Home Buying advice needed...

[EggsForIHOP]

Okay...here's the deal...my husband and I have basically, through his father and father's subsequent passing a few years back, LUCKED INTO what we have. Yes, there were bookoo taxes and such that came with it at the time of his death, but we didn't have to actually go out and hunt down and finance anything. Overall it really was luck as we were still city living renters at the time...so I am clueless in the "how to get a house" department...HOWEVER...

One of my best good friends RENTS the tiny little trailer across the road here. She is a single mom, 3 kids, tons of bills, CRAPPY CREDIT and really would love to OWN her own place....she asked me the other day where to start and besides "Save some money" I was clueless.... I DID tell her I would ask online though, as this group seems to have some pretty sensible answers and mucho experience as well.....

SOOOO.....How DOES ONE WITH SUCKY CREDIT AND MINIMAL SAVINGS POINT THEMSELVES IN THE RIGHT DIRECTION TO BUY A MODEST HOME WITHOUT GETTING TAKEN FOR A MAJOR RIDE? The last part scares her TONS - she is EASILY duped and admits to it. A nice person with a shiny smile is a MAJOR weakness for her....

Besides saving money, which she recently has conquered in small steps and is working on....what does she do next? She doesn't even have a freaking bank account! (and as a server in a restaurant I tell her every time we talk she needs a secure place for that cash - sock drawers are NOT secure and neither are prepaid debit cards) So Monday I agreed to go with her to our bank to open an account (they have a second chance program, which is always better than the sock drawer!)

But what next? Tips and pointers would be great - I would love to see her and the kids in their own little place free from a creepy landlord - he's kind, but kinda weird too! Like I said, we really just got lucky in an unlucky way, or we would probably still be apartment dwelling in the city all rat race style....so someone tell me how this is done because she looks to me for advice and this time I have none

 

[ksalvagno]

You have to establish credit. You need something so that you have a credit score that the banks can look at. I believe they are asking for at least 20% down payment. Banks aren't loaning out the money. Even to people with good credit scores. Banks like to see that you have been making payments on something.

 

[journey11]

Establishing good credit is definitely the first step. Does she have any student loans or installment-type debt she can work on paying off? They look at the ratio of debt to credit extended to an individual. Like, if you have a credit card and your spending limit is $5000, but you only owe very little or nothing at all on it. Or you took out a $10,000 student loan or car loan and you have it paid off or nearly so.

Then the next thing they'll look at is your debt to income ratio. Here's an article that explains that: http://banking.about.com/od/mortgages/a/debttoincome.htm Basically they want to know how much money you have freed up to pay on a mortgage.

There are also FHA loans that help people in your friend's circumstances buy a home. Certain qualifications apply. Also a lot of times first-time homebuyers will be eligible for loan programs that require no downpayment, but you will pay PMI (private mortgage insurance).

Really the best thing to do is just go sit down and talk to a local lender about it and they'll help you with the process and let you know what your options are and what kind of chance you have of getting a loan. It's best not to even begin the home-shopping process until you have some idea of what you can really afford (which is usually less than you think it will be!) We got a pre-approval first to see what price range to look in.

I've heard plenty of stories of single mothers who've bought dirt-cheap fixer-uppers and remodeled the house themselves. If your friend is determined enough, she can make it happen. Good luck to her!

 

[LetsBeSelfSufficient]

This is a good article on ways to improve your credit score: http://articles.moneycentral.msn.com/Banking/YourCreditRating/7FastFixesForYourCreditScore.aspx

Also, sometimes people with bad credit can get assistance from their state. The HUD website might be able to offer her some tips: http://portal.hud.gov/portal/page/portal/HUD/topics/buying_a_home

 

[Denim Deb]

First off, she needs to do everything she can to cut expenses where she can. If she doesn't already, tell her to hang her clothes out to dry. A "solar" dryer is very inexpensive. Even if she has no washing machine, and has to wash her clothes at a laundromat, she can still hang them out.

