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The only debt I have is 1500 in credit card,and 1000 in student loans.
Owing the feds doesn't pop up on credit reports. But,still, that's $11,000.
I'm working with a credit repair company to raise my score.
One thing the attorney said to do was get another credit card.
She said its because my debt is too low,and I need to show I can make payments on multiple accounts.
I only have one credit card.
She also told me do not pay the whole credit card off,or else the score would go lower.
She said the 3 credit reporteing agencies want to see that you can pay installments each month,while staying under 30% of your spending limit.
Funny,I make the most out of my siblings,yet everyone else owns a home.
My sister and her hubby have 6 kids,and make 48,000 a year. They get food stamps,but were able to buy a 87,000 trailer home. They live in Nc. Had $7000 in savings. Credit scores 670. She tells me everything.
Other one in Union,with 1 kid,single,affords a home that's 180,000. Monthly mortgage and taxes $1600.
How many times do I need to say, you should be able to afford to buy a home? The problem is NOT your income.
Sit down and go over your sister's budget with a fine tooth comb.
Let's compare your situations:
$48,000 per year + welfare benefits + $7000 in savings vs. $110,000 per year - $30,000 per year in current taxes - $30,000 per year in transportation (I added a bit in to cover things like tires, repairs, registrations, and additional gas and wear and tear since you'll be driving farther) - $9600 per year in groceries - $11,000 in tax fines and penalties (you will likely need to have this all paid off before you'll qualify for a loan. They run more than credit checks these days.) - $1000 student debt - $1500 credit card debt - entertainment costs - clothing, etc. - $12,000 per year in mortgage, property taxes, pmi, home insurance (likely an unrealistically low figure) - $3000 in closing costs - $5000 down payment - $1000 moving costs. Very likely add in $4000 for paint, flooring, if you can miraculously find a place with only minor cosmetic issues (this likely won't be optional--think carpets with animal urine, etc.) + $3000-6000 in yearly utility costs. Etc...
A mobile home will generally have modest utility costs (by the way I personally don't think a mobile home is neither a good investment, nor can it be compared to owning a single family home).
Have you ever heard the saying "Penny wise, and pound foolish"? That's why I suggested that a more expensive home might actually make more sense for someone with no savings.
If you simply removed the leased car from the equation and had purchased a nice, reliable used car (and got rid of the second) then your financial picture would look significantly better.
Good luck.
Last edited by Litlove71; 02-20-2013 at 03:36 PM..
Reason: Updated since OP posted new info
The only debt I have is 1500 in credit card,and 1000 in student loans.
Owing the feds doesn't pop up on credit reports. But,still, that's $11,000.
I'm working with a credit repair company to raise my score.
One thing the attorney said to do was get another credit card.
She said its because my debt is too low,and I need to show I can make payments on multiple accounts.
I only have one credit card.
She also told me do not pay the whole credit card off,or else the score would go lower.
She said the 3 credit reporteing agencies want to see that you can pay installments each month,while staying under 30% of your spending limit.
Does that sound right?
Opening a new credit card account, or any type of additional credit right before or right after trying to obtain a mortgage is a mistake and a red flag. And paying off credit card debt is not a bad idea, its a good idea. Having a good payment record by charging and then paying it off is what you want, not carrying debt at 19% interest or whatever.
A lot of posters got very hung up on your monthly expenses, because some of them seem out of whack high, but here is precisely what the lender and the underwriter will look at (and I have just under 10 years exp in the industry)
Credit Score - min 640 for FHA, 720 for conventional, might be able to squeak through between 640-720
Debt to Income Ratio - car payment, credit card minimum monthly payment, yes IRS debts, student loans, personal loans (insurance, groceries and non-debt transportation expenses are not a factor) The rule of thumb is 28% front end (housing payment only, PITI), 36% back end (housing payment plus all debt). In your case, your stated income conservatively supports a $2500 monthly payment, but as many have pointed out some of your expenses seem high
Collateral - the value and condition of the house you want to purchase determined by appraisal
Size of Down Payment - less than 20% means PMI, FHA PMI is especially costly. Conventional might be as low as 5% but all other ducks need to be in a row to get away with anything less than 20%
Reserves - FHA no requirement, Conventional is minimum 2 months PITI
Documented Income - W2s, stated income or unvalidated income won't fly
I would strongly recommend building the minimum reserves of 2 months PITI, but really having a cash pile is a good idea - a lot can go wrong with a house, burst pipe, leaky wrong, broken AC, storm damage, busted appliance. Not having a cushion could be very stressful. In addition, there are limits on seller paid closing costs, and you should plan to have 2% of the homes value to cover origination fees, appraisals, insurance reserves/escrow and other closing costs. Assuming your income is stable, you can certainly afford to buy a home, just be sure to think about and plan for unforeseen costs and emergencies (i.e. have a pile of cash).
Ok,so that's the scoop. I have no savings,because I spent $8000 paying off debt,and the car broke down,so I got it fixed,plus leased a new one.
Do you really need savings to qualify for a mortgage?
I really do think I'm a good candidate for a mortgage.
