I see that you are the man (or woman) to talk to about these things. I have a question for you. If you have lets say $5,000. Is it better to pay down debt to raise a FICO score out of subprime and qualify for a better rate/ratio etc or put that money into a downpayment? My husband has a FICO in the low 600's and we would like to get a mortgage in about a year. We have no savings yet but he has a good job with great pay. He has a settled charge off, two small unpaid collections and some lates from over a year and a half ago. Should we be saving to pay down debt or have a significant downpayment? What do lenders consider more important? Thanks DMR143
I can't speak fro lenders, but let me speak as a homeowner. The statement "we don't have a savings account" is enough for me right there. Houses are a money suckers. I am telling you, they are wonderful to have, a great tax writeoff, and the American dream, but they cost money. The sink will leak, the toilet will back up, the outside needs maintenance, etc., etc., etc. My advice is save, save, save. Get yourself a savings account, and I don't mean for the downpayment. Get your mortgage with as little upfront cost as possible. Pay a little more a month for no points, and ask the seller to finance your closing costs. Easy to do and very much legal. I closed on my house ($86,000) with a check for a tad over $1,000. You are going to need the money for the upkeep, and in my opinion, no one should own a home unless they have 6 months of payments in the bank.
I know what you mean. our hot water heater went this week and the bill went straight to the landlord. My mother-in-law has an 85 year old furnace that could go anytime. What are they ...about 5 grand? Not to mention taxes. I know it is quite a commitment. I think that is part of the reason it has been so hard commiting thus far....well besides for the obvious credit woes.
Re: Re: Flan tan mortgage ? Wow. I agree 100%. I closed on the same price home for $104. I convinced the LO to allow me to finance prepaids that people normally pay. I have two months PITI saved and am working to increase that each month. Also - if you do buy, please do NOT buy a fixer upper. Buy something that is either new or newly upgraded and in excellent move in condition. The important things to look at are the roof, the plumbing, the wiring, the HVAC/heating system, the foundation. If you are unsure about the home, make the seller include a home warranty in the contract. If you need to, raise the price (i.e. $400) to get this home warranty. If something major breaks, you will need to pay $500 in deductible, but that beats paying $3000 to replace the heating system. I have a friend who moved into a house that is 3 years old and she has already paid $7000 to replace the heating system twice. Unbelievable.
Re: Re: Re: Flan tan mortgage ? Sorry to disagree, but we just sold our home for nearly three times what we paid for it! It was a fixer, it was our first home and neither of us is in the trades. We did most of the work ourselves. Luckily we were quick learners! Anyway, my point is not meant to be arguementative, but to point out that in todays market-highs, a fixer may be a good way to gain short-term equity, and hedge against a downturn if one is willing AND ABLE to do some, if not all, the work themselves! The downside is that you had better estimate your costs very realistically before you buy... using contractor. Then do it yourself!
Re: Re: Re: Flan tan mortgage ? It really does depend. We have friends who obviously know what they are doing but I have in-laws that live in an 18th century house where each room is partially finished even after they have paid off the mortgage after 30 years. They will not get a home equity loan because they are within a few years of retirement. I guess each situation is different and you have to really think about how realistic the situation is.
DMR Thanks for the kind words. First, last time I checked, I was male, and my wife is very glad for that. In answer to your question, each situation is a bit unique. For some people, raising FICO is going to be their best option and for others, increasing the DP is the better option. Lenders look at the totallity of the picture, not just a single aspect so I can't just summarily give you an answer. What causes the FICO scores to be where they are? Is it simply utilization, or are there other underlying reasons. Without looking at a tri-merge, it is even more difficult to answer. I can tell you that there are conforming programs out there that will go up to 100% LTV with scores either at or near where DH's scores are currently. I hope that I have been able to give you some direction. fla-tan
