Buying a home with bad credit and low income?
Ok my mom wants to buy her 1st home in the next few months, shes a single mother with four kids two young daughters that are children and two adult children my brother and I who are in our late teens and early twenties. My mom's tired of renting but she has bad credit and a low income making around $2,200 a month, I make about $1,800 a month, and my brother $1,500. The home that our family wants is a foreclosed home that's listed with a low down payment and programs available, I want to know with the help of a FHA loan and American Dream Downpayment Initiative(If that still exist) what do some of you real estate experts thinks the chances of our family getting this house is.
The house s listed at $300,000 and we live in NY and the basement is split so one half is like a studio apt. If that bit info helps with an answer as to what are the chances and what are the steps we can take to get this house, thanks for any help you can give guys.
Idk if this other details helps but I just thought of it but were a minority family and the area the home is in is pretty much a lower income mostly minority working class neighborhood but not the ghetto.
- Steve DLv 79 years agoBest Answer
Maybe. Assuming that the incomes you listed are net (after tax), we'll put your mother's gross income at $3,000, yours at $2,400 and your brother's at $2,000 for a total of $7,400 a month, which is about $90,000 a year. This translates to a mortgage, all else being equal of $270,000, so you would either have to come up with $30,000 down payment (which is 10%) or a combination of down payment plus lower price of $30,000 (say $15,000 down and knock the price down to $285,000). This still leaves the problem of closing costs, which will be another $15,000. The alternative would be an FHA mortgage at 3.5% down (about $10,000) plus 6% closing (about $18,000) for a total of just under $30,000.
Now, if the amounts you gave were already gross, that is income of $5,500 a month, or $66,000 a year, which translates to a mortgage of about $200,000, which puts the house completely out of your price range.
As for down payment assistance, the American Dream Down Payment program seems to have ended in 2007. There may be other programs operated by the State of New York that you would be eligible for.
The main problem, however, in addition to the down payment, will be your mother's poor credit. FHA requires two years of clean credit before they will consider guaranteeing a loan. If you go non-FHA, the bank will probably want a down payment of at least 20% since your mother would be considered high risk (assuming she would even qualify).
My suggestion would be to spend the next two to three years getting your mother's credit history in order (bring every thing up to date, make all payments on time) and start saving. In almost any event, you are going to need close to $25,000 to $30,000 to move into a $300,000 house (more with a conventional loan).
- BillLv 79 years ago
With bad credit and low income you don't have a very good chance of getting a mortgage. This would be the same even if you and your brother were added as co borrowers. The payment on a $300k house would be approximately $1800 p/month plus taxes and insurance and that would not include cost for utilities or maintenance.
- A HunchLv 79 years ago
I'm sorry I am the bearer of bad news. It's unrealistic for your family to purchase the type of house you are considering. Even if you utilize you brother's and your income, you would not be able to purchase a house for more than $165,000. (2.5times your total annual income).
Without your income, the maximum home price would be about $66,000.
It also isn't the smartest thing for you, your brother, and mom to purchase a house together. In a few years, you and your brother will want to move on to your independent lives and this will be very difficult if you are tied to a mortgage with your mom.
- EllenLv 44 years ago
I'm not sure what the program is called but it's through Bank of America. They help you get a loan by looking at your current utility bills only. Such as phone/electricity. They don't look at past bills. If you've been keeping up on your utilities you have a good chance of getting accepted. Also, there are a lot of rent to own houses.
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- 9 years ago
maybe u guys should pick a cheaper house the finance companys may not take a rish like that and u dont want to be payin for the house for a 100yrsSource(s): life
- 9 years ago
If you kids are living at home and helping to pay, then you'll have to be on the mortgage, which mean YOUR credit is also considered.