Opinions requested

[momof5]

Ok, I am in a house I rent. Current rent is $1350/mo. I have been here over a year.

A couple of days ago a letter came addressed to the owner. Holding it to light , it said that the house is in pre-foreclosure. The owner hasn't paid December's or January's payments. (My neighbor's house is being auctioned off because her owner hasn't paid since July.) So, all these investor owned houses are going south.

I found a house in a better neighborhood. It is 'worth' $230K. It is on the market for $193K. (The owner must have gotten it as a gift because the Property Records show he paid $100 for the house....and that is not a typo!!!) Probably why he can sell so cheap.

Now, I didn't plan to buy for another year. BUT - with all of that, and the drop in interest rates, I am considering it.

Possible roadblocks:

Current FICO scores 606 624 628 (because of maxed out credit cards).

I have 0 in savings.

I am a contract programmer. In the industry for 16 years, but this position (since July) was preceeded by 2.5 mo unemployment, 10 months on another contract, 2 mo unemployment, 10 mo contract, preceeded by nearly 3 yrs salaried. This is one concern I have and why I was going to wait. The contract I am currently on is converting me to perm employment in April (salaried). My current income is $72800 annual.

On the positive...

I have VA eligibility. 0 down.....

I was thinking of offering his asking price if he pays closing costs.

With that, my housing costs don't go up (PITI). My utils go down. (this house has less sq ft and it is a 1 story)

Add one more motivator....crime in my current neighborhood is WAY up (In fact a few blocks from here a guy was killed...yesterday...shot in the head. UGH!) And they are bringing the Section 8s from the crime riddled Northside to my current area in new apt complexes.

Do ya'll think I should just go for it?

[Amerikaner83]

Go for it mom! That's a hell of a great deal! Instant equity!

[isislc]

Go for it, at least spare yourself having to put up with forclosure if the landlord doesn't pay up.

Here in Milwaukee, they forclosed on a few homes and the sheriff went and basically confiscated all the stuff of the renters that were still there with a moving company. They showed on the news that they got documents that their stuff was going to be sold to help pay for what was owed on the house. But the house isn't theirs so how can their stuff be sold. The Sheriff was like, I can't answer that for you ma'am. Poor kids were crying when they took their toys and stuff from their room.

[momof5]

Well, the lady next door contacted the judge in the foreclosure of the house she lives in.....and he told her that when the owner stopped paying the mortgage, the owner breached the rental agreement and rendered it void. My neighbor stopped paying rent (to save up the deposit and money needed to move) and the judge said there was nothing the owner could do to her! (Didn't really sound 100% right to me...) But, realistically, the owner isn't going to have her deposit to give back to her is he?

I think I am going to contact USAA and see what they say about a mortgage and go from there.

This would be way too cool!

[isislc]

Well, the lady next door contacted the judge in the foreclosure of the house she lives in.....and he told her that when the owner stopped paying the mortgage, the owner breached the rental agreement and rendered it void. My neighbor stopped paying rent (to save up the deposit and money needed to move) and the judge said there was nothing the owner could do to her! (Didn't really sound 100% right to me...) But, realistically, the owner isn't going to have her deposit to give back to her is he?

I think I am going to contact USAA and see what they say about a mortgage and go from there.

This would be way too cool!

Nope, I highly doubt it. What's the guy gonna do? Take you to court? I don't think so. Do it, you're better off. I personally can't wait to get out of my place. Just waiting for it to warm up but my nerves are getting racked. I tell my friends another day I didn't hide her body in the dumpster. lol. No she's alive but I could ramble off all the torture devices I would love to use on that psycho b*t#h.

[jq26]

I say go for the new house. Make a LOW bid and give yourself room to negotiate. If this person received this house in some sort of intrafamilial transaction, which is likely when the tax records say $100, then it is likely this owner is sitting on a ton of gain anyway and just wants to unload.

Rates have plummeted lately. Timing is everything. It is hard to pick bottoms in these types of situations, but this may be the bottom. Cheap money is back and current homeowners have accepted the new reality of pricing. The December #s showed a reduction of inventory- strange time of year to see that.

As far as the lease, I am concerned that you may be on shaky legal ground. He still owns the home and you guys have a contract. Be careful that you don't breach before he does. Your security deposit and/or last month rent payment which is being held will go bye-bye.

[firstsource]

I would start off by writing a good LOE (Letter of Explaination) about your job history. Include a letter from your current employer saying that you are wonderful and that they are excited about having you work for them and your future employment there looks great.

Take both letters to a few brokers and have them send to their favorite lenders. If you get two lenders that say "no problem", then go for it.

Charles

[jetscarbie]

I agree with what Charles said.

