I have good credit, near 700, and I am looking to be a first time homebuy in the near future. The problem is that I have about 20k in credit card debt. I make about 50k a year in a sales position. What would be my best route to getting a mortgage. If i can get a home below the appraised value, would it be possible to pay off some of my debt with that? Please let me know if i can give you more information
Jason S
Favorite Answer
You can not roll the payoff of the debt into the mortgage if you were to find a house below appraised value. Bank's do not work that way....if you agree to pay $100,000 for a house and you have no down payment, then the bank sees that as you needing 100% financing, irregardless of what the house appraises for. Personally, I think right now is the best time to buy! As everyone says, it's a buyer's market, which means you can find some real deals if you do some research and find a good realtor to help you. Everyone seems to have this misconception that you must be debt free and have a large down payment before you can buy a home. This is just not true! My suggestion would be to buy something now (as long as you can swing the payments). In about 3 to 5 years the experts say the market is predicted to level out. At that time, you should have enough equity that you could refinance to a 15 year fixed rate mortgage to pay off your credit cards.
CJKatl
You've gotten some good answers, but let me try to give you some building blocks to understand the process...
Over the past few years, the credit score drove the process. This is changing rapidly. Ability to repay is the new mantra.
To measure your ability to repay, the lender will look at how much of your GROSS income is devoted to repaying housing debt (Mortgage Principal, Interest, Property Taxes, and Homeowner'sand Mortgage Insurance; aka PITI) and consumer debt (credit card payments, car payment/leases, any mortgages or personal lines of credit). The debt load will be put over the income and the result should be no higher than 38% for you to qualify for 100% financing with your credit score. And note that minimum credit scores for 100% loans have climbed to 720 for many lenders.
As for pulling equity out of the home, for lending purposes, the lender will treat the lower of the appraised value and the sales price to determine the value of the home. For six months after you purchase the home, that lower price will still be used by most lenders, no matter what an appraisal says. This is called "seasoning" and has been ignored over the past few years. It's back, too.
And the previous posters are correct. Purchasing the home is only the beginning. I purchased a newly renovated home in April, and have had to get contractors in to do some small things ($3k), pay movers ($1k), replace a furnace I thought would last a few more years ($2k), despite very good credit, put deposits down for some of the utilities ($250), purchase curtains ($400), replace/get a few things because I wanted them for the house (TV $2k, Oven $2k), paint ($300), assorted other thing (shower curtains, closet rods, rugs, trash cans, etc. - probably another $2k). Plus lawn maintenance, increased utilities, and some art for the walls... Oh, and you'll need to pay for the mortgage, too. The higher the LTV, the more money you'll have to bring to the table just to pay for the mortgage. The point is, unless you're starting with a clean slate and money to spend, purchasing a home is just going to drive you further into a hole.
The previous poster is correct. Write down the goal: Purchasing the Home. The write down the steps you need to do to get there: Pay down debt, put away at least 5% towards the purchase, apply for a mortgage, start looking at homes, complete the purchase. Then go step by step.
good luck.
Yanswersmonitorsarenazis
Quit thinking about buying for now. Bad idea.
Start thinking about "how can I be debt-free in 12-18 months?"
If you walk into buying a house with $20K in debt already, you're just begging to end up in bankruptcy. Your spending habits are clearly out of scale with your income. What happens when an appliance breaks? Roof needs repair? Driveway? Siding? Deck? Etc... The list goes on.
Find some very cheap housing for a year or two. Buckle down on your spending. You gross about $4100/mo. You should have a net after taxes of at least $3000. Keep your spending under $2000, and put at least $1000/mo. against your cards. At least $300/mo. of that will go to interest at first, but it will keep getting better.
Best part is, once you've done that, you'll have so much more ability to manage your funds for future emergencies.
Anonymous
u want serious answer or feel good answer?
1st live on 25K$ yr pay off ur credit slave cards. 2nd sell more or get second job.
anything extra , save it to down payment .
get 10-20% down , fixed rate , 15 yrs no penalty points. don't buy to fill the bank or realators EGO just enough for u to live in.
wait for the market to adjust for next few years. have money b4 u buy.
visit daveramsey.com to learn what the bankers and credit slave cards pray u never ever learn or worse apply in ur life.
How to own ur money not be owned by it.
suggest u look at people who are being foreclosed on now and find out what they did . Then DON'T do it. hate to have to visit u.
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