Don't Know where to start!?!?!

tcbalgord · Joined: 19 Aug 2006 Posts: 6 Location: Wisconsin

Hello everyone! Our names are Tom and Christine and we currently are renting a somewhat small apartment for our needs. We just got married this past July and have 3 kids (2 boys and a girl). However, we do not have the kids full time as we do not have any children together yet.

Anyways, because of my (Tom) divorce about a year ago and a malicious exwife who is still raking up bills using my last name, as well as recently changing jobs (7 months ago), we have not even started to consider buying a house.

Well, like most things in life, when you are not looking, things seem to find you. We are now faced with a great opportunity to purchase a house from a relative at an extreme discount. We would be paying in the neighborhood of $23,000 less than the actual price of the home. (We have based this figure on the most recent survey done on the property for tax purposes).

After going through a lot of numbers and a few chats with a lender, we would could easily reduce our monthly bills by about $400 if we were to buy the house and then use equity to pay off our current car loan. (We purchased this car a few months ago so there is a long way to go before it is paid off).

The trouble is that our credit is bad and I am fighting hard to fix the things that my exwife has on there after we got divorced. Also, at least one of the creit companies even has my middle initial wrong and states that I live in a different state. (No identity theft has shown up and I think this is just a computing error.)

So, I guess I would like to 'pick your brains' about options that would allow me to buy this house with bad credit. We are doing this as an 'in family' type deal and while we will be hiring a lawyer, we will not be using any realitors.

We are somewhat scared that if we just start trying to apply at every place we know, including internet sites, our credit will be further harmed since so many people will be checking into it.

I guess this will be a good start as far as explaining my situation, but if anyone needs to know more, please let me know. Thank you in advance for any information or ideas you can give me.

Haplo · Joined: 20 Jan 2005 Posts: 2422 Location: Springfield, IL

Quote: After going through a lot of numbers and a few chats with a lender, we would could easily reduce our monthly bills by about $400 if we were to buy the house and then use equity to pay off our current car loan.

You generally can't take out the cash from the equity of the home the moment you sign. I'm not sure there's anything against your family member paying your debt off for you, but there are few lenders that are going let you take out cash from a good buy.

That being said, you haven't really told us *what* your credit looks like. Can you go into more detail? Are we talking collections and late payments? Judgements? Bankruptcies and foreclosures? Or has she just opened up a lot of new debt.

There are thousands of companies that work with bad credit, so that's not an issue. We need to know a tad more about your scenario to help you out best though. Especially with it being a family transaction.

tcbalgord · Joined: 19 Aug 2006 Posts: 6 Location: Wisconsin

My credit is actually pretty good when it comes to my paying back loans and such, however, the thing that really kills me are the medical bills I have 'rang up' over the past 6 years due to my son being autistic. So, in short, I have had collections, late payments and judgements against me. My only shining spot as far as credit goes are about 10 to 12 loans I took from a bank, ranging from $1,000 to $12,000, and my credit cards (I do not use credit cards any longer. Not because I dont want to, but because I do not need to).

As far as some of the things that are on my credit report as of last week, my exwife has been evicted two times and has had a car repossesed once. There are also some cell phone bills on there from my ex changing cell phone companies every time her current phone gets shut off for not paying.

I do know my credit score and when I went to refinance my new vehicle, I had to use a cosigner.

The advantages I think I have right now are that I have been able to pay my rent without being late for the past two years and I have been able to always stay current on all of my other bills such as electric, cable, cell phones. But, to my dismay, these things never seem to show up on a credit report, unless of course I would happen to owe them money. Also, even though I have not been at my job for very long, it is a union job with a very stable company. There has not been a layoff for over 10 years there and so it could be assumed that I have a relatively high margin of job security.

chow · Posted: Sat Aug 19, 2006 8:33 am Post subject:

The first thing you need to do is put an alert on you credit reports so people don't give your exwife anymore credit based on your name! Second, order the free credit reports that you are allowed to once a year fro each of the three credit report companies. Don't bother buying all of the fancy bells and whistles-but you might want to sign up for the "alert" feature so if your credit is pulled-you know about it. Then get stuff straightened out.

Your credit is subprime if you needed a cosigner for a car. Based on what you've said-I would reccommend you find a FHA lender who can do manual underwriting. You need someone who will not depend on a score-but what makes sense. A relative can gift you any amount of equity in the home to get the deal done. The rate will be fixed for 30 years, and it will be a much better loan for you than something that starts off low and goes up in rate after a couple of years-forcing you to refinance and spend more money. It's not all about the start rate in your case. It's about stability-and keeping some of that equity in case you need it later.

Hop over to my home page-The first link under my signature and click on "How can FHA help me buy a home?" We have many educational pages just sitting there for you to read. :wink: If you have any questions and live help isn't open hop back over here and ask one of us. (Yes- we have "chat" Mon-Fri 8am to 8pm EST) FHA is not a lender-we insure the loans for lenders. Ask your lender if they write FHA loans, if not-please find one who does, and compare that to your current offer.

Haplo · Joined: 20 Jan 2005 Posts: 2422 Location: Springfield, IL

We do, however your main hurdle in this situation is likely going to be showing that those items weren't yours.

FHA doesn't look at credit scores for determination of approval. They do however look at history. So your phone bill and utility bills can help with that. They won't entirely offset your derog history though, which is why you would likely need to explain and find a way to document the negative history there.

tcbalgord · Joined: 19 Aug 2006 Posts: 6 Location: Wisconsin

Amazingly this morning I woke up to an email stating that I have been preapproved for a morgage of $117,000, which is well over what I will be needing. However, the company now wants to know what realtor or firm I am trying to use to make this purchase and I do not want to use one at all. Will this become a problem or should I hire an attorney for this transaction?

