even sell the house and get all of your money back. (2) I have no interest in the deal, nothing of mine is there, so if I bail I'm not really affected. Your bank will be though. (3) Foreclosures are skyrocketting. (4) Other companies are not interested in buying that type of mortgage from you so your bank is stuck with it. (5) Housing prices may fall.

So if I bail, I lose nothing, and you might be able to sell the house for $170k. Loss to you: $13k + many thousands of dollars on foreclosure costs.

Are you still willing to loan money to me?

By putting some of my money into it (A) I have an interest in the house and something to lose. (B) At least you don't loan me more than the house is worth. Your chance of a loss is smaller and the amount you lose will be smaller. Is $5k enough to make a massive difference? No. But any amount will help someone who is struggling just to be able to obtain a mortgage.

If you bail, don't you have a negative impact on your credit? Can they pursue further money from you for their losses in civil proceedings?

 

[dullard]

Originally posted by: vi_edit
Not having 20% down is not even close to strapping us financially.

Good for you. I didn't have 20% down either. There are good reasons not to save up that much, especially when you are just starting out. But, if you want to violate the old rule-of-thumb, you had better stop and think it through. While it turned out well for you. It won't turn out well for millions of people who are just about to be foreclosed on. Millions of people who didn't think it through.

No rule-of-thumb is ever always right. You are a good example. But, it usually is correct.

 

[dullard]

Originally posted by: Reel
If you bail, don't you have a negative impact on your credit? Can they pursue further money from you for their losses in civil proceedings?

Yes, my credit score will be tarnished, badly. But I just bailed out of housing. Meaning for some reason I didn't want to own a house or couldn't afford a house. Since the credit scores biggest impact is to make buying a house difficult, it is meaningless to someone who just bailed.

Sure, it may be a bit more difficult to finance a car and insurance rates may go up a bit, but it really isn't a major problem. And the problems that are there are indirect and hidden.

As for your second question, I don't know enough about laws to answer it accurately.

 

[lokiju]

Originally posted by: vi_edit

Originally posted by: dullard

Originally posted by: tfinch2
What's the point of putting down 5%? Wouldn't you still have to pay PMI? It seems that if you're hard up to put 5% down on a house, you shouldn't even really be purchasing one.

There is a wise thought in your post. A wise thought that many people have forgotten in the recent housing frenzy. If you can barely afford to get 5% or even 10% of the house value, what makes you think you can afford to pay the remaining 95%?

The old 20% rule of thumb had a lot of wisdom behind it.

But, for someone who is set on getting a house and who is right on the approval/disapproval border, any amount even 5% will be an assest.

I understand the point, but I think there are a lot of exceptions. My wife and I for example. She went from a negative income (school) to a very large one by simply getting a degree. Between the two of us our mortgage payment is less than 14% of our gross income(Zero down, BTW). Not sweating us by any means what so ever.

But it would take us almost 3 years of saving every extra penny of expendible income we have to come up with the 20% downpayment on the home. There's a lot of other stuff we could have paid down with those three years of saving (including putting it back into the principal of the home)

Not having 20% down is not even close to strapping us financially.

This is nearly 100% our situation.

For the amount we're looking to get in a mortgage, we'd be paying out about 18% of our income, which by no means would strap us for cash or put is in risk of being foreclosed on.

We'd still have plenty of monthly income to pay other items, save, etc... but it'd take so long to save up 20% that it'd be a good 3 years before it'd happen and all the while I'll be throwing money into renting which could be going into equity and a home to start a family.

 

[Busie23]

Check out pentagon federal credit union, or navy first credit union. They make it a very smooth process without all of the shens that go on with regular banks/brokers. Anyone can get in at penfed, only members of the navy, or family members at navy first.

 

[FoBoT]

this is the WRONG time to get a mortgage without good credit

just don't do it

find the clip of Jim Cramer having his meltdown the other day

 

[dullard]

Originally posted by: lokiju
We'd still have plenty of monthly income to pay other items, save, etc... but it'd take so long to save up 20% that it'd be a good 3 years before it'd happen and all the while I'll be throwing money into renting which could be going into equity and a home to start a family.

The throwing money into renting idea is a really bad way to look at it. People make decisions that sound right but are mathmatically incorrect when using that logic. Instead, use the math itself:

If you got a $180k house now and if it has no problems at all (nothing to repair), you'd spend right around $54,000 on that house in the next three years. You'd also get roughly $5000 in tax breaks and have almost $6000 in equity at the end of that time. Thus, you'd spend $54,000 to get $5000 + $6000 = $11,000. You'd have "thrown money into buying", $43,000 to be more precise.

What about renting? If you rented for 3 years, money will be wasted by renting. Lets divide $43,000 by 36. You get nearly $1200. If your rent is more than $1200/month, you are better off buying. If it is less than $1200/month you are better off renting. Lets say your rent is $1000/month. You'd throw away $36,000.

That's right, you'd "throw away" $7000 less by renting. And that ignores the fact that houses break, that houses need more energy to run, etc. If you include investment income over the 3 years, that $7000 grows even that much bigger.

Of course, houses have intangible benefits that aren't measured by this math.