Should I apply for foreclosure?

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This week, I know for sure that we won’t be able to pay our monthly mortgage for the first time. My husband has been laid off for almost 6 months now and we have used up all of our resources. Used our credit card to pay some bills, buy groceries, and everything else. It’s so hard especially that we have a 7 month old baby. I tried to refinance my condo with multiple banks and even online(Quicken Loans) and we have been denied because we don’t have enough source of income. My credit score as of today is 679 and have never been late with anything but all of our credit cards have been maxxed out. We have about 30k in CC debt. Can anyone give us some advice on what to do? I’m thinking of foreclosure and just move to an apartment. We don’t want to do any loan modifications. I’m willing to give the condo up but in the future, I would still want to finally get a nice house of our own. We’re trying each day to be optimistic but things are getting out of hand lately. I would appreciate your suggestions.

My husband and I are looking to buy a house. We took first time homebuyers classes, made out a budget for what we can afford, checked our credit scores, and paid down our only credit card by a couple thousand. We are both fresh out of college, so we have not started to pay our student loans, but we have figured into our budget what the payments will be. My husband got a really great job over six months ago, and that is the reason we are even looking. To get an idea of what our mortgage would be before we applied, we did a variety of mortgage calculators online and through the bank that we are applying through for our loan. We found out yesterday that we only qualify for $ 60,000, but all mortgage calculators and our budget tells us otherwise. We were thinking it would be closer to $ 80-$ 100,000. So what did we do wrong, and what do we do in the future. We have thought about asking my parents to cosign, but will that help that much,or do we need to pay our card off?(About $ 3000)

10 Comments
  1. Reply
    suzb49
    February 12, 2011 at 9:34 am

    Call your mortgage lender and have them help you with this problem. The banks really don’t want to forclose on properties since they are responsible for upkeep until the place is sold. That means paying to have lawns mowed, driveways and sidewalks shoveled, heat in winter months, cleaning, etc. Call, explain your situation and see if they can work something out that will be agreeable for both parties. If you have paid your mortgage down, the bank may accept an interest papment instead of a full payment. They will be able to answer this question best since they will know what paths are available for you. Good luck.

  2. Reply
    newjerseyguy
    February 12, 2011 at 10:24 am

    You say you prequalified with a bank: talk to them about how they arrived at the amount and what you can do. Some possible factors could be your student debt, your credit card debt or the factor that you don’t have much time at your current jobs (some lenders want 12 months or more).

  3. Reply
    bob W
    February 12, 2011 at 10:52 am

    check out lease to purchase or owner financing. Its the only way people buy houses anymore.

    You can get twice the house by just taking over someone elses payments

  4. Reply
    rolsenn2003
    February 12, 2011 at 11:23 am

    In the lending industry there are many different types of loan packages. The online calculators might be set for a particular type of loan. You say you found out yesterday that you qualified for 60K. Where did you find this out from? If you went to a bank you were probably held to higher qualification standards, since it can vary bank to bank. I recommend finding a Mortgage broker, preferably one that someone you know has used in the past. The benefit of the mortgage broker is they can shop your loan around and get you a better rate. This will increase your loan amount. Remember that there are a lot of people that have gotten into exotic loans and now are in trouble. It is best to stick with a fixed rate since we are at near historic lows, by locking it in now you will have the same rate for the length of the loan. A variable rate mortgage might go down a little short term but is likely to go up long term. Paying down the credit card will help your ratios, and also might help boost your score a little.
    Getting family involved in your personal finances usually comes at a price. I have had business dealings with family before and it opens them up to opinions of your business dealings personal or otherwise. It sounds like you have worked hard and are doing the right things. You will feel better about yourself if you stand on your own. If your family wants to gift you some money for a down payment that might be fine but it is my suggestion to stay away from borrowing.
    It also sounds like you are at a point that small changes in income could make big changes in your buying ability. I was in a similar situation at your age. I bought my first house for less than I could afford. Later I had a setback and it worked to my benefit having a lower mortgage payment. You might be able to get into something and live there for a while and then either move up or turn it into a rental (long term best bet).
    I hope this helps good luck.

