Real Estate experts: PLEASE help me buy this house!

[Felonious Monk/Fignozzle]

Okay, some of you know about our move to AL from TN to take a new job.

August '04: we move in to a rental in Alabama.  My credit score at the time was 621. (keep this number in mind...it affects the rest of the story) Hey, coming off of a bankruptcy (discharged Feb '03), coulda been worse.  We were told to make sure not to let anything negative happen, since it was right on the verge of going too low to get financing.

March '05: We sold our house in Tennessee, and immediately used the proceeds to pay off ALL debt.
Anyway, we found an awesome house and a GREAT price.
I started mortgage shopping, only to find that my credit score has DROPPED nearly a hundred points since August!

WHISKEY TANGO FOXTROT??

Start investigating, and it turns out during the bankruptcy, we had inadvertently missed a house payment and for 9 months afterward, was making our "on time" payments exactly one month late.  AAaaarrgh!

My wife really wants this house.  I really want this house.  
We can EASILY afford the house, if we can just get financing.
What can I do?

Feel free to PM, email fignozzle at yahoo dot com, or reply on the board.

[...has left the building.]

I was up until recently a mortgage broker for a very innovative place. For your privacy you can send me a PM on THR if you don't want to answer them right on the board.

Questions:

-What percentage can you put down?
-What is your wife's score?
-Was she also named on the bankruptcy?
-Does your wife have income?

[Felonious Monk/Fignozzle]

Daniel,

I remembered SOMEBODY had a sig line about mortgage brokering...you're just the guy I need right now!

I'll PM on THR, and maybe we can email or talk further from there.

Thanks a ton!
Fig

[...has left the building.]

PM replied to

[Brad Johnson]

Important thing #1 - DO NOT USE AN INTERNET LENDER! EVER!!!! I can't stress this enough. There are always much better local solutions. In my six years in the business I have yet to see an internet lender perform satsifactorily. Most just downright stink.

Important thing #2 - There is always someone, somewhere who will finance a house. It's just a matter of how much you want to put down and how much interest you are willing to pay.

Important thing #3 - If there is a paper trial on the late payments and everything else (and I do mean EVERYTHING!!) is in order, you might get a lender to except you out of the late pays due to the misunderstanding. You might even get your old lender to write you a letter explaining the mixup on the mortgage payments (and if pigs had wings....).

If nothing else, see if your bank will do a simple five year collateralized loan (with balloon). That will at least get you in the house. Once the mortgage late pays have ended, and your account has seasoned at least a year, you should be able to refinance using a more standardized mortgage product.

Hope this helps!
Brad

[Smoke]

"Important thing #1 - DO NOT USE AN INTERNET LENDER! EVER!!!! I can't stress this enough. There are always much better local solutions. In my six years in the business I have yet to see an internet lender perform satsifactorily. Most just downright stink.
"

Couldn't agree more.

[Felonious Monk/Fignozzle]

Well, it turns out there's also some blatantly incorrect items on the credit report, things which were discharged in the bankruptcy but are showing up as UNRESOLVED!
We called the credit union today, and they apologized profusely, but it'll still take anywhere from 30-90 days to resolve it with the credit reporting agencies. Aargh.

The seller of the house we want has made an offer and signed a contract to buy a house and closes May 6th.
He will be motivated, but probably upset if it turns out we can't come to the table with traditional financing/ a smooth transaction to get him smoothly out of the old house so he can get into the new one.

I guess its' HIGH time to get up to speed on real estate, especially as a way to escape 70 years of wage slavery.
If I can correct all the credit report nonsense and get into this house, I think I'd better start looking for ways to get some passive income happening.

So, priority #1 is to get into this house as a primary residence.
Priority #2 is not to let stupidity keep me down. ;-)
Learn from mistakes, use them to give you an advantage.

BTW--anybody do okay with rental properties?  Can someone who's not got a half million dollars to buy an apartment building get into an investment  house or two and do reasonably well?

[Brad Johnson]

Most mortgage companies will accept you application if you can provide documentation that the problems have been resolved (as in "Letter from the Credit Union").

Step One - Go to a local mortgage company and get started on a pre-approval. Shouldn't take more than a couple of days if you have all your documentation together. Then, and ONLY then, will you know for certain that you have the ability to borrow enough to buy the house.

Step Two - Put the house under contract.

Step Three - Close on house and move in.


