My girlfriend and I are getting ready to buy a house together and I have a question about how we would qualify. I want to make sure my credit is not going to wreck everything. Here's a rundown on us: Me - My middle credit score will be around 610. My income is 75k/year. My debt to income, not counting housing, is less than 15%. My only late pay in the past 12 mos. was a 30 day late last Oct. I have several 30 days late and a few 90 in the past few years. Nothing worse than that. A few more inquiries over the last few months than I should have but I was hoping to get a credit card or two for the purpose of reducing my utilization ratio. I'm currently at 90%. GF - No credit score pulled yet but should be perfect. Her score should exceed 700. One credit card balance of $700. Her income is 40k/year. Her debt to income is less than 20%. We are looking at a house that we believe we can get for 200k. We have 6k to put towards downpayment/closing costs. Thanks. Ryan.
I don't know anything about the qualifications but I have one question.... Are you sure you want to purchase a large purchase as a home with just a girlfriend? That just sounds too financially risky to me.
We've been together for over a year, talked about getting married and we are headed that direction. We pay a combined $1400 a month in rent and believe that money would be better spent on a house payment.
It may seem like it, but in the grand scheme of things, a year isn't very long. Why not rent a place together for a while. That way, if you do break up before you get married it's a lot easier. Trust me when I say that staying together because your have your finances tangled together is not good. I wouldn't get a house together (or get married, for that matter) until you've know each other at least 2-3 years. It can take that long to realize some things that you can't stand. I didn't quite follow that rule, but my husband moved into my house before we were married. We had know each other for about a year. But it was MY house, his name wasn't on it until I couldn't refinance to get cash out without his help. We had been together for just under 3 years by then.
That is true about paying rent and throwing it away but just think if you split up and both names are on the home then there is NO divorce settlement. She could take the home and wreck your credit or vice versa. At least in a divorce settlement there can be a settlement in writing. Girlfriend/boyfriend situations on such a large sum of money is risky financially. Why not wait and get married and then buy the house. My current husband moved in with me (I owned the home) and we didn't refinance it to put his name on the note until we got married (been married 6 yrs now) as I was not about to lose my home to a boyfriend. Just be careful. Once credit is comingled it can be disastrous.
Re: Re: Mortgage question A whole year? Slow down a little. First, you're not throwing away rent money in this housing environment. Housing prices are going to fall in the near term, and you're better off waiting for cheaper prices to get a house. Also, you need to realize that there will be considerable up-front costs involved in buying a house. Closing costs, taxes, insurance, etc, will put a huge dent in your savings account. If things don't work out between you two, that's money down the drain... much more than rent. Also, since housing prices are beginning to fall, you both might find yourself in trouble if you do break up and need to sell the house. Your closing costs on the purchase, along with a real estate agent's fees, mean that you'll probably need to come up with cash to pay off the mortgage if you need to sell it in the short-term. That rent could end up saving you money if things don't work out.
Re: Re: Mortgage question If you have a roof over your head and you aren't sleeping in a cardboard box, you aren't "throwing away" rent money, you are putting a roof over your head.
Re: Re: Mortgage question Interesting. I came with a mortgage question and instead receive an onslaught of relationship advice. I guess I'll address that first: We are both in our late twenties, have both had prior serious relationships, have both sown our wild oats and both feel comfortable that we know what we want in a partner and a relationship. We are both attorneys with very busy schedules. The time we spend driving back and forth seriously cuts into time that we can relax together and enjoy each other's company. We are both responsible with our money and if our credit is tied together through the house I can tell you that neither one of us will sacrifice our own credit to sabotage the other's. Renting an apartment together is not an option because we each have a dog and want a yard. We both understand the risks. We can rent a house that meets our needs for 1,500 to 2,000 per month or we can buy one with a lower monthly payment and start building equity. The house we are looking at is located in a historic neighborhood with a property on every block going through rehabilitation. Owners are replacing renters throughout the area. The neighborhood shows all the signs of continued appreciation. The bottom falling out of the market is a risk regardless of whether we buy together or buy separately. If anyone is interested in answering my original question I would appreciate it. I pulled my scores and my middle score is 625. She has about six years of credit history with two credit cards, a car and student loans with zero problems, minimal inquiries and a low utilization ratio. I'm assuming her scores will all be over 700. Does anyone have any thoughts as to whether we will get a decent deal on a mortgage? Or is my credit likely to make it difficult?
