Am I dreaming or is there a slim chance....

[Anonymous]

Hello All & Happy New Year:

I've been looking at a new constructions and found one that I really, really  love, but would like to know from you all if I have a snowballs chance of obtaining a mortgage for it.  Thanks for any and all advice.

Details: 

Monthly Income:  $4600

Car Payment: $562, never late, owe $7700 more

CC:  $10 Min Payment-Paid in Full every month-CL-$500

Student Loan: $62-It use to be $336, but applied for IBR and payment was reduced to $62, balance: $56000 (funny, I don't feel that smart)

Planning on going VA, FHA or NACA (still pondering on it)

One account in collections, currently in dispute.  Amount $1100, so could be paid off in a month, if necessary.

Scores:  672, 606, 636 in Nov, I'm hoping 2010 will bring an increase in all scores.

No lates within 12 month

Tampa Bay Area

Would like not to pay a down payment; however, living rent  free right now and can save $8-9K in 10 months

Looking to close in November for my birthday.

The house:  $230K base model, knowing me, I'll probably wany upgrades.  I'm hoping the builder will include some upgrades, but....

Am I dreaming, or is there any chance of obtaining this house?  Thanks!   -YesICan42

[Anonymous]

Assuming you're a veteran, VA is the only loan that is 100% no money down.  FHA requires 3% I think, maybe USDA does too and USDA has rural area constraints.  Not familiar with NACA

I'd say chances are good.  However, any of the governement-backed loans aren't tied to credit scores per se, but to debt ratio.  I'm not sure how a lender will look at your student loan.

Depending on outcome, you not only need a down payment, but closing cost as well.  The latter can run at least 5% of sales price.  And of course, your realtor's/buyer broker commission (2.5% or more of sales price)  Usually paid by seller and is split between agents, key word here is "usually."

Other than a car payment, student loan, and taxes, you say you can save 8-9K in 10 months.  I figure you have close to $3K after you pay bills and you only can put away 900 a month?  Am I missing something?

Yes, as you add options to the build, the price will creep up fast and big.  Most builders only install "builder's choice" appliances, cabinetry, flooring, and any architectural work to interior/exterior; the cheapest, entry-level stuff.  However, getting it done during construction is a lot cheaper, then say 10 years down the road and you now want vaulted or trey ceilings.

Other things to consider, what concessions is the builder offering?  Any upgrades thrown in with base pricing?

Find a good realtor or buyer broker; ask friends, family, or acquaintances (however be leary of recommendation and do your homework before entering into a contract) and I would not negotiate with the builder directly.  You could, but unlikely you'd have protection and walk-away clauses in the contract. 

[JenThompson777]

Hi, I understand that USDA loan is 100% financing with no money down required.  They do have a 2% fee, but its financed in... and no PMI! Yay!  Just make sure as already mentioned, that your home would be in a USDA approved location (See there website to make sure).  For you, the USDA sounds like an awesome way to go.  Mid-score only has to be 620 and it looks like that's met.  With 620, the USDA lender (usually) does not have to send in written explanations for negative info on credit report, unless its a negative federal debt, BK or judgment... I'm pretty sure.. at least that's what my USDA office contact tells me.

I'm also working on getting the USDA loan!! So good luck to you!!

[Anonymous]

your problem is going to be DTI...

You have 4600 per month income allows for about 1950 in total debt.

Student loans will be counted for the full payment, not the reduced payment.  You can not use the new programs for reduced student loan payments as a way to lower DTI.  They, at least as far as anyone on the board here has shown or reported, will count your full student loan balance and the associated payment when factoring DTI.

So if your current loan payments (car and student loans) = 898

Call your card and loan debt 900 and that leaves you 1050 for total mortgage payment.  I believe that NACA and USDA are fairly strict on DTI as well so you may have little room for an exemption for high DTI.  1050 is not going to get you a 230K house.

The basic payment and interest (30 year fixed at 5.25 %) = 1270 and then you have taxes, insurance, PMI, and HOA's if applicable.  Even assuming reasonable taxes and insurance, you will probably be over 1500 by the time it is all added up and possible as high as 2K if taxes and/or insurance is high.  Even if they do count the lower student loan payment, that still leaves you a couple hundred a month over DTI limits or more depending upon taxes, etc.

One thing to clarify, I am assuming the income you gave was gross as that is the number that is always used in mortgage discussions/applications. 

Also, going for a 230k+ (you mentioned upgrades) morgtage on 46K per year in income and with a almost 600 per month car payment make little to no financial sense.  That is in reality 5 times your yearly salary, not the recommened 2-3 times.  I know certain areas of the country this is almost impossible to keep to( I live in So Cal and we are at about 3.5 x our salary to buy a house....), but going that high on a zero down program is very dangerous.   Even more so seeing how if the car and credit cards you currently have have never been late, there must be some pretty big past credit issues for the scores to still be in the lower 600's unless the credit history is really short or something.  Please do not take this as judgemental as I have as bad or much worse at times, just observational.

[Anonymous]

Mickie08 & BrettW:

Thanks for the reality check. 

Over the past 5 years, I have not applied for any credit because I hate rejection and due to time,  all of the baddies (which were many) have fallen off.  Which is one of the reasons my score is so low.  I'm purchasing the car from a relative, so that is not being reported to any of the bureaus; and I simply don't have alot showing on my CR.  I used the $900 a month figure, because that was the rent I'd been paying for the past 2 years.  In reality, I plan to save that and more.  I've even considered paying off the car to lower my DTI, which would be beneficial, but still would not put me in this house.  To be realistic, I should look for homes under $100k and be happy with whatever I can find.  JT777, thanks for your input as well.  I hadn't thought about the USDA program, but it sounds like another option. 

Be Blessed!

[Anonymous]

I think your income is too low compared to your debt.  I was just approved for $250K and my income is $6K a month with $0 DTI.  You can get approved for a mortgage, just not that amount unless you pay off your current debt.

[Ned505]

As an Option.

I would suggest looking into saving the real estate commission.  Find an attorney who you can develop a relationship with.  Someone whose student loans are just as high

A realtor is paid for bringing buyer and seller together.  You will want one when you are too busy at work when you go to sell this beautiful house in a few years. But that work is done.  Save the commission, for when you are the seller.     

It is a really great time to be a buyer, especially to a motivated seller/builder who may be carrying the note on the land and the development.

And those upgrades will be worth it when you do wish to sell.  It is the little things that move a house. 

[Anonymous]

Ned505 and op.

The OP's issue is financial, not real estate related really.  The OP deos not make enough money to qualify for the price of the home that the OP was looking at.

As far as realtors, the seller pays for the realtor, not the buyer.  The sellers does not lower the price of the house if  the buyer does not have a realtor because the sellers realtor gets the full commission.  It is between the buyer and sellers agents to decide the split of the fees, but those fees are not determined by the number of agents involved.  It is a flat % of the sale price usually (5-6% is normal).  So paying out of your own pocket to have a lawyer as a way to lower costs instead of having a realtor that you choose whom is paid entirely by the seller makes no sense at all.

Of course you could not get a realtor and use the sellers realtor for the transaction while having your lawyer eyeball the contracts for a small fee, but there is a big downside to this as well.  The sellers realtor knows they will be doing more work if you have no agent of your own so they will not likely agree to much of a commission cut yet they will be working for the seller, not you.

In other words, not having your own agent generally does not help you very much, but makes you much more at risk to get scammed by someone or to end up in a bad deal.  It simply is not generally worth the risk for what in most cases is little to no savings in money.  Of course there are some exceptions such as buying from family or friends when all details are agreed upon prior to the start, etc.