Unusual Situation

[happymommy]

I need help from anyone who might be able to give me some direction on this...

We are currently in a home with about $170k left to pay on our mortgage. We do not have 30% equity in the home, only maybe $15k and that's being generous. Our mortgage payments were always fine to deal with but now that my husband isn't working, it's tough. We decided to put our house on the market and start looking for cheaper places to get our mortgage down considerably.

Putting the cart before the horse, we found a home that we are in love with. We would be able to save an unbelievable amount (more than half) on our mortgage payments. We thought this house had slipped through our hands when we found it but the two offers made to the bank (foreclosure - bank owned) were 1) denied and 2) countered without being accepted.

So, the house is yet again available and the realtor has said if we want it we need to get an offer in now.

Here's the problem... our house has not yet sold and, while I got prequalified for a mortgage of $99,000 (the asking price), and we'd be offering closer to $80,000, we cannot close on the new (cheap) home unless our current home sells. Our debt ratio just wouldn't allow for it.

So... now to the fun stuff. (I'm sorry this will get lengthy but you've no idea how much appreciated any guidance is)

• We attempted to have my father co-sign. He has enough in reserves to cover the payments for 6 months which is what the bank required. They then came back and said because he wouldn't be living there, the reserves would have to be in one of our accounts, and couldn't be a gift.
• We found potential folks to rent our current home, for at or above our monthly mortgage payment. Though we thought that'd cancel out that monthly debt payment, we were told that unless we had been landlords for a year, it would not. We were also told that if we had 30% equity in our home we could claim 50% (or maybe more) of the rent payments as income and that'd work fine... but we don't have 30% equity.
• The new home we're purchasing will give us an immediate 50% or more equity in it. It is worth about twice, if not more, than what we'd be getting it for.
• We tried to set it up so my father was actually purchasing the home for us, however we were told that this would mean he'd have to purchase it as a investment property and put around 20% down... something he cannot do (he just took out a home equity loan).
• We don't have fantastic credit, just "good" credit. We were told if we had great credit and assets to back it up, it'd be no problem to let us have the second loan and offset rent or whatever. Right now what we've pre-qualified for is an FHA loan since it's not credit based.

We do not want to lose this home again. We will do whatever it takes to find a way to get it before our current home has sold. I'm looking for any advice on how we could move around in the system to have this work in our favor. Thanks so much for your help!

[shayne54]

I worked in the Mortgage industry for 6 years, but have been out of it for the last 3. In my opinion everything you have been told is completely accurate. I see no way that you and your husband will be able to buy this home with out either:

A. him finding employment in the same line of work (which would still make the loan difficult as I believe he would have to show 2 paystubs before you would be able to close)

or

B. Selling / Closing on your current home

This is MAYBE another option, and I say MAYBE...what about a land contract on your current home? I don't even know if it is possible, but if you offered your current home for sale land contract and required a nice size able down payment... its something you might want to ask your loan officer.

And lastly, you will have ZERO equity in the new home aside from your down payment. As far as the banks are concerned a home is only worth what someone is willing to pay for it. So if you buy a $200,000 home for a steal and get it for $80,000 its only worth $80,000. A year down the road you could have it re-appraised for its true value, but until then in the eyes of the bank they don't care how sweet of a deal you just got.