Mortgage questions - buying a house (Bank owned/REO)

codrus wrote: Around here a 1 acre parcel would be bought up along with the one next to it, then turned into 20-30 "single family homes" that are 6 feet apart from each other and sell for a million dollars each. That's what happened to the 2 acre parcel near my old house that used to have a tire store, body shop, etc on it. The bay area is crazy.

What's crazy is that our little town in the snowy mountains of northern Arizona is getting to be this way.

I could buy my wife's uncle's place in Stockton for less money than a 30 year old house in Flag, but then I'd be competing for jobs with a few million people.

Resurrecting this old thread.

I am in a pickle. I can pay up to $60k cash, but that is my whole wad. So it has to be:

1) livable as-is with a garage for $60k (not likely)
2) livable with a garage in the $40k range so that I have 20k left to fix it up
3) (the most attractive option) find an $80k place, put 20k down and finance 60

The problem with #3 is that I just went salary a few weeks ago. My 2016 tax returns will be small gross on a 1099 with a ton of deductions making my AGI almost nothing. Prior to that I was $14/hr for a brief time and it was spotty before that. Credit is amazingly awesome; low 800s, so no worries there.

The other big problem is, many of the houses I am looking at won't pass an inspection, so no money. In fact, many of them say right in the ad, "no FHA or VA mortgages" because they won't pass.

What do people do when there is a big gap like this? I either pay cash for a dump, or try feebly to get financing on something too expensive simply because it will pass an inspection? (and then get denied because of income anyway)

Since you are curtis, and therefore likely not afraid of it, might I suggest finding a real dump of a place with a decent garage, buying a ~$5,000 RV, and then you don't even need the place to be liveable?

Otherwise, with $60k liquid and an 800 credit score I would assume you've got a really decent chance to get financing, even on an $80k property.

Is a 203(k) an option?

http://www.bankrate.com/finance/mortgages/mortgages-pay-home-renovations-1.aspx

With an 800+ credit score you can probably get a loan for the type of money you are talking about unsecured from a company like Lightstream or similar. Then you have no worries about inspections, etc. They really don't care what you do with the money. (this would be for option #3)

Is the inspection even an issue if you're not doing FHA/VA? No way in hell would my place have met the requirements for an FHA or VA loan (no handrails ANYWHERE in the house, chipping paint outside, plaster falling down inside, an exposed hot wire or two, ect.), but none of that was an issue for a conventional mortgage. I mean, I wouldn't call my house dumpy and I have no idea what kind of places you're looking at, but the inspection requirements are significantly less stringent if you aren't doing FHA or VA. For what its worth, the ad also said specifically "no FHA or VA" as well.

In any case, I think your next step should be to go for a pre-approval on a mortgage. You're making a lot of assumptions about what you think you can and can't do until that happens and you'll need a pre-approval letter in hand anyways before you can make an offer on a place you'd plan to borrow on. In the scheme of things, you're really not asking for a huge sum of money - $60k on a 15 year mortgage is <$450 a month. I know people with E36 M3 credit and E36 M3 employment histories making less than you do that have no problem getting approved for an auto loan costing well over that amount.

One of the problems is that the only lenders I've spoken to have swept me off. They basically said I wasn't going to get approved so don't even try.

curtis73 wrote: One of the problems is that the only lenders I've spoken to have swept me off. They basically said I wasn't going to get approved so don't even try.

What lenders have you talked to? Try walking in to a small, local branch.

I have spoken with my bank (very small and local) and Centric (realtor's suggestion of a specific agent).

I'm assuming that FHA is more lenient about lending regarding house condition? What other lending is out there that I should be trying to get?

I'm not trying to buy a basket case house. For instance, one of the houses I was looking at someone broke in the basement and stole the copper, but being a 1-story house it would have taken me 2 hours to fix. But of course the bank runs away from it like its diseased. Told me I would have to pay cash for the house, have a licensed contractor fix it, then I could do a cash-out refi thingy. (at which point if an inspector found anything else wrong I would be screwed.) Another one wouldn't qualify because it was missing a toilet in one of the bathrooms.

It just seems like I'm boned because I'm in this zone of either having to buy a cheap basket case with cash or shop for $120k and pray I get financing.

