topic Possibly buying house that we're currently renting - Mortgage advice sought in Mortgage Loans

Possibly buying house that we're currently renting - Mortgage advice sought

DUISlayer — Sat, 14 Oct 2017 07:37:15 GMT

Here’s a little background before I get into the financial details. My fiancé and I have been together for two and a half years, and we’ve been renting the house we’re in now for the past year. The landlord (who we’ve befriended) wants/needs to sell it by January to buy some land and build their “forever” home. We love the house. It’s not our DREAM house, but it’s beautiful and perfect for us for right now. It’s in a prime location in a city that is just exploding with growth and in an awesome educational system.

About the house: Built in 1993, brick, 1440 sq ft, 3/2, 2 car garage, ¼ acre lot. Zestimate is just under $141k. Current owner bought it in January 06 for $161,500 and wants to get $140k for it. It has pretty nice upgrades inside of it.

About our current situation: She’s an RN and in school to be a practitioner. Has worked at the same hospital for about 11 years. I just got wrongfully terminated last month and I’m in the process of appealing it (99% confident I’ll be reinstated, but I won’t go back to work there). She has always wanted to do travel nursing, but couldn’t because of my job. Now we’re going to take advantage of a bad situation and begin traveling for a little bit. We’ve been wanting to buy this house before all the nonsense happened with me, and despite our travel plans, we’re still considering buying the house. We were initially planning on just her financing it, but both of our financials are included.

After doing some research in the forums, I’m starting to shy away from buying the house, despite it being a pretty appealing investment property based on the location. However, I don’t want to waste whatever advantages we’d have being a first time home buyer. I’m thinking we could put the money into some sort of savings account (not too sure about the best type, but that’s another topic) for the next couple of years and have a good down payment for our forever home.

Oh, we both just became NFCU members, and that's likely who we would use for the mortgage should we/she decide to get the house.

Time for the financials. I’m going to include mine as if the stuff with my job didn’t happen, since next month it’ll be like it never happened. Primarily focusing on her information though because I think she is going to finance it on her own.

CREDIT SCORES

Her - FICO 8: EQ 698, TU 701, EX 651

Mortgage: EQ5 659, TU4 765, EX2 658

Me - FICO 8: EQ 683, TU 684, EX 677

Mortgage: EQ5 654, TU4 674, EX 636

NEGATIVES

Her: One medical collection that was just PFD’d. Only reporting to EQ, should be deleted tomorrow (10/15). Worst case scenario, it’ll show PIF, and it was only $75. She just didn’t know about it. Very thin credit profile. No credit cards. She’s always been against having any kind of debt and always saving for what she wants. I added her as an AU to my C1 card for the boost, but it’s only reporting to TU. One auto loan closed Sept 2008. Nothing negative. One inquiry March 2017 with EQ. About $30k in student loans in deferment while in school.

Me: Just started a gardening phase with my credit after an app spree. No collections. One AMEX CO from 2012. 120+ lates on student loans about 14 months ago, but across several different loan accounts so much more negative impact. A couple 30+ lates on two CCs but from about 4 years ago.

GROSS INCOME

Her: $55,000

Me: $45,000

SOURCE

Her: Hourly, no OT

Me: Hourly, $36k annual, approx. $10-15k in OT

MONTHLY DEBT PAYMENTS

Her: None. Student loans in deferment until graduation May 2019, then 6 month grace period.

Me: $150/mo student loan. Neither of us have any auto loans.

EMPLOYMENT

Her: W2, 11+ years same company

Me: W2, 2 years

ASSETS

Not much for either of us. I think she has around $5k, I have about $2,500 in savings

LOCATION

Don’t want to put the ZIP on here. Already posting more information than I’m typically comfortable with. But it’s USDA eligible. If it’s necessary, DM. Thanks for understanding

The rest is in the story. As always, thanks for your time and advice!

