house buying advice

[Diesel4me]

Ok here's the deal. i have been renting a 2 bedroom 2 bath patio home for three years now. My credit is screwed and i just had a repo AND i don't have much in the way of savings so i have not pursued buying my house or any other house. My landlady called me today. She's been looking into refinacing the house to get some money out of it to put into her business which, from what i am hearing, is struggling at the moment. Maybe just maybe this little infusion of cash she's looking for will be what takes her business to the top. Or maybe not, but i digress.

Anyhow, she knows how my credit is and she called today asking if i would want to buy the house, and if i did, she would co-sign the note. She says my payments should be the same or probably less than what I'm paying in rent.

Does anyone see a downside to this, assuming of course that everything goes as she has indicated?

[MS Fowler]

Sounds like a deal--IF everything is as it appears.

[kerry]

I agree, sounds good if everything checks out. What kind of down payment is she looking for?

[el presidente]

Originally Posted by Diesel4me

Does anyone see a downside to this, assuming of course that everything goes as she has indicated?

There can always be a downside:

1. You'll pay too much for the home.
2. Your interest rate will be killer.
3. All of the maintenance/upkeep, taxes, and insurance will now fall on your lap. Sorry to sound harsh, but if you can't afford a car, what makes you think you can afford a house?

[Kuan]

I wouldn't unless there's a chance the rent for your nice little cozy abode will go up once she sells.

Something's fishy about her picking you. I would steer clear because of her motives.

[Diesel4me]

Originally Posted by kerry edwards

I agree, sounds good if everything checks out. What kind of down payment is she looking for?

She has not said yet. I'm hoping not much! The house needs work if she wanted to sell it to someone else. The kitchen needs updated appliances (but the old ones still work) and she would have to put new carpet and paint in, fix the side porch, do some landscaping work, and paint the outside. I also suspect there may be some foundation work needed because neither of the sliding glass doors seems to line up properly anymore.

[el presidente]

Originally Posted by Diesel4me

I also suspect there may be some foundation work needed because neither of the sliding glass doors seems to line up properly anymore.

Kuan called it....great work.

[t walgamuth]

the first three rules of real estate are location location location.

is it in a good location? this is the most important aspect of buying real estate. a great home in a poor or medium location will never do as well as an investment as an average home in a great location. also you don't want to be the biggest home in the neighborhood, better to be the smallest.

so the circumstances might be favorable but it still could be a poor deal.

get some advice from a local person with experience.

good luck

buying a home is the best savings most folks ever have.

tom w

[Diesel4me]

Originally Posted by el presidente

There can always be a downside:

1. You'll pay too much for the home.
2. Your interest rate will be killer.
3. All of the maintenance/upkeep, taxes, and insurance will now fall on your lap. Sorry to sound harsh, but if you can't afford a car, what makes you think you can afford a house?

It was not that i could not afford the car, it was that i could not afford the $7500 repair bill plus the car. Those VW diesel engines are not cheap! Kinda like having to buy two cars and only getting one.

I know the interest rate will be killer. i have been paying the maintenance on the little stuff already. In fact she's not paid anything towards any repairs since i have lived there. Of course i have only had to have the plumber out three times and the AC technician twice. I've replaced all the bathroom fixtures, the kitchen fawcet and the disposer, and replaced the compressor in the outside AC unit, which turned out to be bad and had to be replaced again.

i don't want to have to move again anytime soon.

[Hatterasguy]

You might not have to take out a note, will she owner finance? What is your credit score? If its lower than 600 thats a problem, if so try this:

See if she will owner finance on a 3 year balloon, interest only. Then for three years build your credit up, you want 700+, that should get you prime rates. Then refi with a convential loan of your choice, I like 30 year fixed loans on primary residences. If your credit is 600 or lower you can still probably get a loan, but its going to be way over prime. I'd guess 7%-8%. But its not perminent you can refi when your credit improves and lower that.

Or
Does she currantly have a note on the house? Can you use it? Why not make payments on that note, draw up a contract so its all nice and legal.

When you rent a house the idea is to rent it for more then the loan payment to make a nice profit, but this doesn't always happen. So depending on what its worth your payments could be much lower, also you can deduct the interest from your income.

Also make sure you do not overpay, know what its worth.

Getting the money usualy isn't that challanging, their are thousands of ways to fund any RE deal. The trick is paying for said financing, and what the money wants from you.

You could set this up as a lease to buy as well, but it sounds like she needs a large chunk of cash now so that may not work.

Note: Talk to a RE attorny, accountant re laws very from state to state.

[A264172]

Originally Posted by Hatterasguy

You might not have to take out a note, will she owner finance? What is your credit score? If its lower than 600 thats a problem, if so try this:

See if she will owner finance on a 3 year balloon, interest only. Then for three years build your credit up, you want 700+, that should get you prime rates. Then refi with a convential loan of your choice, I like 30 year fixed loans on primary residences. If your credit is 600 or lower you can still probably get a loan, but its going to be way over prime. I'd guess 7%-8%. But its not perminent you can refi when your credit improves and lower that.

When you rent a house the idea is to rent it for more then the loan payment to make a nice profit, but this doesn't always happen. So depending on what its worth your payments could be much lower, also you can deduct the interest from your income.

Also make sure you do not overpay, know what its worth.

Getting the money usualy isn't that challanging, their are literly thousands of ways to fund any RE deal. The trick is paying for said financing, and what the money wants from you.

I mean you could set this up as a lease to buy as well, but it sounds like she needs a large chunk of cash now so that may not work.

Note: Talk to a RE attorny, accountant re laws very from state to state.

Would an FHA backed 1st time home owner loan be a way to skirt the bad credit issue to a degree? (and avoid a large down payment)

[Diesel4me]

Originally Posted by Kuan

I wouldn't unless there's a chance the rent for your nice little cozy abode will go up once she sells.

Something's fishy about her picking you. I would steer clear because of her motives.

i think she 'picked' me because it would be easier, i already occupy the house.

I pay $850 per month for the home now and comparable homes in my neighborhood now rent from $1000 and up.

[Hatterasguy]

Originally Posted by A264172

Would an FHA backed 1st time home owner loan be a way to skirt the bad credit issue to a degree? (and avoid a large down payment)

Yeah there terms can be pretty liberal. You don't need a down payment, you don't need any money at all really. People think you need money to buy RE bah, thats a crock of crap. You do need money, just not yours.

If you are a Vet you can get a VA guaranteed loan up to $250k no sweat.

If you have good credit you don't need to get creative to get around the down payment, and no one pays PMI anymore either. 80/20's or 5/15/80's are very common.

It really depends on how bad his credit is, there are also a million ways to fix poor credit really fast. I know guys who make good money at this. They buy cheap distressed homes, and sell them to people with no credit. But before that they lease the homes to them for a few months, bump there credit up 100-200 points then the people can get a loan. The investor makes a nice profit in the end, and the people get a home everyone wins.

But I'm not expert on this, however I do come across some super creative ways to finance things.

[A264172]

Originally Posted by Diesel4me

i think she 'picked' me because it would be easier, i already occupy the house.

I pay $850 per month for the home now and comparable homes in my neighborhood now rent from $1000 and up.

If you do this, you need to get the best home inspector money can buy to check out that foundation, and anythig else that might turn you upside down on it.

[Hatterasguy]

Originally Posted by Diesel4me

i think she 'picked' me because it would be easier, i already occupy the house.

I pay $850 per month for the home now and comparable homes in my neighborhood now rent from $1000 and up.

Whats the FMV of the house? You can Zillow it for a real ball park.