First time home buyer looking for help..

Howdy from southeast Michigan!

I’m currently trying to help my father, 49, get a great property (for habitation, not investment). I’m a total newbie to the process so forgive me if I’m short on details.

The property, a condo, is currently owned by a family member. This property has been appraised for $135,000 and similar models have sold for $150,000. However, because of the relation (my mother, fathers ex), she’s willing to sell it to us for what she currently owes ($119,000). The property is in good condition aside from a few needed touch ups (such as new carpet and a good paint job). The area is also a hotbed of activity. There’s a new hospital opening in early 2006 and a new downtown area that will begin construction this fall. Time is a major factor in this as the 2nd mortgage is in default.

My father, a Vietnam-era vet, has been employed with a major, national “big-box” electronics store for 9 years and has a gross income of $55,000 a year. His credit falls into the “poor” rage with scores of 564, 576 and 629. Aside from his $600 a month apartment, he has only one open line of credit in the last 5 years (a paid off car loan in good standing for around $6,000). However, total debt adds up out to around $1,500 (a few utility accounts that were my fault). As far as a down payment goes, he has $5,000 in cash and a money market account worth a little over $8,000.

I’ve been talking to several local lenders who advertise they deal with “bad credit” and I get the feeling I’m the butt end of a snow job. Not that I have any experience with the industry, but I just don’t feel like I’m being told the whole truth.

Anyhow, could someone let me know if what I described above would be doable from a traditional lender or would I need to find myself an investor? If an investor is required, how would I go about finding one? Any tips, advice, pointers would be a fantastic help.

(I’m doing as much leg work as I can as he’s training a new district manager and his time is very limited at the moment.)

Yes looks like a good loan, he makes plenty of money to go full doc. He could get into a something like a 3yr arm interest only, in the mid to high 6% range or a 30yr fixed for a little higher. Looks like there’s no need for a downpayment your already at 85% ltv = (119 + closing fees)/150k. Or you could pay the closing fees out of pocket, stay at 80% ltv for a little better rates.

If you’re father has only that savings, I would not go 80%, reason being, if anything ever happened, what reserves does he have to fall back on? (RESULT mortgage lates or foreclosure)

if you did a 95% LTV (70/25) split, it would still leave him with reserves.
or with that credit score, owner occupied,full doc, you could even go 100% (80/20) LTV using part of savings for closings, and keep money market for reserves.

if he went 95% or 100% he would be getting cash out? Without putting any money in he is already at 85%.

If you’re talking to the local lenders, don’t feel like you’re getting a snow job.

Even with the utility accounts, I’m guessing they are collections based on the fact that you said they are yours and his scores are in the 500 range. FHA will still look at that loan at market if the collections are older than 12 months.

Other wise, he could work with a subprime lender and do a 100% or 85% as
previously mentioned as long as the investor will accept the higher of the sales price or appraised value. Many investors take the lower of the sales price or appraised value.

Another option is to find out if the current loan on the home is assumable in which case he could take it over as long as he qualifies with that lender. This might be a reach since there aren’t too many assumable loans out there.

Another option is the VA loan as long as he has his eligibility certificate. This being the case, the loan is 100% with 0 PMI and the seller can contribute up to 6% to closing costs allowing him nothing out of pocket. just raise the sales price to cover all of the closing costs and the payoff. VA is usually a little more lienient on credit issues as long as he can explain the problems on the credit.

Let me know if you have any other questions.