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Thread: When to buy a condo/try to get a mortgage?

  1. #1
    Senior Member IsabellaRouma's Avatar
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    Default When to buy a condo/try to get a mortgage?

    Here's my situation: I'm currently living with my mom. It's obviously saving me a lot of money for my son (2 weeks 4 days old) and I to live here rent free. When I move out, I want to move into a property I own, not somewhere I'll be paying rent. I'd like to move out as soon as possible.

    I live in Central CT where you can still buy a nice 2 bed/2 bath 1,144 sq. ft. condo in a nice area for under $170k

    I'll be returning to work in March 2007 and I expect to gross $6000 per month. I expect to pay off my Visa and some other personal debt by April 2007. My expenses living with my mom are ~$1300/month including life insurance and health insurance. I'll have a ~$20,000 down payment saved by the fall and I'd like to purchase a condo then BUT I'm only 22 so my credit history is limited and isn't so hot (really rough summer in '06: pregnant, unemployed, payed all the bills (Car loan, visa), but payed them all late for 7 months) and as a dancer I don't have much proof of income.

    I only worked 4 months in 2006 and grossed about 25k in those 4 months so that's all I'll be declaring for taxes in '06. For 2007, I'll be paying taxes quarterly based on my expected income so I'm hoping I can use that as proof of income as an independant contractor (dancer) but I don't know if that'll fly. I expect my credit score to be somewhere in the high 500s/maybe very low 600s by the fall of 07, but I know that isn't very good.

    I plan to stop at my local credit union and ask them what the best way to approach this is, but I was hoping someone here might have some advice for me as far as what I need to do to put myself in a position to get a mortgage by Fall 2007 or if that's a total impossibility with my credit score and lack of steady income/employment history.

    My family might add 10k or so to my downpayment (bringing it to 30k), but I know they won't co-sign the mortgage, so a cosigner isn't an option.

    Any advice is appreciated! Thanks!
    "Emancipate Yourselves From Mental Slavery; None but Ourselves Can Free Our Minds." ~Bob Marley

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    Banned Melonie's Avatar
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    Default Re: When to buy a condo/try to get a mortgage?

    Well, there are several developments which could affect you ... and I would be doing you a dis-service if I sugar coated them.

    #1 - you didn't say what your declared income was prior to 2006. Under new regulatory guidelines lenders must look at 2-3 years worth of earnings history in order to evaluate creditworthiness. If you only have a $25k reported income in 2006 to work with, you're going to be considered a 'subprime' borrower for at least the next year or two.

    #2 - New regulatory guidelines to lenders regarding income verification and 'worst case scenario' financial risk evaluation, a just released rule change on the part of Fannie Mae forcing originating lenders of belly-up loans to 'buy them back' (i.e. the person writing future 'subprime' loans is now the one who will take the loss if the borrower goes belly-up instead of Fannie Mae a.k.a. US taxpayers), and the beginning of what may turn into widespread financial problems among companies that specialized in 'subprime' mortgage loans, are all combining to make future lending to 'subprime' borrowers both more difficult and more expensive.

    Realistically, until your credit rating improves and until you build a 2-3 year history of officially reported incomes that are proportional to the price of the house you are intending to purchase and the size of the monthly payments + property taxes + utilities, the odds of being approved for a mortgage with an interest rate below the 'extortion' level is pretty small.

    Also, realistically, if you were to actually purchase a house now with a $30k down payment versus a $25k reported income, it's likely to prompt an IRS audit as to exactly where the $30k materialized from. This wouldn't be as big of a deal if, for example, you reported a $72k income in 2007 and waited until 2008 to try and buy the house. And it probably wouldn't even raise eyebrows if you reported a $72k income in both 2007 and 2008 and waited until 2009 to buy the house - which would also probably allow you to be approved for a 'mainstream' mortgage loan without the 'extortion' level interest rate that will go with a 'subprime' loan.


    Another factor to consider is that the US real estate market is clearly in decline, with all indications being that the worst is yet to happen. By the real estate 'cycle theory', real estate values won't bottom before 2008 - and with Fannie Mae's new 24 month maximum time delay re delinquent loan foreclosure real estate values may not bottom until 2009. Thus from an economic standpoint, it's distinctly possible that by waiting until 2009 to go house or condo shopping you'll wind up saving a significant amount of money versus trying to buy before the real estate market has bottomed and risking taking a 'loss' on the purchase.
    ~
    Last edited by Melonie; 12-31-2006 at 12:03 PM.