Also, I noticed that I was preapproved based upon my income, before tax and any other obligations. I now wonder if this can change my approval status once I let the lender know that I have to pay child support, which reduces my income by around $500 to $800 a month?

This preapproval was gained by using lendingtree.com. Should this happen to be the only lender who I can be preapproved from, would I be wise to take it and then search for better 'deals' once I already own the home? The current quote was a 30 year loan with a very reasonable payment, but the interest was only garanteed to be fixed for the first 2 years. My worst fear would obviously be purchasing a house I can afford right now, but in two years from now, there is no telling if the payments get out of reach for me.

Also, this loan says it has penalties for paying ahead of time. Is this common? For some reason, this makes absolutely no sense to me!

tcbalgord · Joined: 19 Aug 2006 Posts: 6 Location: Wisconsin

I have been doing some more research and I started looking into the option of getting a VA loan for this house. I went through the list of requirements and feel I should be very well qualified. I also have the eligibility certificate on hand and have been discharged only 8 years ago. (I am assuming this is a federal program? If not, I live in Wiscosin and I gathered all this info from their website)

Is this an ok option or should I still go FHA? I want to explore a few options before I 'jump', but then again, I dont have forever to get this done either.

P.S. Would knowing my credit score and some of the finer details help you help me?

chow · Posted: Sat Aug 19, 2006 9:28 pm Post subject:

That lendingtree.com preapproval isn't worth the paper it is written on. Actually listing all of your bills-will change things! (and since that was a paperless preapproval you got-it doesn't take rocket science to figure out that one-does it? You are not a lendingtree customer. I would feel safer sitting my grand daughter in the middle of the IMS Race Track on Memorial day weekend-than telling you to even think about pursuing that offer!)

Okay, The VA loan is good for financing most of time for first time homebuyers. They underwrite about the same, and if your lender is a "Prior Approved" VA Lender, then VA will underwrite the loan, and if they underwrite it-about anyone will buy it. When I was a broker, I always spent the extra money to get "Prior Approved" status with VA-just in case someone like you knocked on the door. VA's underwriting staff told me that the way they look at credit is: " If it makes sense, the person served our country-it's our job to help them own a home" So, find a lender that can show you both types of loans. FHA has a VA/FHA program, but remember, you're going to be manually underwritten sooooooo shop for a Loan officer who can do both. PM some of the LO's here and ask questions. They don't mind.

Haplo · Joined: 20 Jan 2005 Posts: 2422 Location: Springfield, IL

I'm confused beyond belief!! :lol:

Know what I recommend? Give me a call. I'm sitting in my office putting in a couple of applications, but I'll take a minute to discuss it with you.

It sounds to me like there's a little bit of 'rubber waders and canvas gloves' work to be had here, but it'll be easier to figure out through a conversation than through the 'what about, and what if' situations.

And yeah, Chow's right. A pre approval from lending tree means that you want to buy a house and have a pulse. Sometimes I wonder about the 2nd part.

tcbalgord · Joined: 19 Aug 2006 Posts: 6 Location: Wisconsin

If the current homeowner owes more on the house then they are selling it for can they still sell the house?

Haplo · Joined: 20 Jan 2005 Posts: 2422 Location: Springfield, IL

If they bring cash to close they can.

chow · Posted: Thu Aug 24, 2006 12:44 pm Post subject:

tcbalgord wrote: If the current homeowner owes more on the house then they are selling it for can they still sell the house?

It's called a "Short Sale" and has to be approved by the lender (of the seller's) if the seller doesn't have cash to bring to the table. This happens more often than you want to know about. Deed in lieu of foreclosure is another situation coming up more and more.

I haven't ran into one person willing to sell the house and bring money to the table. I've been around 20 years. :wink:

tcbalgord · Joined: 19 Aug 2006 Posts: 6 Location: Wisconsin

So then if this is happening more and more are lenders more willing to allow a short sale or would they just rather foreclose?

Haplo · Joined: 20 Jan 2005 Posts: 2422 Location: Springfield, IL

Quote: I haven't ran into one person willing to sell the house and bring money to the table. I've been around 20 years.

Two of my buyers in the last month have had to bring money. Granted, it wasn't much (around $1000-$2000) but it's > 0.

chow · Posted: Fri Aug 25, 2006 11:00 am Post subject:

Foreclosure is expensive. If the sellers can bring a little cash-like Haplo's, that the best way to go. (Travis-you are one lucky LO!) If it gets into steeper figures, and the mortgage is behind, the tax bills are due-then the lender has to look at short sale if the borrower is moving out, but willing to work with them on sticking around until it's sold. Usually, Loss Mitigation efforts offer some small shelter to keep the borrower in the home. The mortgage insurance pays the claim, or the loan is modified and the payments moved to the end of the loan. The 80% loan to value rule was put into place because if a mortgage company has to foreclose, they usually recoup about 80% of the value of the home after legal fee's, time and the costs to go through foreclosure.

Short answer is: No-they would rather have you sell your house than foreclose. You should try to sell your house rather than walking away from it. It can seriously screw up your credit for years. The other thing people need to remember is: Take care of the property, stay in the home until they tell you to move. A vacant house is usually broken into and trashed, or becomes a issue to the neighborhood. I've known people who lived in a home for up to 3 years because it couldn't get sold. Some higher end homes, just don't sell fast. They took care of the property, kept it up, and worked with the Realtors to try to get it sold.