Another thing, if you are gonna try to go VA....it's always best to start your paperwork with them AS SOON AS POSSIBLE. The goverment is slow!!!!!!

[zfire]

If u go VA ...those loans aren't score based, so if you pay your bills on time,

the fico won't be an issue..

[momof5]

Yeah, I know the gov't is slow. When I bought my last house I was going to go VA. They took too long getting my cert of elig, that I took an FHA instead. When I finally got it, the idiots made an error... Just a little typo....like my sister's SSN not mine! LOL (ours are off by 1 digit. Mine ends in 5, her's in 6). Apart from that, all the other data is correct including the prior va loan.

Thanks Charles. That is the kind of thing I was looking for.

Explanation..... = Winn-Dixie...ugh. I got to be one of the corp folks laid off by them when they filed BK. Contracts, by their nature are supposed to be short term. I only do these while trying to get a salaried/perm position.

Does it help to show I never got behind on rent during the whole time? (Especially since the rent I pay now is ~ what the mortgage would be)

Oh, and jq.... My lease is over....I am in month to month. There is only the deposit that he would be holding. And, no, I wouldn't breach my lease. Even if I was justified, who needs the court battle?

[jq26]

Well, that is good news. No lease issue. What is a Winn-Dixie? A grocery store?

[momof5]

Yeah, it was 'southeast' before, but they closed most of the stores so now it is predominantly in FL.

Update: I called USAA for their opinion and they quoted me current VA is 6%. And recommended I get pre-approved online. They charge $100 for the pre-approval and if you use them, you get that back at closing.

I then called BoA/Military. Same 6%. But they charge $50 pre-approval. They superficially 'qualified' me for $199K. Said the employment should not be an issue. I went ahead and let them pull a CR for a pre-approval. She said that I should hear in 3 business days. I have been in the industry for 15 yrs so that helped over the past 2 yr history. The tri-merge showed only 2 CAs that she said would only need a letter of explanation and I wouldn't have to pay them. Then the standard documentation...DD-214, VA Cert of Elig. (which they would get since the last one had the wrond SSN), 2 yrs tx returns...they took landlord (real estate prop mgmt) ph # for rental history (18 mo @ $1350 no lates), said debt ratio 'was about right'....etc.

Crossing fingers.....

[Magdalen77]

Go for it, at least spare yourself having to put up with forclosure if the landlord doesn't pay up.

Here in Milwaukee, they forclosed on a few homes and the sheriff went and basically confiscated all the stuff of the renters that were still there with a moving company. They showed on the news that they got documents that their stuff was going to be sold to help pay for what was owed on the house. But the house isn't theirs so how can their stuff be sold. The Sheriff was like, I can't answer that for you ma'am. Poor kids were crying when they took their toys and stuff from their room.

Here when they foreclose the county (or maybe the bank or finance co) has to pay for movers and a storage unit for one month. I know because it happened to my DF three years ago. I don't know if they're still doing that with the increase in foreclosures. Prices didn't go as crazy around Philly as they did elsewhere, so maybe the foreclosure situation isn't as bad.

[momof5]

OK new question for those in the biz or in-the-know....

This is a second use VA loan I thought about getting. I have nothing to put down so I thought this would be good for me.....except they want a 3.3% funding fee for 0 down...

Now here is the curious q????

In a conventional loan, if the property is worth $230K and I pay $193K, that is an ~85% LTV loan. Does the VA do the same thing? Because there would be 15% equity in the house.....and a 10% down lowers the funding fee to 1.25%.

Anyone know?

[amortgageman]

Unfortunately, they will use the purchase price for loan to value purposes.

Fortunately, the VA funding can be financed with the loan, so a $193,000 loan becomes $193,000 plus $5,869, or $198,869.

Also, keep in mind that the seller may contribute up to 4% of your closing costs, and you probably have all kinds of room to negotiate with the sellers. The 4% can be used for the funding fee, normal closing costs, or discounnt points (to buy the rate lower).

Try to get some sort of estimate from your loan officer as to what the normal closing costs will be, and then apply the remaining amounts to reducing the funding fee or a lower interest rate, but definitely try to use all this money.

Regarding the purchase price, I would lowball the first offer, and also include "all closing costs up to 4%" in the offer. You can always counter offer until you get what is amicable to both parties.

[momof5]

Wow the things you learn when you ask!

I didn't know there was a 4% limit on seller paying closing costs. When I bought my first VA home, I offered asking price if he pays ALL closing costs.

I take it the 4% is 4% of the sale price, right?

[amortgageman]

Wow the things you learn when you ask!

I didn't know there was a 4% limit on seller paying closing costs. When I bought my first VA home, I offered asking price if he pays ALL closing costs.

I take it the 4% is 4% of the sale price, right?

That is correct.