  5. Reply
    pbandham
    February 12, 2011 at 11:26 am

    First of all, just because you don’t qualify with one bank doesn’t mean you won’t with another lender. And I don’t mean shady high interest programs either. I would say before you even start looking into buying a home, you should pay down your credit card balance down to zero. There are people who will tell you that it’s more important to have the money in the bank instead but that’s just to play around with a few points on the credit score. The best thing financially for you is to pay off all credit cards so that your debt level goes down. Also, look to skimp on things for a few months to save up cash. You want as much cash in the bank as possible. Think of it as a game and try to save on anything and everything possible.

    The market is going to still be down in a few months. There is no hurry quite yet. Also, your husband’s job is only 6 months old so he doesn’t have stability in the eyes of lenders. Once he hits a year it’s a lot more stable. And do you have a job? It helps if you earned income too.

    Your parents’ cosigning would help only if they had good credit. It would help a lot actually if they had good credit. Also, what is your credit score? The best interest rates are given to 700+. If you have below that, that means, you have either too much debt, not enough credit history, or default and late payments. All no nos. I’ve never had one late payment in 15 years of credit history and that’s what it takes to have perfect credit.

    The best course of action is to take a deep breath, don’t get caught up in the excitement and frenzy of trying to buy a home. Take better stock of not only how much you can pay per month (too many Americans only worry about living month to month) and instead think about your overall financial health. You should have at least 6 months of living expenses saved up before you even think about buying a home. What happens if your husband were to lose his job? You’d lose your home and anything you put into downpayment in 4 months. That’s stupid. So worry more about paying down your debts to ZERO and getting some savings in place before worrying about buying a home.

    Too many people think that if they qualify for a loan, they should buy a home. WRONG! Qualification is the minimum requirement. If you guys don’t even qualify yet, you are not ready.

  6. Reply
    ebosgramma
    February 12, 2011 at 12:23 pm

    Since you just got out of college and only qualify for a $ 60,000 mortgage, your husband has had his job for only 6 months I am going to say that the reason you did not qualify for more is that your credit history is not very long. You may need to wait another 6 months and if you have no other credit than the 1 card you may need to take out and pay off monthly another card, maybe a car loan. Little to no credit can be as bad as having bad credit.
    If your parents are willing to co-sign that would get you into a house sooner but it is a bad idea for anyone to co-sign ever.
    I suggest you talk to a mortgage officer and follow their suggestions for building your credit over the next 6 months.
    Good luck.

  7. Reply
    s and d e
    February 12, 2011 at 12:29 pm

    you may just need more time of being out there in the real world. a lot of time you need a 2-3 year history of renting and good payments. try looking for a company that does manual underwriting of mortages. they will look at more than just your credit score

  8. Reply
    Aniyah
    February 12, 2011 at 1:27 pm

    There are hundreds if not thousands of websites on the internet enumerating the ways to apply and receive home loan when you are plagued with bad credit issues. These sites help consumers with bad credit scores to increase the viability of their existing credit scores and set up loans regardless of their credit history.Companies that specialize in bad credit home loans; usually offer a wide range of options for consumers with bad creditBad credit hasn’t stopped them from purchasing a home. There are several programs available for people with bad credit that helps to restore their credit status and to live debt free lives.

  9. Reply
    A Real Realtor
    February 12, 2011 at 2:22 pm

    Your student loan payments are calculated into the Debt-to-income ratio, when I am sure that you already are familiar with.

    Even if they are in deferrment, the lender still counts them., contrary to what alot of people will tell you.

    Remember, what you think you can afford and what the bank thinks you can afford are not the same.

    If they are telling you that you can’t qualify for a home over $ 60K then that figure is most likely accurate….banks are not very different when it comes to DTI ratios.

    If you are not calculating your student loan payments into the DTI calculator…then there is your error right there.

  10. Reply
    Master Tong
    February 12, 2011 at 3:00 pm

    I want to save your marriage. Why am I so nice? Because it is the right thing to do. Listen to me, carefully. Do NOT buy a home. Do NOT get a loan from the bank, from your mommy, or your rich uncle. The housing market is way over-priced and if you were to buy a home, you will end up paying more for what you should in 5 years. Do whatever you need to do, live with your parents, grandma, aunt, or whoever. Go rent if you need to. You and your husband will be much better off waiting on the sidelines and watching the housing prices continue to drop for the next 2-3 years. By then, you can go shopping with him and buy the home of your dreams dirt cheap, not to mention all the money you could save up by shacking up a few hard years will be well worth it.

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