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Old 02-16-2015, 01:25 PM
 
Location: Phoenix, AZ
518 posts, read 869,362 times
Reputation: 693

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Quote:
Originally Posted by parentologist View Post
If you have no savings, you can't afford to buy. How will you pay for the new roof, new furnace, new hot water heater, whatever else breaks?

Can you realistically expect to be able to pay off your student loans with your income? If so, then cut your expenses to the bone. Rent with roommates - one per bedroom in a house. Find extra work and pay off the most expensive debt first - credit cards, car loan, whichever is highest interest rate. Spend nothing. Figure out if the student loans can be consolidated to a lower interest rate. After the high interest rate debt is paid off, start saving up a down payment while continuing to pay off the student loans.

If your student debt looks like you will never be able to pay it off, you may never be able to buy a house. Honestly, if you're in that situation (and of course it's too late to fix that), you might consider paying the student loan off by planning a bankruptcy. You can't declare bankruptcy on student loans - but you CAN on credit card debt. You could get as much credit as you can qualify for, at the lowest rates possible. You'd be amazed how much credit cards will lend you, as long as you continue to pay the monthly minimum. Live frugally off the credit cards and put your entire income toward the student loans, while continuing to pay the bare minimum monthly payment on the credit card debt. You will build up a great deal of credit card debt, but if you live frugally and put as much of your earnings as possible toward paying off the student loans, perhaps you can get rid of them, and then declare bankruptcy once the credit card debt exceeds the amount that will allow you to simply escape it in a bankruptcy. You might be able to string it along this way long enough to buy that cheap house for cash, and of course be sure to have a good, young, paid-off car, too, since you're allowed to keep your home and your car when declaring bankruptcy.

It's not an honorable way of handling it. But then again, neither is 24% interest on credit cards offered so freely to anyone who can sign their name.
I wonder how many credit cards and how much credit would even be given to someone in OP's situation? What number are we talking here? He just calls up his credit card company and asked to extend his credit line by a ridiculous number?

It doesn't seem logical that a lot of credit would be given to someone with no income. I'm curious to know more details about how practical this is for someone like OP.
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Old 02-16-2015, 10:29 PM
 
213 posts, read 236,730 times
Reputation: 84
Quote:
Originally Posted by VM1138 View Post
I'm fairly new to the idea of buying a house. Here's my unique situation: I have a lot of debt. Mostly student loans but my debt to income ratio is high. However, renting is getting increasingly expensive and in my area there just aren't many affordable rentals. I have virtually no savings.

Naturally, I understand my odds of getting a nice, average priced home is going to be nil. High debt-to-income ratio, no savings for a down payment, etc spells bad news.

But, I also happen to live in an area with very cheap home prices. A nice house (but not a very nice house, if you know what I mean) can run about 80-100,000. A lot of my friends have purchased decent houses for 30-40,000 and just fixed up things here and there on them.

For an equivalent house rental I'd be looking at 900 bucks a month, but most mortgage calculators show I could grab one of these houses for around $400-500 with mortagage/insurance and taxes thrown in. It's a no-brainer for me to buy, then. Even with the cost of fixing things like hot water heaters, plumbing, etc.

Do banks and credit unions bother offering mortgages for houses so cheap, and would they be more lenient since there's almost no way the house value drops even lower? If I can show I pay my rent on time, it's basically the same thing as a mortgage payment, would that help my case?
You should buy a cheap house, put money into it to make it how you like it. Your friends did it the right way.
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Old 02-18-2015, 05:55 AM
 
Location: MID ATLANTIC
8,666 posts, read 22,851,544 times
Reputation: 10485
It also depends upon the condition of these ultra cheap houses. They must, whether bank or credit union, meet minimum property standards. Don't count on anyone financing a home without the bathrooms intact, a HVAC that works and so on.
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Old 02-18-2015, 07:54 AM
 
Location: Verde Valley AZ
8,775 posts, read 11,877,615 times
Reputation: 11485
Quote:
Originally Posted by SmartMoney View Post
It also depends upon the condition of these ultra cheap houses. They must, whether bank or credit union, meet minimum property standards. Don't count on anyone financing a home without the bathrooms intact, a HVAC that works and so on.
Just in the past few weeks I've had a real crash course in buying a home and mortgage 'rules and regs'. I've bought and sold homes before but it's been nearly 20 years so I figured there's been some changes.

Mortgage companies are pretty 'picky' when it comes to what they will and won't finance. Some won't finance single wide mobiles, even with add ons. Some will but then there's the problem of how old the property is and anything older than 1979 is a no go, usually. I was going for FHA but my bank has decided that conventional is better for me. Need to find out exactly why. It surprises me sometimes as to the 'little things' they look for that I might not even think of.
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Old 02-18-2015, 07:58 AM
 
Location: Verde Valley AZ
8,775 posts, read 11,877,615 times
Reputation: 11485
Quote:
Originally Posted by chancellor14 View Post
You should buy a cheap house, put money into it to make it how you like it. Your friends did it the right way.
I just bought a "cheap house" but unlike so many this one is in nearly perfect condition and move in ready. It has taken me a long time to be able to do this and I'm thrilled. The only money I will have to put into it is all outside stuff...landscaping, patio, etc.. If they take their time and really look for a decent place it can be done. I was really lucky to find this place and I KNOW I "did it the right way".
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Old 02-18-2015, 09:01 AM
 
8,561 posts, read 12,336,785 times
Reputation: 16468
Another possibility might be to look for a house being sold with owner financing. Hard-to-sell houses, especially those needing repairs, are more likely to be sold through owner financing--although the pickings will still be pretty slim. Any time you deal with owner financing, however, you need to be extra wary and do your full due diligence. Don't skimp on inspections and make sure that the title is clear. It's best if you get title insurance. Above all, make sure to have a real estate attorney review your contract and financing agreement--whether it's being sold on a Land Contract (aka Contract for Deed) or with a Purchase Money Mortgage.

Whatever you end up trying to do, you need to save more money and make progress paying down your debt. You'll need money for repairs and maintenance, especially if an emergency situation arises. Owning a house isn't cheap but, if you do it right, it can still be cheaper than renting.

(Still, not everyone should own a house.)
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Old 02-18-2015, 10:53 AM
 
18,518 posts, read 15,506,793 times
Reputation: 16198
Quote:
Originally Posted by freemkt View Post
Many people would say a person in this position "can't afford to buy a home". I regard this scenario as "can't afford to NOT buy a home". In case you hadn't notices, rents do not go south, and today are rapidly going north. Buying a home is the only way to escape the rent treadmill.. I would gladly trade short-term pain for long-term relief. After a couple years with solid payment history you've got a seasoned loan and can refi at reasonable rates.
Too general, although probably accurate in OP's case.
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