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I've been trying to buy a house in a historic district on the north side of Youngstown without much success, even though I have great credit. I attended a Christmas party for the members of the Wick Park Neighborhood Assn. (neighborhood where I'm trying to buy a house) and some of us were talking about our recent experiences with banks, and the concept of legal redlining came up. I'm not the only one having trouble getting financing from the banks, it seems. Another member is trying to buy his first house in the same neighborhood, without much success. Yet another resident recently bought a neighboring house with cash, but still can't get the financing to make any improvements.
The main problem is that these houses appraise so low. The house I was trying to get only appraised for $15,000, and the owner wanted $20k. The other member's house only appraised for $20k, (it's move-in ready!) and the owner finally came down to $31k. The house in the third example appraised for less than $10k, and they need about $15k to complete their renovations. They couldn't replace the roof, for example, even if they used all the equity the house had!
Youngstown has a reputation for being run-down. But, it's no wonder these neighborhoods fall apart, when the only people who can buy these houses are out of state investors who happen to have lots of cash on hand. And, all they typically want to do, is divide these homes into as many small apartments as they can after making minimal repairs, and rent them to college students.
Well, I don't feel better, but that's the end of my rant, I guess. Thoughts? Has anyone else had similar experiences in any other cities?
Wow, it is hard to imagine paying less than the cost of an average car and owning a home outright.
I'm not surprised that lenders aren't willing to do a mortgage loan for such a low amount. The paperwork costs alone would nullify any potential interest they would receive on it. Many people pay more in closing than the costs of the houses in your neighborhood.
If your credit is that good, why can't you get an unsecured cash loan for $15-20k?
Agree with Wrxflyer. There is no attempt to redline here, it's all a matter of economics. Even if the appraisals came in at the higher asking prices, most lenders would still not want to handle a loan for these.
So, the only way to restore this neighborhood is to find interested people who happen to have the extra cash laying around?
Quote:
Originally Posted by WRXFlyer
Wow, it is hard to imagine paying less than the cost of an average car and owning a home outright.
I'm not surprised that lenders aren't willing to do a mortgage loan for such a low amount. The paperwork costs alone would nullify any potential interest they would receive on it. Many people pay more in closing than the costs of the houses in your neighborhood.
If your credit is that good, why can't you get an unsecured cash loan for $15-20k?
I haven't tried to get an unsecured loan. The loan officer I was working with said I could probably borrow about $5k, but that was before I had gone through the pre-approval process, and so they didn't know my credit scores, yet.
The house pictured below will probably be demolished, because it needs about $150k in renovations. But, it probably wouldn't appraise for $150k, even when completed, because houses in this neighborhood appraise for between $10 - $25 per square foot.
Location: East of Seattle since 1992, 615' Elevation, Zone 8b - originally from SF Bay Area
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I have to agree, those home values are about 20% of the cheapest homes around here. You can see that on a 30 year loan even at a high interest rate they are not going to make much. Most people would save up a down payment more than that, so it doesn't seem out of question for people to save up a few years and pay cash for homes in that price range. If they city is concerned about improving the area, they should establish some sort of buyer assistance program.
Wow, it is hard to imagine paying less than the cost of an average car and owning a home outright.
I'm not surprised that lenders aren't willing to do a mortgage loan for such a low amount. The paperwork costs alone would nullify any potential interest they would receive on it. Many people pay more in closing than the costs of the houses in your neighborhood.
If your credit is that good, why can't you get an unsecured cash loan for $15-20k?
I agree. Ironically, it's impossible to get such a small mortgage in my state. My state has predatory lending laws in place that the APR cannot exceed 19. On a mortgage that small the APR is always going to exceed 19% so it's impossible to close. The laws congress enacted to protect the people prevent them from getting a small mortgage.
I've been trying to buy a house in a historic district on the north side of Youngstown without much success, even though I have great credit. I attended a Christmas party for the members of the Wick Park Neighborhood Assn. (neighborhood where I'm trying to buy a house) and some of us were talking about our recent experiences with banks, and the concept of legal redlining came up. I'm not the only one having trouble getting financing from the banks, it seems. Another member is trying to buy his first house in the same neighborhood, without much success. Yet another resident recently bought a neighboring house with cash, but still can't get the financing to make any improvements.
The main problem is that these houses appraise so low. The house I was trying to get only appraised for $15,000, and the owner wanted $20k. The other member's house only appraised for $20k, (it's move-in ready!) and the owner finally came down to $31k. The house in the third example appraised for less than $10k, and they need about $15k to complete their renovations. They couldn't replace the roof, for example, even if they used all the equity the house had!
Youngstown has a reputation for being run-down. But, it's no wonder these neighborhoods fall apart, when the only people who can buy these houses are out of state investors who happen to have lots of cash on hand. And, all they typically want to do, is divide these homes into as many small apartments as they can after making minimal repairs, and rent them to college students.
Well, I don't feel better, but that's the end of my rant, I guess. Thoughts? Has anyone else had similar experiences in any other cities?
Sort of. We have a manufactured home that we wanted to sell for $50k and we could not find ANYONE who would finance it. Even with 20 percent down. They just will not loan anything on high-risk properties. It stinks.
Many of you are looking at the economics of these loans, and I've never thought of that before. But I don't think that explains what's going on here.
In the second example, the transaction can't be completed, because the bank's appraiser says the house is only worth $20k, and the owner wants $31k. But, if the owner decided they would lower their asking price to $20k, then the bank loses.
There are buyer assistance programs from the city and from other non-profit organizations. But, none are greater than $5000, and there are restrictions. Some programs target certain neighborhoods, others have low-income restrictions, yet others (most, in fact) are targeted at first time home owners.
Just wanted to add that I am saving as much as I can. But some of the houses I've been looking at are in desperate condition, and may be even more severely damaged--or even gone--by the time I would be able to pay cash for them.
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