What strikes me when first reading your post is you only have $6K to put down for a $200K home. That alone may only cover closing costs & taxes. The bank will be expecting at least 10% if not 20% down.
Re: Re: Re: Mortgage question You are totally unprepared to buy a home. You don't have enough saved, your credit is marginal, and you don't have a grasp of the current home market environment. Trying to buy a $200k house with $6,000 in the bank is a recipe for disaster. What will you do when the roof leaks and needs to be replaced? Go deeper in debt? Get to know each other longer, save some money, improve your credit, and be patient.
Re: Re: Re: Mortgage question If mortgage rates stay low, do you really think housing prices country-wide will start to fall? Serious question. I'm looking to buy a house myself. In my market, (central/northern NJ) price increases have slowed, but they're still increasing. My friend bought a town house last year for $225k, his neighbor with same unit, no upgrades, etc, is selling now for $265k. (That's actual contract price, not list price, it listed for $270k.) At the same time, I've had other friends in other states say prices have dropped in their area. I think it's safer to say in specific markets, prices may drop, I've seen interviews with national home builders saying markets like San Francisco/Bay Area have seen some drops. To the original poster, buying a house with low equity is pretty risky in the first place. Add to that the possibility of housing price drops, and you have a potential situation where you owe more than the house is worth. Being upside down on a car is bad enough, on a house, it's crazy! And now add to that the possibility of breaking up and it looks even worse. Spend a little time browsing through this board for lots of examples of sweethearts gone bad, and you'll understand why the general response has been negative. I'm the farthest you could get from an expert, but I've seen 620 being the cutoff for non-subprime mortgages. At that level though, you're still looking at paying more points than someone in the 700s, and you'll get a higher interest rate. Not only that, but you may not get a low down payment mortgage. They may want you to do 5-10% in the first place. Altogether, in reality, I'd want to have at least $15-20k for the increased closing costs and down and another $5k in the bank. Can't you take 6-9 months and do 2 things: pay down your current debt and save up to somewhere near those levels of savings? Waiting should also help your credit score assuming you don't rack up any more lates and keep paying down your debt. 90% is very high, and probably drops your score significantly.
Re: Re: Re: Re: Mortgage question There are several important factors to consider concerning housing right now: The 10 Year Bond rate has spiked way up yesterday and today. It's the benchmark for home mortgage rates. That spike has got lenders really worried about rates. If I had to guess, I'd say that we've seen the lowest rates already, and that we'll see mortgage above 6% next year...if not sooner. Remember, when the Federal Reserve cuts rates(the one you hear about on the news), it has almost nothing to do with mortgage rates. The massive (and hidden) problems inside Freddie Mac and Fannie Mae threaten to throw the home lending market into chaos at any time. It's a real can of worms, and anything could happen. They have made some really stupid moves over the past few years, and it's anyone's guess just how bad it could be. It may well be worse than Enron. When rates rise, housing prices will fall. This will trap a lot of owners. If those owners become victims of rising unemployment, they will face foreclosure. Foreclosures are already at record highs. We cannot continue to absorb those numbers for much longer without putting significant pressure on housing prices. If even one of the above problems plays out (and it will), we will face a 30% correction in US housing prices, on average. Some cities(Boston, San Fran) will suffer even worse declines. If we end up with a worse-case scenario, and Freddie and Fannie collapse, the stock market crashes, etc, we will see housing prices lose 80%+ of their value. Recently, Sir John Templeton, a highly-respected Wall Street guru (he's 90, and has been around to see it all), said that he wouldn't recommend buying real estate in the US until it drops 90% from current levels. Yes, it really is that bad. You won't hear it on the news, but the US economy is truly on the brink of a complete collapse. If the Federal Reserve or the White House makes a bad move over the coming months, we will sink into a depression that will make 1932 look like a cake-walk. Probably more than you wanted to know. However, if you're considering buying real estate right now, you should keep your ear to the ground and listen for the signs. When prices do fall, there will be some amazing bargains out there for those who have cash.
