On a Mission-- Any thoughts appreciated

[granny031350]

I am on a mission to help my 26 year old daughter, mother of a 6 year old and 3 month old and her non working husband get a house of their own.  I know that it will take at least a year and I just began the process of writing her gw letters and getting her credit cleaned up.  so. .

Issue no 1.  She is a bartender.  She makes pretty good money except that it is undocumented.  Her boss does take out "tip" money but only what the law demands.  The rest is cash in her pocket.  So with all the changes in the FHA rules etc, how does a person who has undocumented income get a mortgage.  Granted her's would not be big (maybe 75,000 tops) but she wants her OWN house in her OWN name.  She gets great EIC but her income reported is only around 12,000 to 15,000 each year. 

Issue no 2.  Her credit needs work.  We have begun that process.  However, is the look back for lates 1 year with FHA?  My goal is to get her to 620 in a year on all three bureau's.  She has never paid attention to due dates and she has sub prime cards that charge her fees and take her over the limit.  We are working on closing those out, paying them off and getting her a decent (B of A) secured card so that in a year she can increase her score.

What else is there also that I should be doing in preparation for a 2010 welcome home party for her?  I should add that this is HER wish, not mine.  She came to me last night and ask for my help. 

Thanks to all

Message Edited by granny031350 on 12-21-2008 11:54 AM

[teton]

You will get more definitive information from one of our resident experts, but it seems like she should start documenting her income. That way she will have the figures to use for her mortgage and will also no longer be violating our tax laws.

[Anonymous]

Yowsers, Granny! If you weren't in line for the Mom of the Year award, I'd say you're a CINCH, now!! And here's majorly hoping that your DD knows what a great mama you are (though I'm sure she does!)!!

The only "thoughts" I have for you in this situation (seeing as how I have no idea what you should do, other than what you ARE doing) are "good thoughts!"

Good thoughts winging their way to Granny's house!!

[Anonymous]

Have her file her full income on this upcoming season including all the tips that she makes,  also have her deposit ALL the money she makes into a bank account. I believe she can get her own loan with a W-2 and bank statements.

[granny031350]

that is a good idea.  She lives on a "cash" basis because of her tip money.  She makes about 1000 a week working 4 nights in this little corner bar.  It doesn't look like much but she rakes in the cash.  And the depression in Mich isn't hurting her tip money either. 

Thanks for the suggestions!  Keep them coming!!

[Anonymous]

First thing, they will want 2 years of reported tip income to count it.  So, she needs to report tips for this year.  That means she will have a hefty tax bill this year.  Then, when she files (and has claimed) all her taxes next year, she will have the whole 2 years worth...So, about 14 months from now, she would be able to prove everything she needs to.

Second, she should figure out how much her mortgage, taxes, PMI, and insurance +10% will be epproximately for what she wants.  then take this money and subtract out her current rent payment.  The rest of the money should be deposited into a separate savings account for the next 12 months.  That will show the bank her ability to afford the payments and a little extra for upkeep, as well as her ability to budget over time.  It will also build up some more funds for down payment or reserves.

Third, if she has credit cards, she should get all of them paid down to under 9% utilization prior to statement dates as soon as possible, this is always a FICO score boost and again shows good budgeting and monetary skills.

Now, I have to say one thing and I hope this is not taken the wrong way at all....  She is the one that needs to do all of this.  If she is too busy with the kids and work, then maybe help with them to free up some time for her.  The whole point of credit is personal responsibility.  While the urge to do that for her may be strong and coming from the right intentions, this is something she and her husband should be doing on their own.  Also, alot of times for GW and such, personal interactions gets the best results and she will be the only one able to do this.

[WannaHouse]

I think you need to look at the USDA direct program. It is geared for low income households. I think it's her best shot at getting a decent house.

A brief rundown of it is that it requires no money down. Also, the government will help her to make sure she gets a decent house, and it has to be in great shape. They will give either 33 or 38 yr loans, and well as lower her interest to as low as 1%.

Go to the USDA site for your state. Read up on everything you can on it. It truly is better than an FHA, and income wise, her best chance to buy.

PS: There are 2 different programs. The DIRECT is for very low and low income and is all done right through USDA itself; the GUARANTEED is for low to moderate, and you go through a loan officer just like any other loan.

I wish her lots of luck.

[granny031350]

I am not offended in any way.  I was hoping for suggestions on what to tell her she needed to do and those are the responses I am getting. 

She does need to do this on her own as she is the one that has to save the money and make the committment.  But my goal was to let her know that it is possible despite the fact that she has undocumented income.

She realizes that she is a ways' away from owning her own.  But she has just watched her sister get a HUD home and also her brother move up to a posh neighborhood in Detroit with the foreclosure crisis here.  And in the Spring, I also am going for home ownership.  So she wants to join the party.

So I do appreciate all the advice.  And yes, she will probably have to declare her tips so it will come down to whether or not she wants to do that.  It is up to her. . .