Have you talked to a local mortgage broker? That might be your only chance to not pay cash.

At the moment it looks like you have a few points working against you:

• You don't want to borrow a lot. Banks don't like that, plus the closing costs for you and the admin costs for the bank are going to be rather high, so they don't like to touch small home loans. Especially if they can't palm them off to Fannie Mae.
• You're looking for fixer uppers - I ran into the same issue when were looking to buy our house and we found a gorgeous fixer upper. The credit union would've required us to put something like $60k minimum into escrow just for the work, otherwise they wouldn't consider financing it. To add insult to injury the property would've qualified for 203(k) financing if it had been less than half a mile down the road.
• I'd also check if HUD financing would be available, they tend to have somewhat more lenient requirements.
• Our CU for example wouldn't like it that you've just gone from 1099 self employment to salaried.

Only other way I can think of is to do some type of unsecured financing, fix up the place until it'll pass inspecting and then refi your way out of the unsecured financing. Or pay cash for something that needs enough work to put off other people but isn't condemned...

The only problem with the last suggestion is that I have then blown my whole wad... which isn't the end of the world if I can complete the purchase and the renovations for under $60k (kinda tough around here it seems)

After 8 months of shopping I have realized that house plus garage isn't in the cards for $60k; with the exception of a few basket cases that have a 1-car garage that is big enough for a Yugo.

So let me update you on what I want: House (prefer small for energy use and I don't need big for just me) and garage; could be a nice 2-car but prefer a proper shop. Depending on the financing I can build a garage with the leftover cash, but to do a garage/shop inexpensively it will need lenient zoning (steel building)

Once you are salaried, if the job is consistent with your previous work history, and you've received at least one pay check almost any mortgage broker can get you just about any type of loan you desire.

At the moment an FHA loan is the most expensive type you can get. Their mortgage insurance is outrageously high AND goes on for the life of the loan. USDA (outside major cities) is the least expensive.

What state are you in?

Small loans are the toughest to get because on one had the government says you must do these X things in order to close on a loan (ostensibly to protect you), but on the other hand they say your closing costs can't exceed X%.

Those 2 things don't go together very well once you drop below $100,000. Many many lenders don't want to risk running afoul of some second guessing of whether a lender met the rules a couple of years after the loan is made so they simply say past this line "There be dragons" and the bottom cutoff loan size can vary significantly.

The good news is that the legislation that has put into place so many of the absolutely asinine mortgage rules we've had for the last few years, the Dodd-Frank Act, is on Trump's radar to be one of the very first things he wants to get repealed or changed significantly so housing might open up quite a bit. Housing has been held down artificially by this legislation since 2010.

Hope this helps. You can PM me and I can give you some specific info that might help. I might not know all the rules for your state but since mortgages are federal in nature most of the rules are the same wherever you go.

Example 1 with garage, but needs extensive repairs

Example 2 which needs copper in the basement and has no garage

I rather like the first one if the road past isn't too busy. Just has a ton more character and more land, too.

Carguy, I know you do this everyday... but I just got an FHA loan. The mortgage insurance goes for 5 years on a 30 year loan. I think you need to check your info.

And for what it's worth, I also deal with this for my job, although not every day.

No they are talking about cutting the MI back to how it used to be but as of this moment it still goes on forever. It's the way they've been trying to raise their reserves by increasing the cost of MIP and making it last forever.

Hopefully after the we have the new housing secretary that will happen bur as of this moment the only way to get rid of MIP is to refinance into another type of loan.

I may have missed this, but why not look for a more expensive property?

You have the cash, you have the credit, and you will, or soon will, have the salaried work history. Buying a more expensive home would probably result in savings in a few ways:

-retain value or appreciate more (especially vs. double-wide)
-easier to secure financing
-frees up a whole lot more liquid (due to above), which is going to make you more in the market
-less likely to have neighbors that are complete douchebags (in my experience anyway :( )

With $60k cash on hand, the last place I'd wan't that tied up is in a $60k house. I'd rather put down $30k on a $150k house. I wouldn't want to buy any more house than necessary, but purchase price and sq. ft. there don't seem to be linked down in that price range.