Re: Re: Re: Re: Mortgage question Thanks for the reply. Nope, not too much info, exactly what I was looking to hear. It all sounds a little doom and gloom though, pretty contrarian, and though I'd love too see housing prices drop 30%, down to where I think they should be (a 1500 sq. ft. town house should not be $349k!), I don't foresee a crash like that. And though it would be great to finally be able to afford reasonable housing, god forbid a crash like that happen! But then I guess I said the same thing in 2001 about the Dow! Here's another question from the top of my head: is it better to buy now at say $290k at 5.5% interest, $14.5k down or say next year, $260k 7.5% interest, $20k down? My assumptions: housing downturn will happen, but not as bad as doom and gloomers. (I guess I could just go to one of those calculators eh?) I guess worst case scenario for me, not having bought a place yet, would be Greenspan playing the game perfectly, rates increase to say 6% and market stays strong as recession talks die down and economy picks up. In that case, I may be looking at $320k at 6% for the same place!
Re: Re: Re: Re: Mortgage question For the original poster, go to the link below to ask this question, there's some great brokers over there that are very knowledgeable and should be able to offer you some help. http://www.creditboards.com/phpBB2/viewforum.php?f=9 Hope this helps, good luck with your house buying adventure.
Re: Re: Mortgage question UM YES if you pay RENT you are paying SOMEONE ELSE's mortgage! That to me is throwing money away. At least when you buy a home you are building equity for yourself. Not giving your money to a landlord.
Re: Re: Mortgage question I would say go ahead and purchase the house and just ignore all the people that are trying to give you relationship advice. The site is called CREDITNET. Of course what makes this board great are the opinions and you have to sometimes play detective to find out what opinion fits your needs. Right now pretty much everywhere prices on housing is increasing and you are just throwing your money away if you are renting. Just think buying a house and if you sell and can get a profit that person just paid you back everything that you put into the house and gave you a big "thank you very much bonus." To me, it is just a no brainer. You should go to someone local to finance your mortgage if you can and they have good rates. That way you have that in your face help. When someone is staring right back at you, you tend to get more personalized service. You are less likely to get the brush off. Also try calling the companies that you have late pays with and asking them if they will take them off. Of course the higher the score the better, but if your gf makes good money and her scores are that high, you should not have a problem. Don't get discouraged by the cynical people on this site. More than ever, banks are willing to give out their money. I am sure that you would not be an exception.
Re: Re: Re: Mortgage question Have you ever stopped to think of where a mortgage payment goes? Obviously not. Over the long term, including repairs, mortgage interest, taxes, insurance, etc, residential housing is a horrible investment. The ONLY reason to buy a house is for your own peace of mind. It is not a good financial investment. The only reason people think it is, is because they never sit down with a calculator and do the math. Right now, we have a housing bubble that's allowed housing prices to go sky-high. Peope incorrectly assume that houses will continue to rise at insane levels, never realizing that it's simply not sustainable. Incomes and rents are not keeping up with prices.
Re: Re: Re: Re: Re: Mortgage question Nice doom and gloom story. But you do realize that a house selling for twice what it was selling for 10 years ago is still a lower monthly payment today because of the lower rates. If rates go up to 6% then it will only slow the market. Remember that rates were in the 6% range for the last few years and the market has been red hot for the last few years in a recession.
Re: Re: Re: Re: Mortgage question True and when that bubble bursts there are going to be a lot of unhappy sellers out there. Here in Atlanta there are homes being renovated in economically depressed areas going for $250,000 when the house right next door is only worth $53,000!
