Low income, credit in ruins, family growing...will there EVER be hope of owning a home on a...

[FrodoLives!]

My partner and I are employed, but our income is pretty low.  Olean does not have a lot to offer by way of jobs, and we're grateful for the jobs we have, even if they suck.  With our family growing, we are going to need a house.  Ownership feels like such a long way off and impossible, especially since our credit is in horrible shape and we don't know when we can afford regular payments to repair it.  We've discussed buying at a tax sale, or programs like HUD and Habitat for Humanity, but according to their website they only help needy families with good credit???  We want to fix ours, but it is not going to happen as quickly as we want and this baby is not going to wait.  I feel discouraged.  Is it possible to repair completely ruined credit on a low income and ever own a home?

[frugalmama]

The first step is to look at WHY your credit is bad - if it's past medical or the like, find out the statute of limitations in your state and figure out how much longer you have before they fall off your credit report. 

If it's something like defaulted federal student loans, which never fall off a credit report then yeah I'd save / sell what I could and buy a foreclosure or tax sale after looking over the house really well. How handy are you & your partner at home repair / construction? I know here {south Texas} you can buy homes that have been foreclosed for as little as $10k, but they need a LOT of work done to them, and a chunk of the work would have to be before move-in {unless you pitched a tent in the back year while working on the house, which I have seen done here}. 

Have you considered relocating to somewhere with more jobs and a lower cost of living / cost of housing? Is there any chance of perhaps working something like oil field {Texas or North Dakota mostly} for a short time at really good pay to earn funds to pay for a home free and clear? I know several people who did that recently, and not all "oil industry" jobs - one friend of mine cleaned and made beds in bunk houses for the oil workers, and in a year made over $100k that she used to buy a house. 

Have you checked to see if your city / county / area has a down payment assistance program {Ours does a match of $3 for ever $1 you put into an account, up to $12k} and if so will they allow you to use the full amount towards a home purchased for that amount?

*hugs* We're in close to the same boat - while we managed to get the house using creative financing back in 2006 when they allowed it for low-income, now it needs major repairs and we can't get a 2nd mortgage to fix it. 

[bearski5]

Well it's a small world! I live in Shinglehouse PA but do all my shopping in Olean NY! We are a family of 5 and bought a 100+ year old house. We put no money down on this house and have lived her for a little over 7 years. We live in remodleing mode 24/7 we have house projects going on every spring and fall. When we are done with this house everything will have been replaced! Our house payment is very low...which it had to be when we bought this house because we were very young and didn't make very much money at all. We had a job loss and never lost our house.... Everything is fix able even bad credit...I would start by paying everything on time that will help alot.

[Thystle]

Ok what is the ruined credit over?

If you want us all to chip then give some more info. Medical? Credit Cards? Taxes? Student Loans? Repossesions? Bankruptcy? Judgements? Evictions? Loans? Bounced checks? Other????????

How old is it all? How new is the last "bad" item?

Do you have a real budget written out? Do you have any left over money at all each month?

Have you both pulled a current credit report with all three agencies each? Do you know what both of your FICO scores are?

If you give more specifics then we can give better advice! 

[mamarhu]

I suspect this isn't the kind of answer you wanted to hear...

Are you sure this is the right time for you to own a home? Even if you can get in really cheap, home maintenance is very expensive and stressful. You will soon be busy with a new baby; moving is a horrible experience at any time! If this is your first baby, you may be surprised how little room they really require. I understand nesting and wanting to make the environment great for your child. But a leaking roof or a broken furnace (with no landlord to make the repairs) would quickly tarnish the charm of even the cutest house for me. I have owned a truly great house (huge 100 year old Victorian on 5 acres) in a thousand ways my dream home. And while I occasionally miss that life, it is more frequent that I appreciate my more modest rented house now. When something breaks, help is just a phone call away, and not dependent on my bank account.

If your current situation is truly not adequate, I would start looking for a great rental. No rush - take your time to find the perfect place to suit your needs. Or put some time and money into making your current home as good as possible. It sounds like you might not be permanently in the area; if a great out-of-town job offer came along, would you be limited by home ownership?

Not denying the value of working on repairing your credit, or the dream of homeownership. But for me, the joy of owning a home was overshadowed by the stress of the responsibility.

[choli]

It's possible to repair credit, but it takes time. The reason it is hard to buy a house if you have low income and bad credit is that you can't afford it. Save and wait until you can afford to buy, right now you can't and should continue to rent.

[frugalmama]

Originally Posted by choli 

It's possible to repair credit, but it takes time. The reason it is hard to buy a house if you have low income and bad credit is that you can't afford it. Save and wait until you can afford to buy, right now you can't and should continue to rent.

Have to disagree with this - in many parts of the country {such as where I live} it is actually cheaper by far to buy than to rent. Rent is highly inflated because we live in both a military and college town, and over 50% are seasonal renter or temporary renters. Rent for the house I own would be $1200 a month, I pay just $726 including taxes a month. FAR cheaper to buy, if you can. 

[PenelopeJune]

Have to disagree with this - in many parts of the country {such as where I live} it is actually cheaper by far to buy than to rent

I agree with this, in certain situations. The crappiest, nastiest rental houses in my teensy, crappy town are going for $650 a month. If you were to buy the same place, your mortgage payment (including taxes and insurance) would be well under $350. We looked at a place that would have needed some work, but was perfectly liveable, that would have cost us just under $200 a month in payment, taxes, and insurance.