MTN I'm sorry to have to give you the bad news, but I went to the source and here's when they changed to make the MIP last for the life of the loan. They began requiring mortgage insurance for the life of the loan in 2013 and there's HOPE that might CHANGE (see what I did there) this next year. But at this stage it's only a hope so if you just got an FHA loan and you put down less than 10.1% then you will have your MIP for the life of the loan. If you put down 10.1% then it will only last for 11 years.

Here's the excerpt from the Mortgagee Letter 2013-04

For loans with FHA case numbers assigned on or after June 3, 2013, FHA will collect the annual MIP for the maximum duration permitted under statute. See 12 U.S.C. § 1709(c)(2)(B).  For all mortgages regardless of their amortization terms, any mortgage involving an original principal obligation (excluding financed Up-Front MIP (UFMIP)) less than or equal to 90 percent LTV, the annual MIP will be assessed until the end of the mortgage term or for the first 11 years of the mortgage term, whichever occurs first.

For any mortgage involving an original principal obligation (excluding financed UFMIP) with an LTV greater than 90 percent, FHA will assess the annual MIP until the end of the mortgage term or for the first 30 years of the term, whichever occurs first.

I hope this wouldn't have changed what loan type you'd have gotten. You can file a complaint about your lender with the CFPB () but you'll need something in writing from your lender that shows their mistatements.

If you deal with this in your work you must be dealing with old FHA MIP terms because at one time that was the rule.

BoxheadTim wrote: I rather like the first one if the road past isn't too busy. Just has a ton more character and more land, too.

The road is a busy rural road, but I'm not sure that would bother me (except for resale value purposes). I lived in downtown LA for 6 years and it only took me about two weeks to get used to the noise.

And how cool is that little tudor outbuilding? I'm thinking in-law suite for that.

carguy123 wrote: MTN I'm sorry to have to give you the bad news, but I went to the source and here's when they changed to make the MIP last for the life of the loan. They began requiring mortgage insurance for the life of the loan in 2013 and there's HOPE that might CHANGE (see what I did there) this next year. But at this stage it's only a hope so if you just got an FHA loan and you put down less than 10.1% then you will have your MIP for the life of the loan. If you put down 10.1% then it will only last for 11 years. Here's the excerpt from the Mortgagee Letter 2013-04 For loans with FHA case numbers assigned on or after June 3, 2013, FHA will collect the annual MIP for the maximum duration permitted under statute. See 12 U.S.C. § 1709(c)(2)(B).  For all mortgages regardless of their amortization terms, any mortgage involving an original principal obligation (excluding financed Up-Front MIP (UFMIP)) less than or equal to 90 percent LTV, the annual MIP will be assessed until the end of the mortgage term or for the first 11 years of the mortgage term, whichever occurs first. For any mortgage involving an original principal obligation (excluding financed UFMIP) with an LTV greater than 90 percent, FHA will assess the annual MIP until the end of the mortgage term or for the first 30 years of the term, whichever occurs first. I hope this wouldn't have changed what loan type you'd have gotten. You can file a complaint about your lender with the CFPB () but you'll need something in writing from your lender that shows their mistatements. If you deal with this in your work you must be dealing with old FHA MIP terms because at one time that was the rule.

Well, I misunderstood. After looking through my documents, we paid it up front. In any case, our monthly payment drops significantly after 5 years (and that has been verified).

And it wouldn't have changed the loan we got. The only thing I'm slightly worried about is that we won't be able to refinance since we're at such a low rate anyways (under 4% including MIP)

ProDarwin wrote: I may have missed this, but why not look for a more expensive property? You have the cash, you have the credit, and you will, or soon will, have the salaried work history. Buying a more expensive home would probably result in savings in a few ways: -retain value or appreciate more (especially vs. double-wide) -easier to secure financing -frees up a whole lot more liquid (due to above), which is going to make you more in the market -less likely to have neighbors that are complete douchebags (in my experience anyway :( ) With $60k cash on hand, the last place I'd wan't that tied up is in a $60k house. I'd rather put down $30k on a $150k house. I wouldn't want to buy any more house than necessary, but purchase price and sq. ft. there don't seem to be linked down in that price range.