When she shops, have her keep the receipt. Then, make up some 3 x 5 cards w/the items that she buys on them. She can either use one card for each item, or one card for several similar item. I prefer 1 card per item. Then, everyplace where she buys this item, she's going to write down the store, and how much it costs(in pencil-that way she can erase it if the price goes up). Have her carry these cards w/her when she shops. That way, she'll know whether or not something is a good price.

When she shops, have her check the unit price. Often times, people think the larger size of something is cheaper. That's not always true. I've seen it more expensive by quite a bit b4. As for laundry detergent, she needs to go not by the unit price, but by the number of loads. Divide the cost by the number of loads the detergent says it will do, that will give her the load price.

When she shops, check the circular! And, she can plan her menu around the circular, instead of the other way around. If she has several stores that are close, and has the time, she can buy some of the items in one store, and some more in another. For me, I have grocery store #1, then grocery store #2, Big Lots, Aldis and Wal-Mart all w/in 2 miles of each other. I start w/the store farthest from home (grocery store #1), and end at Wal-Mart. Wal-Mart is the closest to my home.

Coupons are only good for saving money if a) it's something she normally buys and b) it's cheaper than another brand-including the store brand. I very rarely use coupons because I normally can't find any for the stuff that I buy.

No lunch meat! Instead, if she cooks a ham, turkey, roast, meatloaf, etc, she can use the leftover meat for sandwiches-and other meals.

Make sure lights are out when not in use, and there's nothing sucking power.

 

[freemotion]

She needs to read all the archives of this forum and learn how to not spend money and save-save-save! Yep, she needs a good credit score. What you describe of her financial situation is what will lead to foreclosure. She has a bit of work to do. It is doable.

One of the problems sometimes with a cash-based income is the temptation to not report it to avoid paying taxes. Then when you want a mortgage or a car loan...."nope, our records show that you have had very little income for the past several years. We can't risk that you won't pay us back." So she needs to count up her tips and report them.

Most people have more money than they think they do....especially if they have a pocketful of change and one dollar bills that go easily onto snacks, treats, soda, and other junk. Been there, I know. Get ALL that cash into the bank, and keep a budgeted and tiny amount for weekly spending. Make treats a rare, special thing instead of several times a day.

When I was a child, when my siblings and I got soda, it was RARE....maybe twice a year? And the three of us split one can. We had an ice cream truck that came through the neighborhood every day in the summer....so my mom got some popsicle molds and we always had popsicles, creamsicles, or fudgesicles in the freezer.

I could go on and on, but you get the picture!

As for what you can afford....you need to count on an average of 10% a year for home maintenance and repairs, and sometimes 10 years worth comes all at once! So this needs to be budgeted in, and that is for a house in good repair from the start.

 

[Niele da Kine]

See if she can find a place with owner financing and give them her story, maybe they will let her make payments. It is going to take years for her to get a decent credit score since she is basically starting at ground zero. At the moment, the banks aren't real keen to loan money and she doesn't seem like someone they would search out for a client. As long as the mortgage interest rates stay low, banks have very little incentive to loan money.

Perhaps she can find an elder person who doesn't have any family and "adopt" them. Help them, take care of them as she can and in general be their friend. They would not only probably have good advice on day-to-day living but might even leave her their house as an inheritance if they don't have anyone else to leave it to.

IMHO, she's gonna have to get creative since the traditional mortgage route is more than likely going to be a really rocky road for her.

 

[hwillm1977]

I've bougth my last two houses with no credit and no down payment... both were rent-to-own deals... but you really do need to shop around for that kind of thing, some rent-to-owns can be a huge rip-off.

