Loan Feasibility

[GrdnDelite]

Simply put, I am hoping there's a way to purchase this house other than cleaning out my IRA to do so, as I'm not sure I can do that and also pay the taxes that result.  Subject property is rural northern California (along the Russian River, meaning rural, Sonoma County, 20 miles from Santa Rosa, and not farming, just not city).  Small SFR, just over 1000 sq. ft. Nice condition, built 1960, and I'm not worried it won't appraise or anything like that.  Price on listing is 169.900 and it is bank owned.  Price is excellent for the area and condition of the structure.

Party one has a low FICO, 578.  Not encumbered--no car payment, no house payment, no considerable debt of any sort, however I am certain his credit report has ugly things on it (collections, etc, though I dont think judgments and I'm certain no trouble with taxes or the like), though unlikely that any recent items are of any considerable size.  Income around 66,000, salary, verifiable, five or so years with employer.  (This is my son.)

Party two, my husband, has a reasonable FICO, around 670.  DTI is way too high as we have a mortgage still in Ohio as well as some credit card debt.  No lates of any kind, ever.  While I'm sure we can get shut of the house in Ohio over time, it's unlikely in the much slower Ohio market that we can sell a century home on 18 acres before the desired subject property in CA is sold.  Income about 30,000, hourly, also verifiable and two years with employer, working on the third. 

20% or so downpayment available from me, and I'd be a third party, but my FICO is shot due to continuing efforts to get shut of still another property, that one also in Ohio.  I've not paid on that property in six months, and the third short sale offer is with the lender now.  RE agent thinks they'll accept this one, as it's much better than the prior two were.  If they don't, I'll be filing BK to get shut of that property.

When I examine hard money sites, it appears the sort of property this one is doesn't much interest that sort of lender, LTV notwithstanding.  If a hard money loan will do it, we'll do that, though 40%-50% down is a stretch.  I am hoping there is a middle ground I'm not finding.

What would work best for us is a 20% down and any reasonable loan terms on the remaining 80%.  Reasonable means it's okay if the interest is higher than folks in a more conventional/desirable circumstance would pay.  Reasonable also means we'd consider an ARM, though we've never had one.  Would consider other alternatives.  We'll pay closing.  We'll occupy once husband gets work there.  I am confident that he will get work there, as will I.  If pushing the percentage downpayment a bit higher will make the deal, we'll do that. Much over 30%, though, and I start to sweat.

The imperative is that we obtain this particular property.  It is the home in which we lived (and that we owned) prior to leaving the state, and relocating to Ohio has proven not to be a good idea (for family reasons, nothing against the state, mind).  Presuming we can find a way back into this property, we'll not be moving again in this lifetime, either of us.  (I'm 57, he's 44.)

Is there any chance someone might lend to one with great income and a poor history in the company of another who is too much in debt at the moment, but whose payment history is pristine?

Thanks for any help any can provide.  I am open to anything at all that is feasible and that will allow us to obtain this particular piece of real estate. 

[Desert-Rat]

I sent you a PM

[Anonymous]

does any of the parties already have a job in the area of the house.  If not, then no one is going to lend on that house unless you could possibly qualify for some sort of vacation/2nd property loan.  That is unlikley if the first house in Ohio is underwater or has little equity.  Either way, any lender is gonna know that you can not commute from Ohio to Nor Cal and is going to require not only a job in the works, but that you actually to have moved and started working/recieved paychecks.  On top of that, more than likely they would require that the work be the same  field as the buyer is in now in Ohio or the 2 years work in same field might kick in.  Hard money and he like may be a possibility, but if this all hinges on pushing a deal to get into this onehouse then you are rolling alot of dice getting this in the works for something that could easily fall through.  Buying a property when moving across country for a non-job related transfer is always tough.  Also, being that Cali is a community property state, you would be looking at FHA probably as the only option with those scores and FHA will require Your debts counted if your husband is on the loan.  It is called the " non-purchasing spouse" clause. 

Last, Even FHA is usually requiring 620 midscore for a loan.

In the end, unless you are willing to go 40-50% down and do a hard money loan, it seems unlikely.  Good luck with it all.

[GrdnDelite]

Thanks, Desert Rat, and Thanks, Mickie. I'm sorry, I should have mentioned that party one, my son, is already back in California and that is where he is working.

Both son and husband are likely to continue in the same line of work, and that is retail.  Employer has husband in a management training program now and employer is nationwide.  Husband could also operate a tow truck, though I fret when he does.

The house in Ohio that is behind on payments is upside down, thus the short sale offer.  The house that is current is about break even, although I do want to get an agent in here to offer a more informed opinion.  I dislike the house so much that I tend to devalue every single thing about it.  Recent listings indicate that there may actually be a bit of equity in that property, about $20,000, maybe.

Will a hard money lender lend on a small rural property of so little cost?

[WannaHouse]

If it's a rural area, then you might have a shot with USDA. Recent derogs may not work though.

try this:

http://www.rurdev.usda.gov/ca/sfh/index.htm

[ShanetheMortgageMan]

With 20% down, and if the home appraises for more than the bank is selling it, so that the entire equity in the property is 40% or more, then you will likely find hard money lenders start becoming interested.  Hard money lending used to be 65% LTV standard, but here in California with prices declining so much we are seeing hard money lenders looking at 60% LTV max, with some only wanting 40-50% LTV depending on the area (Russian River, as nice of an area as it is, simply isn't as in demand area as San Francisco or even Santa Rosa).

Since your son is in California, and if he was going to occupy the property and be able to qualify for the home on his own income, that would be the best way to be able to buy the home.  He could get the 20% down from you as a gift, your homes in Ohio wouldn't play a part in qualifying, since California is a community property state it doesn't matter if you are on the mortgage or not, if you go with FHA or USDA financing your debts will be included in the debt ratio if your husband is on the application and you are not... I am thinking 2 mortgage payments, plus whatever other debt you and your husband carry, might outweigh the $30k of income your husband brings to the situation.

That would just leave your son needing to get their credit into shape.  Since the household income appears to be too high for the Direct version of USDA financing, you'd have to go through the Guaranteed version and deal with lender's overlay guidelines on top of USDA's (such as the minimum score requirement of 620 that most USDA lenders have)... which might put him a couple months out.

[GrdnDelite]

Thanks, Shane! I had not even considered the potential actual appraised value of the property relative to the bank's asking price. The price does look low to me, relative to other properties on the market just now, so there is possible that an appraisal may value it higher than the asking price. That the area is not greatly in demand is, of course, part of its appeal to us. We like rural. Thanks again for taking time to share your helpful perspective.