Mostly cold feet on my part. I don't want to be house poor. I hate the idea of having to work to afford a house that I spend no time in because I have to work so much to afford it. I don't ever want to stress about how I can make a payment.

My personal goal is to not spend more than 20% of my income on a mortgage. At $36k/yr (which is just over $2100/mo take home with zero exemptions on my W4) that means no more than about $400/mo.

Truth is, the whole idea of having a mortgage with a long term commitment scares the crap out of me. I am willing to do it as long as I can pay more than my monthly and get it paid off fast. I have spent my whole life living simply and cheaply, so doing the "traditional" thing is a little odd for me. My original plan was to pay cash for a big shop and buy a 32' travel trailer to live in. Zoning around here makes that tough, so I'm looking for a little house with a big garage instead. Its not really a compromise, its just a different (equally acceptable) way to get the result I want.

I like being comfortable financially and have taken great steps to get to a good comfy place. I'm not ready to dive into a $150k house with a 30 year commitment (or 15 or 20 or even 10) that requires me to kill myself working. I can't imagine ever not working here at the theater, but it is a non-profit organization on a shoestring budget. There is always the possibility of a layoff in any job, and I don't want to have to scramble for a Barista position just to make ends meet. I want to stay as financially stress-free as possible which means cheap house, used car, and Bud Light instead of Amstel Light.

MTN with FHA you pay for your MIP upfront AND monthly. When you sell you get back the portion of the upfront which hasn't been used which always turns to be too darned little.

Why would your payment drop after 5 years? What is causing that? The MIP is not going to change.

You've never said what you do at your job that deals with MIP

carguy123 wrote: Once you are salaried, if the job is consistent with your previous work history, and you've received at least one pay check almost any mortgage broker can get you just about any type of loan you desire.

Here is the history: as of last week, salaried. Back to Oct 2015 I was 1099 at this same job. Prior to that I didn't work for three months. Before that I had been with Home Depot for about three years with a 9 month hiatus (divorce, move, broken heart, etc). So I wouldn't say that its been in the same field, and there were significant gaps. Enough that a bank might see red flags.

At the moment an FHA loan is the most expensive type you can get. Their mortgage insurance is outrageously high AND goes on for the life of the loan. USDA (outside major cities) is the least expensive.

Can you maybe tell me a bit more about it? I found some googles but they all look the same to me.

What state are you in?

Pennsylvania

Hope this helps. You can PM me and I can give you some specific info that might help. I might not know all the rules for your state but since mortgages are federal in nature most of the rules are the same wherever you go.

It does help, thank you. Its all still VERY greek to me, but its becoming clearer.

I'm still not seeing your logic.

You're limited by mortgages that are available and your unstable (from the Bank's POV) work/income history. Either

1: Go and get a mortgage for $50k (which at 4.5% and 30 years is about $440 a month, including insurance and taxes) and get a real house that is move in ready with $10k left over for improvements (that won't be needed nearly as much as what you're looking at). I'd imagine that even with the work history you can get this with your credit and putting 50% down.
OR
2: Buy a camper, live on a real shoe string budget for 2 years and save up every penny that you can, and attack this when you have more cash to avoid being tied down to a loan.

carguy123 wrote: MTN with FHA you pay for your MIP upfront AND monthly. When you sell you get back the portion of the upfront which hasn't been used which always turns to be too darned little. Why would your payment drop after 5 years? What is causing that? The MIP is not going to change. You've never said what you do at your job that deals with MIP

I work in a bank in risk. "Mortgage stuff" comes across my desk about once a month or so, so I'm not completely foreign to it.

Honestly, I'm going to have to review my documents to make sure that the lender didn't lie to me. I have it in writing (email) that my mortgage insurance payment would drop off my loan after 5 years when I'd have 20% equity into the house. If they did lie, I'm happy and ready to call the CFPB--I've done it before and I'm sure I'll do it again.

Curtis, usually the FHA loan is not the best one available--especially for you since you can put down quite a bit. It was for us due to our situation (limited credit history for me, lowish credit score for my wife, expensive town), but I went with it only after exhausting other options.