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When I bought my first home... the requirements were strict.
3 years in the same line of work
2 years for the same employer
home had to appraise and have a termite clearance
25% down was the norm... 20% the minimum
6 months living expense in the bank... etc.
During the run up to the bubble... I became friends with several of the new families that bought in my old neighborhood...
All the families were from Mexico... the homeowners were not American Citizens and no one verified income... they were all great neighbors and did lots of improvements... concrete, roofs, windows...etc.
One family paid 510k and it was 3 brothers with two of them being married... they had two old trucks and did landscaping... they and many like them got stated income loans or liar loans... almost no paperwork and no termite clearance on 1920 homes...
One mortgage broker told me he could get anyone 18 with pulse a loan...
All I can think is how much things had changed...
By the way... all 3 families went back to Mexico when the bubble burst... Jose told me he had to come up with almost $4000 every month for mortgage and taxes...
I was renting the exact same home next to his for $1500 a month including water and garbage..
And that right there is part of what led to the housing market crash. People couldn't afford their mortgages. That who non-verification of income thing was asinine to begin with. Yes, please let's give someone who makes $15K a year a house that costs $500K.
Same with the adjustable rate mortgages. Interest rates go up all the time. Foolish to think that your rate would never go up! Again people spend more than they could afford.
Add all that mess together and now you have the super regulated mortgage industry where some banks were screwed by purchasing other banks/mortgage lenders. But anyone with half a brain know that was unsustainable for the long term. It was all a matter of time before it all came crumbling down.
Why you wouldn't appraise a home and have a termite inspection done has never made a bit of sense to me. What if there wasn't a house on that lot? How would a bank 2000 miles away know? What if it was the local crack house or blow up via meth lab? Stupid things these banks did all to make a buck. And we all ended up screwed.....didn't even get a thank you out of it!
Appraisals were always part of the process... it's just there was a lot of leeway to boost numbers combined with lax inspection...
Another aspect which really surprised me was getting cash back at closing... people not only borrowing 100% of the purchase price... they were also allowed to roll in closing costs and take out another 1 or 2% on top of that.
The checker at the local grocery store had bought 5 homes in 24 months... one to live in and others for investment... put almost nothing down... all financed. He lost or walked away from all 5 when the market turned.
The family across the way paid 200k and refied every year taking cash out... new boats, german cars for everybody in the family... when the bank took the home back... he had it mortgaged for over 700k and had sold the furnace, water heater and kitchen cabinets from the place.
I have mixed feelings on adjustable loans... I had one that was a great rate for 5 years and then each of the next 4 years it went even lower... all the way down to 3%.
Meanwhile, I put away cash to the point I could pay off the mortgage balance at anytime...
In the end, I did a credit union refinance at 2.75% and paid down 100k off my balance because I want my home mortgage not to be a problem no matter what happens... So my 1 experience with an adjustable was more than great!
If all you have is a car loan, and all of your credit cars have a zero balance, then going to the Credit Karma website to pull your own credit is a superb idea, since it will not show up as an inquiry.
Once you get your credit score (I believe they use Trans Union), visit your local credit union, or a bank which you've banked with for several years, and pick their brains, but be sure to make an appointment first.
So my Uncle and I had a long talk this weekend. Here is a recap of what I have found out since my initial post.
1) My uncle is going to pay me back HIS commission. So yes, he would be doing it completely for free. He said he would like me to put it towards something nice in the house, such as new carpet.
2) He has a good friend who can supply me with financing. I have yet to meet with him but my Uncle said that he would provide me with cash back for closing costs. It sounded to me like a sort of referral bonus for my uncle that is being applied to my loan.
3) After this weekend of speaking with my uncle, I came home to a letter from discover with my FICO credit score. 771 is what I have, which is much better than I was expecting. Discover pulled it free of charge and without a hit on my credit.
4) My uncle and I surfed the MLS. Found some great looking homes but unfortunately I still don't have 20% down yet. I am hoping that I can save even 10% by my target of August and perhaps borrow the rest from the pops.
Thank you everyone for the replies thus far. If you have anything to add under the above info let me know.
Lenders do not like it when you borrow money for the down payment.
Plan ahead.
Agree with your father about the amount and sign a formal loan agreement between the two of you.
There needs to be some interest rate as the IRS insists on that.
Get Dad to give you a bit of the money each month and deposit it into your "house buying" account.
Start at least a year in advance and stop at least 2 months before making an offer.
Lenders do not like it when you borrow money for the down payment.
Plan ahead.
Agree with your father about the amount and sign a formal loan agreement between the two of you.
There needs to be some interest rate as the IRS insists on that.
Get Dad to give you a bit of the money each month and deposit it into your "house buying" account.
Start at least a year in advance and stop at least 2 months before making an offer.
He gifted my sister 10K when she bought her first house. I am thinking he might even do the same. I am curious why it would matter? I could understand the tax implication, but do you really think a lender cares where the money comes from? Specifically if my income shows I can afford the monthly payment.
He gifted my sister 10K when she bought her first house. I am thinking he might even do the same. I am curious why it would matter? I could understand the tax implication, but do you really think a lender cares where the money comes from? Specifically if my income shows I can afford the monthly payment.
I know. I was asking in regards to the borrowing. I was only mentioning that he may gift the money but I am not giving my hopes up on that, nor do I expect that one bit. So borrow is still my plan of action if I want to purchase come August.
I know. I was asking in regards to the borrowing. I was only mentioning that he may gift the money but I am not giving my hopes up on that, nor do I expect that one bit. So borrow is still my plan of action if I want to purchase come August.
If you borrow from you dad , it count towards the Combined Loan to Value affecting financing options.
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Plan ahead