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    Senior Member IsabellaRouma's Avatar
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    Default Re: When to buy a condo/try to get a mortgage?

    Thanks Melonie!

    I'll think I'll start looking for a long lease with a purchase option & credit. Maybe sign a 3 year lease and plan to pay down 50k in early 2010. Report 72k for the next 3 years and make sure I get my credit score way up.

    Better idea?

    Hate renting, but can't stand the thought of living with my mom for longer than I must.
    "Emancipate Yourselves From Mental Slavery; None but Ourselves Can Free Our Minds." ~Bob Marley

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    Default Re: When to buy a condo/try to get a mortgage?

    Renting isn't always a bad thing. Lease with buy-option is ok I guess. I wouldn't recommend buying right now, home ownership isn't all its cracked up to be. Over the long run, you will be paying more in high-interest and PMI than you would just renting a few more years. Plus, owning when you already have a history of paying bills late can seriously affect your ability to keep your home. Mortgage lenders aren't so sweet about paying things 7 months late, you WILL lose your home!

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    Senior Member IsabellaRouma's Avatar
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    Default Re: When to buy a condo/try to get a mortgage?

    wasn't 7 months late, just late almost every month for 7 months straight :-) but yeah, waiting 'til I have significant "just in case" savings wouldn't hurt
    "Emancipate Yourselves From Mental Slavery; None but Ourselves Can Free Our Minds." ~Bob Marley

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    Featured Member Katherine's Avatar
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    Default Re: When to buy a condo/try to get a mortgage?

    You should have 3-6 months on "just in case" savings before doing anything...

    That's something every single person should strive to have before making any significant purchases.

    Sophia_Starina = stripper goddess


    "Guys are so damn lame, the only way they can halfway make up for it is by opening their wallets."

    AznExtasy

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    Senior Member IsabellaRouma's Avatar
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    Default Re: When to buy a condo/try to get a mortgage?

    as usual, thanks for the great advice ladies
    "Emancipate Yourselves From Mental Slavery; None but Ourselves Can Free Our Minds." ~Bob Marley

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    Default Re: When to buy a condo/try to get a mortgage?

    For someone in the stripping business, I wouldn't recommend anything less than 6 months. If you get sick or disabled, or if business comes to a halt due to economy or laws, you'll need more cash on hand than the average employee who has all of the insurance and unemployment benefits......

    "Have you ever been to American wedding? Where is the vodka, where's marinated herring?" - GB
    "And do the cats give a shit? No, they do not. Why? Because they're cats."-from The Onion

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    Featured Member scorpio's Avatar
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    Default Re: When to buy a condo/try to get a mortgage?

    as usual, melonie is dead wrong when it comes to mortgages. Most Mortgage lenders operate on a 12 month credit history. Therefore, if you keep your payments all current for at least 12 months, you should qualify for a mortgage, especially if you have some sort of down payment. reporting your employment is tricky, as your employer will need to verify that you do have a job, and unless you improve your credit score to over 600, you will not be able to state your income, which means the bank won't verify it through tax records. The other isse is rental history. Only some banks will allow the "live with parents, pay no rent" deal, but there are enough out there that will.

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    Veteran Member The one and only Raven's Avatar
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    Default Re: When to buy a condo/try to get a mortgage?

    With regards to my present situation....

    I was going to do a stated income loan. The loan officer explained to me that all they would need to do is contact my employer to find out my dates of employment, therefore I wouldn't have to worry about paystubs, tax returns, etc. You could try this route but I'm not sure how much the late payments effected your credit. You have to have a 720+ for a stated income loan. Best of luck to you.

    Krystal

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    Featured Member scorpio's Avatar
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    Default Re: When to buy a condo/try to get a mortgage?

    Raven,
    it is abolutely NOT TRUE that you need a 720 FICO to do a stated loan. I can do a stated loan right now with a 550 FICO. I can do a no money down loan with a 640 FICO. Get a new loan officer. It is widespread knowledge that most loan officers today were selling cars or bagging groceries six months ago. PM me.

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