Yearly income last yr 110,000,but yrears prior 2007 to 2011 it was 80,000 to 99,000.
I try to stay below a certain amount. Cedit score 670.
Monthly income net $6600
Rent is 1500.
Car payment:510
Car insurance:424.
Food:800 monthly.
Irs:300 monthly(now you know why I stay under a certain amount in earnings)
I still owe 11,000 to them.
Student loan:$50
Credit cards:75 monthly.
Gas and tolls:$600 monthly
No 401k,no Ira.
Looking at short sale homes 63,000 to 90,000.
How do I find a no money down mortgage?
Will they also want to see savings,401k,etc?
I have no idea, but shop around.
You might want to wait a little while and save a little. Foreclosures and short sales are nothing but nightmares. Stay away from them especially if you have no savings to fix them up - they ALWAYS need fixing up.
For everyone else:
$100K to support 4 people, 3 of them being growing kids, in NJ, is nothing. At $200K and you're doing "ok"....you're not "rich".
Groceries in NJ are expensive.
Housing in NJ is expensive.
NJ also has a state income tax on wages unlike other states and a 7% sales tax rate.
NJ ain't Texas or Tennessee or anywhere else that it's super cheap to live in compared to NJ.
MY car insurance, for MY car, that I bought, don't lease, is $1200 per year. So spare me the "$424 is high". It's NOT.
The advice about creditboards is very good. I have become a credit guru (In my humble opinion haha!) from frequenting that board. There is also a mortgage forum there. In regard to getting a new credit card... this "could" be beneficial but it depends on what you want to do and timeframe. When applying for mortgages, they are usually picky about "new" accounts close to your loan application. If you're not going to apply for a mortgage for like 6 months from now, then you probably can get another credit card. If you're looking to do the mortgage in the near term, I wouldn't.
However, the advice you received about charging something and then not paying it off is not really accurate. If you purchase something on your card and pay it off immediately it will still get reported the same way as if you carried a balance and made a payment on it. For scoring purposes, people generally have higher scores if their utilization is above 0% ...FICO doesn't seem to like people who have no revolving debt... lol. But you want to keep your overall revolving utilization below 10% and never go above 30% utilization on an individual card....for maximum score impact.
I think you said your score was 670? If you're going to do FHA loan then 670 is already high enough. The rates are usually the same for FHA no matter the score as long as it is above the limit (typically 640).
I think a lot of this thread has been derailed and focused in too much on nitty gritty personal details of your life. But it basically all boils down to what you think you're ready for and if a lender agrees with you. I still stand by my recommendation of going through the New Jersey Housing Authority as I believe you qualify for those programs. Those programs would not exist if they didn't want to help people purchase that don't have a lot of funds laying around.
Regardless if you have the reserves for home ownership or not if something bad happens (to anyone) IE: losing a job or getting injured your living situation will be in jeopardy whether you're renting or owning. In some cases, falling on hard times is easier to handle if you own a home than if you rent. Renting they would be happy to start eviction processes right away while if you fall behind on owning a home they are usually more prone to work with you.
I just don't think its right telling someone "sorry you're not fit for a mortgage" but we're perfectly ok with you spending your money on renting. Yes, the landlord is required to fix stuff if it breaks and that takes a little stress off... I don't think its our place to tell the OP she is "unlendable" or should not be trying to better her situation and owning a home. If she feels her budget is in order and she is paying her bills and doing well then that is her business. It would be an actual lenders place to tell her if she is lendable or not. Owning also has IRS benefits vs renting and really make the difference between being able to itemize or not on your taxes.
Not having a cushion could be stressful whether you rent or not. I think its probably important to have some savings no matter if you own or not. If you were able to qualify for one of the 100% mortgage programs and get closing cost assistance, then I think you'd be in a better position to start working on reserves. If it turns out to be the wrong time for you and the lender thinks you need to wait, then do what they think you need to do to get where you need to be. On the creditboards, I have seen a lot of people say go ahead and apply for a mortgage and see if you can get a preapproval - even if you're not pre-approved you can at least see where your weaknesses are and what you need to do to be able to achieve your goal.
You might want to wait a little while and save a little. Foreclosures and short sales are nothing but nightmares. Stay away from them especially if you have no savings to fix them up - they ALWAYS need fixing up.
For everyone else:
$100K to support 4 people, 3 of them being growing kids, in NJ, is nothing. At $200K and you're doing "ok"....you're not "rich".
Groceries in NJ are expensive.
Housing in NJ is expensive.
NJ also has a state income tax on wages unlike other states and a 7% sales tax rate.
NJ ain't Texas or Tennessee or anywhere else that it's super cheap to live in compared to NJ.
MY car insurance, for MY car, that I bought, don't lease, is $1200 per year. So spare me the "$424 is high". It's NOT.
I thought I was going crazy for a second.
200,000 and your doing ok.....100,000 really seems like nothing.
I think I will wait another 6 months,and see how everything goes.
I will definately check out the Nj programs.
Thanks Anna!
Hopefully,housing prices won't go up by then.
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