Buying a House (first time home buyers/bad credit/little or no down payment)

[AngelBee]

We have to opportunity to buy the home that we are currently renting.

We have never owned a home before. Our credit is not good (mostly medical stuff as a result of being uninsured)

As of right now, we do not have a down payment.

So....what should we do? It lokks like we can get a loan (really high payments) I would like input on what would be our best route. I am concerned that it may not be in our best interest.

However, renting will cost us $1100-$1300 a month! We pay $1150.00 right now to rent a house.

[AngelBee]

Oh....we are a family of 6

[pinksprklybarefoot]

Do you know what the mortgage payments will be exactly? If they will be comparable to your rent (which they very well may be), it might be a no brainer to me to buy.

Some things to consider:

-Utilities. Do you pay all of them now? Heating a house in MN is so ridiculously expensive. I know someone who last winter wound up owing Xcel $3.000 by the end of the winter.

-Taxes. They might be added on to your mortgage payment and put in escrow.

-PMI. You will also probably have PMI if you don't have a down payment.

-Type of mortgage. Be wary of mortgages where the conditions change after a certain number of years. Citypages did an article or two over the last year about all of the foreclosures and less-than-reputable lenders in the Twin Cities. You should be able to find them on their website.

If you are in a decent position to buy, now is the time to do it. There are at least 5 houses for every buyer right now. There are a a lot of people who have had houses sitting on the market for 6 months that have reduced their prices/will take a low offer just to get rid of the thing.

[AngelBee]

We pay heat and electric.....we are in MN too

What is PMI? :

It looks like the payment will be a bit higher then renting. But we can keep our dog. :

The other option is buying land and building as dh can build a house from foundation up.

[AngelBee]

Yeah...I will NOT do an ARM loan.

[tamagotchi]

How much higher than renting would your payment be?

Do you like the house and want to stay there for a long time?

[pinksprklybarefoot]

Originally Posted by AngelBee

What is PMI? :

Private mortgage insurance. It is basically insurance for the lender in case you default on the loan. I have heard of it upping a monthly payment by $100-$200, but I'm sure it varies greatly with each situation.

[AngelBee]

Originally Posted by tamagotchi

How much higher than renting would your payment be?

Do you like the house and want to stay there for a long time?

We find out today around 5pm how much higher.

I would stay here for a long time. I love the area.

Now the issue is that the house is priced higher then we believe it is worth. I feel like I can not win Sooooooo stressed! :

[boingo82]

Aames does subprime loans. You may want to talk to them.

[achildofthe80s]

If you are out of the city limits you should look into a USDA- Rural Development loan. The amount that they will loan out to you is based on a yearly salary and monthly payments are based on your income at the moment. This is good if you have a job change and are making less money, etc.

[KnittingShaker]

Do you have any idea what your credit score might be?

[AngelBee]

Well....not so good : Mostly medical bills from being bumped off state insurance 2 months before my dd1 was born.

Also a couple things from when I was a single mom.....2 bounced checks, phone bill.....

I just found out last night it shows a fed tax lein for a w2 that is not mine. I have already reported it and jumped through all the hoops for 2 YEARS! Apparently a lein was added Sept 2006.....so now I have to figure out how to fix that.

Credit score as is.......in the poor range. Just under 620.

[AngelBee]

Honestly.....how they even figure out the score is BS.

I have THOUSANDS off dollars going in and out of my bank account because of my business. That counts for nothing. I could not get credit as I had no established credit. Then I found out because I was trying to GET credit, it lowered my score because too many people inquired about my credit. :

[AngelBee]

Oh....now I finally have a credit card. A $200.00 secured card.

[jlazx2]

CAN you apply for charity assistance for the medical bills?

[KnittingShaker]

Originally Posted by AngelBee

Honestly.....how they even figure out the score is BS.

I have THOUSANDS off dollars going in and out of my bank account because of my business. That counts for nothing. I could not get credit as I had no established credit. Then I found out because I was trying to GET credit, it lowered my score because too many people inquired about my credit. :

The size of your bank account has nothing to do with your credit score.

[KnittingShaker]

Originally Posted by AngelBee

Well....not so good : Mostly medical bills from being bumped off state insurance 2 months before my dd1 was born.

Also a couple things from when I was a single mom.....2 bounced checks, phone bill.....

I just found out last night it shows a fed tax lein for a w2 that is not mine. I have already reported it and jumped through all the hoops for 2 YEARS! Apparently a lein was added Sept 2006.....so now I have to figure out how to fix that.

Credit score as is.......in the poor range. Just under 620.

In my experience, pretty much anyone regardless of their credit, can get a loan. You might get a terrible rate, but most anyone can get a mortgage.

Find a broker that specializes in non A credit loans. Some lenders do not require you to pay off collection accounts prior to closing, although most will. Some lenders will allow you to close without paying a tax lien, although if it is attached to the house they will.

Good luck!

[tangozulu]

Angelbee, I don't have much input but I will tell you that when you make your offer you can put that the house must assess for the selling price or you can get out of the deal. Also, generally speaking, a lender will not lend you more than what the house appraises for, plus MAYBE closing costs...so you are somewhat protected there - talk to your realtor.

HTH, tough decision!!

Tracey

ETA: You can always refinance for a lower interest rate (and thus lower payments) in a few years when your credit score improves - of course, who knows what mortgage rates will be in a few years, but it is a thought. GL!

[stellimamo]

Private mortgage insurance. It is basically insurance for the lender in case you default on the loan. I have heard of it upping a monthly payment by $100-$200, but I'm sure it varies greatly with each situation.

PMI will usually drop off your morgage payment after you are 10-20% vested in your home.

Remeber you can always refianace down the road sometime too. So even if your rate isn't great now you ca hopefully change it later.

[KnittingShaker]

Originally Posted by stellimamo

PMI will usually drop off your morgage payment after you are 10-20% vested in your home.

Remeber you can always refianace down the road sometime too. So even if your rate isn't great now you ca hopefully change it later.

PMI will automatically come off when you reach 80% ltv of the original appraised value. If you think that the value has increased after a year, you can request a reappraisal from your mortgage company to get the PMI dropped. It should only cost less than $500, depending on property type and part of the country.