Re: Possibly buying house that we're currently renting - Mortgage advice sought

StartingOver10 — Sat, 14 Oct 2017 14:40:02 GMT

Couple of random comments:

The zestimates are not reliable for actual value - could be worth more or less. I mention this so you aren't surprised if the property appraisal comes in lower (or higher)
Student loans are counted as debt even if the loans are in deferment status. Read this link: http://ficoforums.myfico.com/t5/Mortgage-Loans/FHA-changing-guidelines-on-deferred-student-loans-6-15-15/td-p/3823692
First time homebuyer programs may or may not offer you a benefit. Some of the programs are not worth the effort - especially since they are capped on HH income, HH assets and sometimes even zip code. Plus, IME the closing costs are much, much higher than a standard mortgage loan and the interest rate may or may not be higher. There are exceptions and some programs are worthwhile, but you have to research each program to see the exact terms. The most common thing that throws out the borrower from the program is too much income for the household (HH). You get denied even if you are one dollar over the limit for the number of HH occupants. But the really frustrating part is that to use the program (some of them) it takes months rather than a couple of weeks to process your approval. If the program has run out of funds, nothing happens with the approval and you have wasted months. Do your due diligence. IME many (not all) of the programs are not worth the time or effort and cost you, the borrower, a whole lot more in the long run.

Re: Possibly buying house that we're currently renting - Mortgage advice sought

DUISlayer — Sat, 14 Oct 2017 19:22:07 GMT

@StartingOver10 wrote:
Couple of random comments:

The zestimates are not reliable for actual value - could be worth more or less. I mention this so you aren't surprised if the property appraisal comes in lower (or higher)
Student loans are counted as debt even if the loans are in deferment status. Read this link: http://ficoforums.myfico.com/t5/Mortgage-Loans/FHA-changing-guidelines-on-deferred-student-loans-6-15-15/td-p/3823692
First time homebuyer programs may or may not offer you a benefit. Some of the programs are not worth the effort - especially since they are capped on HH income, HH assets and sometimes even zip code. Plus, IME the closing costs are much, much higher than a standard mortgage loan and the interest rate may or may not be higher. There are exceptions and some programs are worthwhile, but you have to research each program to see the exact terms. The most common thing that throws out the borrower from the program is too much income for the household (HH). You get denied even if you are one dollar over the limit for the number of HH occupants. But the really frustrating part is that to use the program (some of them) it takes months rather than a couple of weeks to process your approval. If the program has run out of funds, nothing happens with the approval and you have wasted months. Do your due diligence. IME many (not all) of the programs are not worth the time or effort and cost you, the borrower, a whole lot more in the long run.

Thanks for the info!

I understand Zestimates aren't reliable, and we need an actual appraisal. It at least gave me a ballpark figure (I hope).
I wasn't sure how that worked. I'll check out that post as soon as I submit this one!
That's where I need some advice -- if we do decide to buy this place. I've tried to do some research on the different options, but it's a wealth of information that I'm still trying to wrap my head around. We were originally thinking that even though we won't be spending much time here, we would still have a place to call "home" and use it as an investment since the market is picking back up. I'm thinking there might be better ways to invest our money towards our dream house and not have to deal with the hassle of owning a 24 year old house.

Re: Possibly buying house that we're currently renting - Mortgage advice sought

StartingOver10 — Sat, 14 Oct 2017 23:08:12 GMT

If you want to check into first time home buyer requirements in your area, the best thing to do is google your state/city + first time homebuyer loans. You will see several. Click on the ones that are offered by your city or state and check the guidelines. They are not flexible on the guidelines at all.

I have seen a few that are worthwhile, but really the downside outweighes the advantages for most of these programs. For you especially since you are not planning to stay in this home long. If I misunderstood your post, please let me know. Most of the first time homebuyer programs that include down payment assistance will require you to repay the assistance if you move out of the home. It is only valid if you live in the home as a primary residence. And, yes, they check annually. No getting around this without paying off the down payment assistance. Your programs may be different, so make sure to read the guidelines.

When you say you won't be spending a much time there - that changes everything. If you are only there a short time, than don't buy the house IMO. Being a landlord is not for everyone. Find a location you will be in for the long term and then buy a house. Don't stretch yourself out so that you have this "investment" property and then can't buy your own primary home. JMO