Great Deal, but worried about rushing

[Anonymous]

Hi,

I live in Michigan. I was out of work for about 3 months, and just recently found a new job, the 1st of the year, thank goodness.

My job history as of late has been a little unsteady:

Oct1998-Jun2006: Employer A

Jul2006-May2007: Unemployed, but was enrolled in school in sept, worked part time

May2007-Feb2008: Employer B

Feb2008-Sep2008: Employer C

Sep2008-Dec2008: Unemployed, some part time work

Jan2009-: Employer D

I've been wanting to buy a new house for some time. I bought my first house with my parents help when I was 25, but ended up selling it  less than 2 years later when my job relocated me to New York. I moved back to Michigan about 2 years ago. I'm now 32, and would really like to purchase a home again. Originally I was going to wait until the end of the year or even early next year, when I could save 20%, plus closing costs/other fees, and establish a more stable employment history, but I just found a steal of a condo in a Detroit Suburb. It's listed at $49,900, but it's a foreclosure. Housing is really slow in this market, and foreclosures are one of the highest here, so I was led to believe I may be able to get it for $40-45,000

My credit score is currently 700 EQ, but I think it's because of a recent balance transfer I did to get a 0% interest rate. my score is usually between 680-695.

Monthly Gross Income is:          3500.00

Monthly Debt:                             500.00

Monthly Household Expenses:     400.00

I have about $4,000 in liquid savings

I have about $17,000 in IRA

I have about $ 2,500 in Roth

my plan was if i can take advantage of this deal was to withdraw 10,000 from my ira, since there is no penalty if you use the funds for a home purchase. and use a portion for a 10% down payment, and use the rest for closing costs, insurance, and any other fees/costs that may pop up.

My questions are:

would I be able to qualify for a loan, due to gaps in employment?

do you think i can offer less because of the market?

would I qualify for a decent interest rate?

Will i have any issues with financing due to this being a bank owned property?

i saw on a loan website that they offer fha financing and can roll the PMI into the loan, which according to Suze O, is the best thing to do.

Any feedback, advice you can give would be appreciated, the market is bad, but I do believe this is a true find, and won't be on the market long.

[fishbjc]

Do you have backup cash in case there ends up being an assessment?  How many units in the building are foreclosed/empty?  That would be a red flag for me.  Are these units empty because of management issues, structural issues....etc?

If you go FHA you can put down as little as 3.5%. 

[ShanetheMortgageMan]

If the condos are FHA approved then using FHA financing will be easier.  You can check out the FHA approved condo list at FHA approved condos.  If it's not on there it doesn't mean you can't purchase it with FHA financing, however to do so it must pass a spot approval per this checklist.  Another sign the condo would be OK for FHA financing is if the listing says "FHA financing OK" or something along those lines.  If it can't pass either the spot approval or not already on the approved condo list, then FHA financing can't be used.  You will need to then look into conventional financing.  In order for most conventional financing options to be available the condo must be warrantable and not non-warrantable, so that would be a good question to ask your real estate agent when looking into the condo more.  You can find out on your own, but it requires a condo questionnaire to be completed and that usually runs about $100-150, and then you need a checklist to cross reference the answers against as well.  If you can't determine if it's warrantable or not before making your offer, then make sure that is one of the first items your lender checks out for you after your offer is accepted.  Also will need to check out the condition of the condo unit, I know there are a lot of foreclosed homes in the Detroit suburbs that have been neglected, and if this is one of them the lender might require repairs to be done to it prior to you closing.

Your employment is spotty, however if each job was a step up, or if that was the general direction, then an underwriter should be OK with it.  The most I could see them wanting is more time on your current job, 6 months at most.  It'll be checked out during the pre-approval process though so you wouldn't need to worry about it after you make your offer.  Otherwise you look well qualified for the sales price you have in mind.

[Anonymous]

Thank you to both of you for the advice, I think I am going to wait after all. I really don;t want to feel rushed, and event hough it is an incredibale bargain, I don't want to tap all my funds to get it.

Thank you both again for the great advoce!!

[Anonymous]

thank you

[Anonymous]

thank you for the advice!

[Watchmann]

There is no penalty for using the once-in-a-lifetime chance to tap your IRA, but you will still pay income tax at ordinary rates for the money taken out, so you won't net a full $10,000.  At your age I would resist tapping the IRA. 

[ShanetheMortgageMan]

Welcome, welcome, and welcome!