Mortgage Delima

[mashdun]

I've got a Mortgage situation that I'm trying to resolve and need some help answering some questions. There is a lot to this.

A year ago, I found a foreclosure home that was a great deal. Home built in 2004, 5 beds, 2 and a half baths on almost 6 acres. Tax appasial was 188k at the time.

A relative offered to help me out and use one of their 150k lines of credit, secured by the deed. So he purchased the home for me. Paid $82k and have done about $58k in renovations... now with a balance of like $141k. I also have put about 11k on my credit cards.

He is now needing to use the credit line for another project and I also want to get this thing rolled over into a conventional mortgage. Originally I want to flip the house, but since have feel in love with it and want to keep it.... however....

I am self employed and let my girlfriend do my takes and make all estimated payments for the last five years. Turns out when I was trying to get pre-approved for the mortgage, she had not filed my taxes at all for the last three years. And I guess she horded away the money or spent it. Of course she gone now too. The IRS had not even noticed it and I contacted them to let them know what was going on. I have now filed my taxes for 2012, 2013 and 2014 but owe $25,000 in back taxes.

Other than the high utilization of my credit cards, the only other debt I have is student loans which are $94 a month. My gross monthly income is $3628.

The house should appraise for about $250k now.

My question is.... will a mortgage company roll my taxes and credit card, basically $36k over into a mortgage?

One - I know that paying off the credit cards will boost my score dramatically since I'm at about 85% utilization (ordered all new kitchen cabinets on them).

Two- I know I have to get the taxes taken care of first also.

With that being said... should I look for someone to borrow the $36k to payoff the taxes and credit cards? I'm thinking, since I control how much the house is sold for. I can have my relative sell me the house for $177,000 or so and payoff the $36k loan for the taxes and credit cards. Or is there a mortgage company willing to do this in lieu of a final mortgage?

I am eligible for a VA loan and with a disability, I won't have to pay the funding fee either. I think this is the best route, but I need to get the taxes and credit cards taken care of first.

Yeah, it's a mess. My credit will be over 700 once I pay down the credit cards and my DTI will be fairly low. I would wait and setup payments with the IRS, but my relative needs to use the credit line for another project soon... so I think rolling it all over into a mortgage is my best option. Opionons?

Any advice would be appreciated!

[frugalQ]

I don't think banks allow you to roll over debt into a home purchase situation. You will have to purchase the home at the price you and your family member agrees to, and then do a HEL or HELOC.

As far as the debt, you can set up an installment plan with the IRS and just factor the payment into the DTI. What are your scores and can your DTI support the mortgage, an installment, and min credit card payment?

[Anonymous]

Mash said he's in a mess with-

 "A relative offered to help me out and use one of their 150k lines of credit, secured by the deed. So he purchased the home for me. Paid $82k and have done about $58k in renovations... now with a balance of like $141k. I also have put about 11k on my credit cards."

Alright, so what's in this for your relative?  

So you bought stuff for your house on your credit cards?

"so I think rolling it all over into a mortgage is my best option. "

I don't think thats gonna fly

I am self employed and let my girlfriend do my takes and make all estimated payments for the last five years. Turns out when I was trying to get pre-approved for the mortgage, she had not filed my taxes at all for the last three years. And I guess she horded away the money or spent it. Of course she gone now too.

Lesson learned.

"My question is.... will a mortgage company roll my taxes and credit card, basically $36k over into a mortgage?"

Deal with the IRS first, get a payment plan going and show a history of paying on it.  Till then you're krptonite to a mortgage company, you have 3 years of unpaid taxes just out there, they're gonna pull the shades down when you drive up.  

"I am eligible for a VA loan and with a disability, I won't have to pay the funding fee either. I think this is the best route, but I need to get the taxes and credit cards taken care of first."

It is, and definately.

[mashdun]

I've actually already talked to the IRS and setup the installment with first payment coming out next week. From what I've read though, most mortgages make you wait 3 months once you're on the installment program and the payments go against your DTI... my payment will be $346 month.

With my credit cards and IRS payment added.... my DTI would be around 55% which won't work. That only leaves about $600 in residual income each month.

Credit scores currently around 650, mainly because the high utilization.

[mashdun]

BamaGuy

Trust me, I've helped out my relative a lot over the years with their businesses... there is nothing in it for them.

Yes, all the stuff on the credit cards are from the house. Ordered new kitchen cabinets on them.

I have an installment agreement in place as of a few days ago and will pay my first installment in a few days.

The issue I have is the timing. I know my relative needs to free up the credit line soon and I really don't want to tell them that my ex-girlfriend put me in a tough situation. I'm still after her trying to recoup my money too... but its not going to happen anytime soon.

[Anonymous]

"The issue I have is the timing. I know my relative needs to free up the credit line soon and I really don't want to tell them that my ex-girlfriend put me in a tough situation."

Ok so you need to pay back your relative, but you can't right now because of GF?  Have you told the relative what's going on?  Honest really is the best policy.  Just tell him the GF messed you up but your working on it.

Other than that I'd say you're in the right direction.

[mashdun]

Well, I've decide to withdraw the cash from my IRA to pay the back taxes and payoff the credit cards. This should make it easier to handle. I think I can put the money back in the IRA within 60 days and avoid the early withdraw penalty and taxes too.