Buying a cheaper house/Does anyone know?

Avatar for colomom99
iVillage Member
Registered: 03-28-2003
Buying a cheaper house/Does anyone know?
12
Mon, 05-11-2009 - 9:06am

Good morning: As we continue to sort things out financially one of the things we are seriously considering is trying to sell our house and buy something less expensive. I love our house and the incredible open space views but frankly with my income down to a fraction of what it was and my husband's company demanding pay cuts and unpaid furloughs we really have no business in such an expensive house. Here's my question:

We have a lot of credit card debt. An embarrassing, shuddering amount (about $65K or $1,300 a month minimum payments plus one car loan of $360). I am working hard to pay it down, always pay more than minimum and target one bill at a time. I've wiped out several bills and our total truly is dropping from a high of over $70K just a few months ago. Does anyone know about how they calculate income when applying for a mortgage? I was operating under the assumption they would only look at my husband's income but now I am wondering.

I was told I couldn't count my income as a freelancer at all for two years and then they would average the annual income. I was laid off in June 2007 and made no money to speak of as a freelancer for about six months. But our tax forms for 2007 reflect a half year with my former company or about $25K. In 2008 our taxes show about $13K income for me. This year I have already topped that and I am hoping it will be around $20K

Can I use my 2007 and 2008 incomes to help qualify for a mortgage? It would really help with our debt to income ratios. We would buy something about 100K cheaper and providing our current house sells would have a 20 percent down payment plus maybe another 20 or 30K to throw at our debt.

Jenny

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iVillage Member
Registered: 02-07-2006
Mon, 05-11-2009 - 9:48am

Hi!

iVillage Member
Registered: 03-27-2005
Mon, 05-11-2009 - 10:20am

We are considering doing the same thing right now.

iVillage Member
Registered: 11-14-2008
Mon, 05-11-2009 - 10:33am

Hi,

I am not sure on the mortgage question either. Sorry. But ultimately we know this. You will just have to go and find out. It never hurts to ask the questions you have listed. What is counted for income what kind of interest rate can we get etc etc. Once you know the answers you can move forward and made a plan.

I think it is very brave of you to make this step. Not everyone would do it. Think of how much less stressed you will be? I would personally do a balance with the equity. Down payment and pay off CCs. Just my opinion, especially depending on what the interest rate you get would be vs what the interest rates on the cards are. You just have to make sure your efund is adequate and promise yourself to not use the cards anymore. If you can't make that promise....put more on the house. You know yourself.

I am living in a not very nice house. But! Its fine for now and I am very excited about saving next year for my "forever house"



iVillage Member
Registered: 12-29-2008
Mon, 05-11-2009 - 11:08am

Jenny,


Here's my two cents:

Avatar for colomom99
iVillage Member
Registered: 03-28-2003
Mon, 05-11-2009 - 1:17pm

Thanks for the comments and advice. We bought our house in June 2008 at the height of the run up. It was $481K which is a lot but we had just sold a house for $550K. We figured this was our forever house. At the time we put 20 percent down, had quite a bit of money in three 401K accounts and had two solid incomes. Since then the 401s have tanked, my income has dropped to a shadow of its former self (although I am so much happier and actually making a small living writing), my husband has had to take an 8 percent pay cut plus seven unpaid furlough days plus bigger employee contributions for health care. As much as we love our house and we are paying more than the minimums on our bills every month including a $2800 a month mortgage, we wonder if it isn't foolish to stay in a house when our financial situation is just very different than what it once was.

We could continue as we are and do nothing. We rarely use credit cards anymore (I did have to charge about $1K at Lowes to finish a master bathroom project so we could put the house on the market if needed). I have about $5K in an emergency fund. But I would like to have some breathing room. I started looking at houses about 100K to 150K less than the one we are in and have found some nice ones. Our friend and realtor says she would list our house around $500K. I suspect we would not get that but we would certainly have enough to put at least 20 percent down on another house. I'm hesitant to rent because I want to be settled for the kids. it will be tough enough on them to leave their school and friends.

I called a mortgage broker and I guess we'll see what he says. Sigh. thanks again.
Jenny
Jenny

iVillage Member
Registered: 08-04-2008
Mon, 05-11-2009 - 1:34pm

Just wanted to address your question regarding income and such.




iVillage Member
Registered: 08-04-2008
Mon, 05-11-2009 - 1:38pm

You might want to really take some time and talk to people in some mobile homes before you make that move.


Mobile homes do not appreciate, even during really good home markets.




Avatar for colomom99
iVillage Member
Registered: 03-28-2003
Mon, 05-11-2009 - 2:08pm

Good advice! Some I've already taken or tried. I did try to refinance about a month ago but no go. Part of it is banks don't know what they are doing or what their own rules are. Very frustrating experience. The bottom line was just using my husband's income alone coupled with our high debt and our expensive house meant we did not qualify for a refinance. Because we still have quite a bit of equity in our house and we're not behind we don't qualify for a loan modification either.

As far as house sales go it is hard to say. This is a very sought after neighborhood or at least it used to be. The houses that are selling quickly are the ones that are priced a bit under what they would've gone for a year ago and completely "done" with all the bells and whistles. We have a premium lot that backs to open space and the house has a lot of bells and whistles so we are in better shape than most. There are some things that could still be done (carpet replacement for one) but I'm not sure if it is worth it. I've gone through the house with narrowed eyes and I know what furniture would get stored for staging. I'm a fiend for de-cluttering. Waaaay too many hours watching HGTV.

I guess I'll have to see what we qualify for. I know in the past with our credit scores they wouldn't blink giving us a mortgage even without proving my income. Now, who knows....

Jenny

iVillage Member
Registered: 09-20-2004
Mon, 05-11-2009 - 3:51pm

How bad would it be to just sit tight, since you are able to pay your bills?

iVillage Member
Registered: 11-17-2007
Mon, 05-11-2009 - 4:11pm

In 40 years I have bought and sold several houses. Many of them where fixer uppers I really like fixer upper homes. They are cheap and they go up in value fast.


Here is my advice First go around the house and take down all your family pictures and box them away. Do what Marie says about clearing out things

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