[mattemma04]

Houses around us are going for 15k-40k.They are bought and the rent sign pops up.Rent is usually around $500-750. The rent covers the mortgage,taxes,AND leaves a profit. Buying now is great. Ofcourse renting is good so you can just up and move if you don't like things.

I am suprised programs only help those with good credit. What a disappointment. I hope you will be able to work something out and find a nice place.We have been looking to buy a place to rent.Have the money for the mortgage,but darn those closing cost fees are very high!

[FrodoLives!]

Thanks for the replies, and I'm so sorry it took so long for me to post, I've been having medical problems.

Loki and I are trying to develop a 2-3 year plan.  Well, I want really badly to have a home before my son goes off to college, because I want so badly to share it with him and have it really be "home" to him. 

We are getting out of Olean.  There is nothing for us here.  We're looking at the Buffalo area, because I've lived there before, and there are jobs.  Hoping to rent a duplex, town house or something in Kenmore or Amherst.  Improving our earning potential is the first stage.  I wanted to take a phlebotomy class in the spring; I'm on bed rest with scary high blood pressure and the baby is due in June, so that may have to wait until fall.  I did find a company in Buffalo that hires phlebs for on-the-job training, and my doctor says I will get good blood draw training from them.  In Buffalo, Loki can make better use of his excellent customer service skills to get a better paying job, even if its only slightly better paying.  He plans on enrolling in college so that he can work in tech support. I have several options that I can research via internet while on bed rest, so that hopefully by the time Violet arrives I'll be ready to move forward with my best employment option.  We're allowing a year to begin pulling our earnings out of the hole.

Year two will be spent on cleaning up our credit.  I have no idea how to even start with that.

Hopefully in the third year we can begin looking at programs that may help us purchase.  I don't want to switch school districts again, but to start we may still need access to at least park-and-ride buses and the subway, and our eventual goal is to own a country home, ideally with enough land for chickens or at least a really kickin' garden.

Does this sound reasonable?

[gabbyraja]

USDA Direct offers rural mortgages to low income people, even with not great credit. It's a long process, and you can't have had anything bad in the last 6-12 months. We are buying through them right now. We repaired our credit first, though. If your scores are over 640 they don't look closely at what's on your reports.

Your first step should be to visit creditboards.com. It's an overwhelming amount of information, but you MUST do it yourself with the information you learn there. Only read as much as you can absorb in a day, then go back the next day. It feels like you will never get to the point where you know enough to even get started, but you will. I pulled Dh's scores from 530s to 660s-709 in 5 months. There's a method for everything. Not only that, but we've sued 3 creditors now that were using illegal collection practices. We never would have even known that they were before, or that you can easily find a lawyer that will sue with no money down ("on contingency"), and that 3 grand we've won, on top of our IDA money (the match program mentioned by frugalmama) is going to help tremendously with our house purchase and emergency fund.

USDA subsidizes your interest rate in order to help low income families get an adequate house. On an FHA mortgage at 4% we were told  we could get 70 thousand. With a USDA mortgage (subsidized to 1% interest) we can afford more than twice the house, but with the same or lower payment. We qualify for our county's max loan, $158,000. For a family of 8, that's going to buy us a big enough house that's in great repair, with some land for our homestead plan. Raising our own chickens, and sheep for milk, possible even freezer beef, will save us thousands of dollars per year (assuming we can keep them healthy and avoid the vet this time, fingers crossed). Plus we hope to install (or find already installed. looking at 3 houses that already have) geothermal heat or at the very least a heat pump. Another few thousand a year savings. We're excited. And they don't have to be "in the country", either. Check their eligibility areas and you'll see suburbs and small towns, outskirts of cities, etc.

Any questions about creditboards/credit repair, or USDA DIRECT (not "guaranteed") loans, just let me know. http://www.rurdev.usda.gov/NYHome.html

ETA: Oh, and the house payments w/taxes and insurance will be $300 less than we pay for rent for such a large family.

Edited by gabbyraja - 2/22/12 at 6:43am

[lmonter]

Originally Posted by FrodoLives! 
Well, I want really badly to have a home before my son goes off to college, because I want so badly to share it with him and have it really be "home" to him.

I had a friend in middle school and high school whose family rented the entire ten years they lived in town.  It was a little, 1000-1200sf top floor of a house with three bedrooms and a bathroom/laundry room.  To this day, they are still super close, even with all the exchange students they had back then (my friend had a daybed - exchange students/extra friends used the trundle in her room).  I honestly would've preferred to have lived in their little, happy house than the slightly bigger house my parents owned that gave us space to all stay away from each other (and not have to work on relationships with each other).  So please remember your home is what you make of it, whether you rent or own.  ;)

Originally Posted by frugalmama 

Have to disagree with this - in many parts of the country {such as where I live} it is actually cheaper by far to buy than to rent. Rent is highly inflated because we live in both a military and college town, and over 50% are seasonal renter or temporary renters. Rent for the house I own would be $1200 a month, I pay just $726 including taxes a month. FAR cheaper to buy, if you can. 

Which works if you have to do zero upkeep on the house and nothing ever breaks. 
But then there's folks like us that have the garage door, water heater and dishwasher crap out in a single year, or a roof that costs several grand just for the tiles (if you DIY, much more than that if you hire it out).  I have a friend that's been living with no running water for months (months!) because their well broke and they couldn't afford to fix it right now (and they didn't have $5K-$7K laying around at the time).  Our mortgage is certainly much cheaper than rentals in our neighborhood, but we also have to cough up the money for things that pop up, whether we want to or not.