Check with a local real estate agent about rent returns in your area. Also, don't get in a snit trying to wrangle "a good deal". Who cares what the price on the contract is - someone else is buying it for you!! As long as the rent covers the debt service and repairs then the ONLY expense you have in the house is the original down payment and closing costs. It's about the only way I know to take $15000 and turn it into $100,000 in twenty years with relatively low risk.

Keep in mind that rent property (unless you want to be a slum lord) is a long-term investment. You are getting into the property as an equity investment, and counting on your renters to buy the remaining equity for you. Also, the host of "get rich quick and take money home at closing" courses that you see on TV and the internet are crap. If they worked so well, then the authors would still be in real estate instead of trying to get you to buy their product at $400 a pop. Their programs work in a slow, soft market but just don't fly in an active market.

In general, a person with no prior landlord experience will be required to put at least 15% down. Figure closing expenses, lender-required things like surveys and appraisals, and prepaids for taxes and insurance to add at least another 4-5%.

Brad

[MaterDei]

Some suggestions.

1.  Ask the seller whether he will owner finance.
2.  Ask the seller whether he would lease for a period of time and then sell it to you.
3.  If I was local I'd buy it for you and lease it to you until you had your credit situation fixed.  Do you know others there that might do the same?

Good Luck

[Otherguy Overby]

Regarding owner financing.  It is not uncommon in the South East to have the buyer sign a quit claim deed along with all the owner financing stuff.  Miss a payment and the seller records the deed.   IOW, no equitable ownership, no nothing.  These are not trust deed situations.

Secondly and more applicable to most, if you have debt other than RE debt, DO  NOT pay it off with the proceeds of your house sale prior to your next RE purchase.  The cash may be way more important with your new purchase.  

After you fully know the new situation you are getting into, you can then decide what to do with your cash and debt situation.

Lastly, for the rest of you who always pay your credit cards off, you are actually hurting your credit score.  You WILL have a slightly higher credit score if you carry some revolving credit debt.  It's not intuitive, but it is true.  Higher limits on your credit cards also helps your credit rating.

Oh, and prior to closing, don't go down and charge up a bunch a' furniture, a big screen TV or a car or something.  It will show up on your credit report and could well affect your RE purchase.

Fer the rest of you, do some serious thinking, talk to a financial advisor or someone before paying off your RE debt.  It is government subsidized (tax write offs), paid off in tomorrow's reduced dollars with tomorrows higher wages.

THINK, dammit...

[Felonious Monk/Fignozzle]

Brad-- "Step One - Go to a local mortgage company and get started on a pre-approval. Shouldn't take more than a couple of days if you have all your documentation together. Then, and ONLY then, will you know for certain that you have the ability to borrow enough to buy the house.

Step Two - Put the house under contract.

Step Three - Close on house and move in."


Thanks for the info.  Helping me to focus the process is much appreciated.


Mater Dei-- "1.  Ask the seller whether he will owner finance.
2.  Ask the seller whether he would lease for a period of time and then sell it to you.
3.  If I was local I'd buy it for you and lease it to you until you had your credit situation fixed.  Do you know others there that might do the same?"

I'll ask re: an owner finance option, or maybe a lease/purchase deal until I can straighten out the credit report.
Also, re: #3...not so sure if there's someone here that will do that, but I may have a contact back in TN that would consider it.  I am impressed and appreciative that you would even consider such a deal.  Too bad we're not local!!!


Otherguy-- I'll do some looking in to the quit claim deed.  Thanks for the suggestion.  BTW, I agree re: the THINK comment! I guess the response is that I am not at all offended by you saying that, I just wish there were a decent primer on personal finance that people would have to study and pass like a driver's license, in order to avoid being turned loose in the world to screw up royally by trial and error.
Can you recommend some good places to start studying?

Thanks again for everyone's input!
Ben/Felonious Monk/Fignozzle

[Otherguy Overby]

Otherguy-- I'll do some looking in to the quit claim deed.  Thanks for the suggestion.  BTW, I agree re: the THINK comment! I guess the response is that I am not at all offended by you saying that, I just wish there were a decent primer on personal finance that people would have to study and pass like a driver's license, in order to avoid being turned loose in the world to screw up royally by trial and error.
Can you recommend some good places to start studying?

Ben/Felonious Monk/Fignozzle

Please be aware that the situation with a quit claim deed is not ideal for a buyer.  A late payment, returned check, whatever would be a default and the buyer loses the house without recourse.

Using trust deed financing (note secured by trust deed) is much safer for a buyer than the above mentioned situation with a quit claim deed.  My first message mentioned the finacing using a quit claim deed as a warning because it's commonly done in parts of the south east.