First I worked for a lady who was willing to buy my first house for me, then rent-to-own it back to me... provided I could pay it off within 3 years... so I bought a 1970 12 foot wide trailer for $11,000... it wasn't fancy, but it was my own house

Once I paid that off, I started looking for an old, but structurally straight house in the country with a little bit of land... I would find an abandoned house, find out who owned it through public records, and offer to rent-to-own the place from them. It took more than a year, and a TON of houses, but I found someone who was willing to do it. Her mother had passed away 5 years before and the house had been vacant since then. She didn't want it to fall to ruin, but it wasn't in good enough shape to really sell it (there was no plumbing or electricity when we moved in), so she was happy to sell it to us. We sold the trailer and the money that we had saved, plus the money from the trailer went to getting this place livable.

It's entirely possible to find a home without good credit, and without a ton of money (a good downpayment makes it a lot easier to offer to rent-to-own though). Make sure if she's thinking about something like that, you NEED to go through a lawyer, have detailed contracts drawn up... how much she pays monthly, what happens if someone dies, what happens if she misses a payment, etc... she (and the owner) need to have legal recourse if anything happens.... you can generally count on a couple thousand dollars for legal fees to have that drawn up.

 

[aggieterpkatie]

I would tell her to take a year or two and work as hard as she can to build her credit and save money. Then, look into the USDA Rural Development program. They have 2 types, the Direct and Guaranteed program. The Direct program will lend money to those living at or below the poverty level, and has super low interest rates. The Guaranteed program is for those who don't qualify under the "low income" bracket. They're both very good programs for those who can afford to pay for a house but don't have 20% saved for a down payment.

 

[Dunkopf]

Okay...here's the deal...my husband and I have basically, through his father and father's subsequent passing a few years back, LUCKED INTO what we have. Yes, there were bookoo taxes and such that came with it at the time of his death, but we didn't have to actually go out and hunt down and finance anything. Overall it really was luck as we were still city living renters at the time...so I am clueless in the "how to get a house" department...HOWEVER...

One of my best good friends RENTS the tiny little trailer across the road here. She is a single mom, 3 kids, tons of bills, CRAPPY CREDIT and really would love to OWN her own place....she asked me the other day where to start and besides "Save some money" I was clueless.... I DID tell her I would ask online though, as this group seems to have some pretty sensible answers and mucho experience as well.....

SOOOO.....How DOES ONE WITH SUCKY CREDIT AND MINIMAL SAVINGS POINT THEMSELVES IN THE RIGHT DIRECTION TO BUY A MODEST HOME WITHOUT GETTING TAKEN FOR A MAJOR RIDE? The last part scares her TONS - she is EASILY duped and admits to it. A nice person with a shiny smile is a MAJOR weakness for her....

Besides saving money, which she recently has conquered in small steps and is working on....what does she do next? She doesn't even have a freaking bank account! (and as a server in a restaurant I tell her every time we talk she needs a secure place for that cash - sock drawers are NOT secure and neither are prepaid debit cards) So Monday I agreed to go with her to our bank to open an account (they have a second chance program, which is always better than the sock drawer!)

But what next? Tips and pointers would be great - I would love to see her and the kids in their own little place free from a creepy landlord - he's kind, but kinda weird too! Like I said, we really just got lucky in an unlucky way, or we would probably still be apartment dwelling in the city all rat race style....so someone tell me how this is done because she looks to me for advice and this time I have none

My best friend whom I have known since 1974 is closing on a 180k house the Monday after turkey day. He has 0 credit. Never financed anything in his whole life. He bought a trailer for 5000 about 20 years ago and has paid lot rent and that's it. Electric and water is included in the lot rent. I got him hired at the same place I work, He makes about 60k a year and has been with the company about 5 years. He is getting 4.2% APR. He is putting down 5000.00. I am clueless how he did it. No cosigners no special tricks or financing. The lowest I could get was 7% on my refinance. I have a great payment history but have too much credit.

I believe Wyatt is an exception. I would tell your friend to save her money and wait it out. There's going to be a lot of cheap houses in the next couple years with people desperate to sell. Lot's more foreclosures coming too. They have changed the rules and it is hard to qualify for most people. If your friend has a good paying job and no credit she may luck out though.