Question about mortages

[BlueTaelon]

I hate banks and I swore I'd never get another loan again. I have a seriously visceral response to the idea of interest. I don't like it and it just seems to be a way to stick it to people even more. I've been making calls this morning and its looking like its my only choice:( So I have questions:

 

Say I get stuck with a 30 year mortgage, if I manage to pay it off in 5-7 years do I still have to pay all that extra interest? A $50k house will come with $70K in interest (just used the default 7% in the calculator, no idea what rate I could even get) over 30 years and I am not ok with that.

 

Where would I even go for a loan when I'm low income and poor credit? Most of the stuff on my report is old but its still drags down my score and since I won't use credit cards (don't make enough money to qualify for one anyway I dont think and there's never enough money left over to save up for a secured one, getting a mortgage would cut what I pay for rent in half) its virtually impossible to get my score up.

 

USDA Rural loans are out because you can't have a home based biz on the property or make it income producing which I plan to do.

[Mergath]

With a low income and poor credit, you probably can't get a home loan right now.  Dh has a moderate income for the area we live in, and poor credit thanks to our medical bills, and when he went in to find out what he'd have to do to qualify for a home loan, they told him it would probably take three years to get his credit to a place where we'd qualify.  (I don't mind renting, so I wasn't too heartbroken. ;) )  

 

[rebbyribs]

If you pay off a mortgage early, you don't pay the full amount of interest. You pay the interest charges for the months you do have the loan, and any extra payments go toward the principle.  (You need to make sure the loan doesn't have a penalty for pre-payment.)

[Kim in Appalachia]

No, if you pay off a mortgage early you don't pay the extra interest.

 

Right now you do need money down and good credit for a mortgage.  You may have a hard time getting a loan.  

 

You may look into homes that are rent- to -buy, or see if you could work out that type of deal with the owner of the place.  If the house is inexpensive, then the owner may be willing to do that.  It's  a popular option in low income areas.  

[BlueTaelon]

With a low income and poor credit, you probably can't get a home loan right now.  Dh has a moderate income for the area we live in, and poor credit thanks to our medical bills, and when he went in to find out what he'd have to do to qualify for a home loan, they told him it would probably take three years to get his credit to a place where we'd qualify.  (I don't mind renting, so I wasn't too heartbroken. ;) )  

 

I hadn't had a single thing go on my report in 5 years and I couldn't even rent an apt much less get a car loan:( Don't believe them about 3 years unless your doing things to raise your score like using a credit card.

[Jane in NC]

Is there a credit union that you can join? Credit unions are non-profits and are much more consumer friendly than banks.

[BlueTaelon]

No, if you pay off a mortgage early you don't pay the extra interest.

 

Right now you do need money down and good credit for a mortgage.  You may have a hard time getting a loan.  

 

You may look into homes that are rent- to -buy, or see if you could work out that type of deal with the owner of the place.  If the house is inexpensive, then the owner may be willing to do that.  It's  a popular option in low income areas.  

 

Thats part of the problem, I can't save up more then $2k at any given time or they kill my dd's SSI which we need. There is also just no money left over each month since we pay high rent. I've been looking for a year but the only rent to own type stuff I have seen they are asking insane prices for shacks, like 3rd world shacks they are so bad and they seem to ask for 50% cash down payment.

[kbutton]

If you pay off a mortgage early, you don't pay the full amount of interest. You pay the interest charges for the months you do have the loan, and any extra payments go toward the principle.  (You need to make sure the loan doesn't have a penalty for pre-payment.)

 

There are calculators that help you figure out what the actual interest will be if you pay it off early. Check bankrate.com for that kind of thing.

 

I don't know how recently you checked your credit, but regular bills, etc. do build up your credit rating.

 

If you are interested in figuring out how to get from your current point to being a good candidate for a loan, consider setting up an appointment with a personal banker vs. a loan officer. We had to use a personal banker to solve a problem with a principal payment on our mortgage that was applied incorrectly. After several conversations, we ended up refinancing our house (which has been a big blessing). This particular personal banker had similar financial goals and attitudes to ours, and she does not make money on mortgages. She helped us get better rates on our accounts with the bank, let us know what options she could help with, pointed us to someone who could give us more information on things outside of her job description, etc.

 

You'd have to ask around to see if you have any trustworthy banks that use personal bankers in this way (or any personal bankers who take the time to help their customers this way), but it might be another way to get around the potential pressure or potential negativity of working with a loan officer.

 

[Ottakee]

I agree with going in and talking to someone at a local credit union.  My brother with no so hot credit and disability as his only income got a mortgage through them.

 

Make sure there is no pre-payment penalty and you won't have to pay all of that extra interest.

 

When you see the credit union, take in your income stuff, any utility bills, rental history (if you have a history of paying rent in full on time over a period of time that will help), etc.

 

Then DO NOT NOT NOT (mini soap box here) take out the biggest mortgage they will give you, instead figure out what is reasonable and remember that doesn't include homeowners insurance and taxes so figure out those amounts for the year and divide by 12 to get how much additional you will need a month on top of the mortgage payment.

[BlueTaelon]

I agree with going in and talking to someone at a local credit union.  My brother with no so hot credit and disability as his only income got a mortgage through them.

 

Make sure there is no pre-payment penalty and you won't have to pay all of that extra interest.

 

When you see the credit union, take in your income stuff, any utility bills, rental history (if you have a history of paying rent in full on time over a period of time that will help), etc.

 

Then DO NOT NOT NOT (mini soap box here) take out the biggest mortgage they will give you, instead figure out what is reasonable and remember that doesn't include homeowners insurance and taxes so figure out those amounts for the year and divide by 12 to get how much additional you will need a month on top of the mortgage payment.

 

No worries there, I want the smallest I can get away with. I do not like debt.

[Um_2_4]

I also recommend finding out your situation now with a mortgage broker or personal banker. Do not use an online loan company, they are inflexible and basically following a "script" to sell a product.

 

See if the area you are looking at qualifies for any FHA special programs. Look at that counties housing department. One city we looked at had programs to help with down payments because the area was depressed economically.

 

As far as making a rent to own offer, you need to use a real estate agent or real estate lawyer that works FOR YOU to write up an offer to present to the owner. If it needs lots of repairs, it may not qualify for a loan anyways till the repairs are made. If it has been on the market for a long time, they might welcome the offer. At least it wouldn't be vacant. Perhaps you could offer an agreement that includes you doing some repairs in lieu of some rent.

 

With no stable income and (ETA: I see up thread you may get some government disability, if so they will take that into account) no real credit history (ours looked in that past 3 years) then you will probably have a hard time getting a standard loan. Credit Unions could be an option.

[LucyStoner]

Have you looked into if there is a Habitat for Humanity building anywhere near where you live or want to live? There is a waiting list for each chapter but I have known people who have been able to build and buy their Habitat home within 6-18 months of their application. They would be in a better position to deal with low income would be homeowners and the down payment is your sweat equity, not cash. The interest is low and the house price is low.

[Moxie]

It might seem like owning a home is cheaper but that is just not true. Things that seem fine break in an instant. Plumbers are expensive. Roofs need replaced. There are millions of things just waiting to break. Were I in your shoes, I'd make peace with renting.

 

Just to give an example--we bought this house in March. It passed all the inspections and is in a nice area. We had to spend $3k on the brickwork. We had to have it sprayed for ants. Our sump pump went out causing a basement flood (don't have the bill from that yet). We have a water leak in the bathroom wall that still needs fixed. And this is all in just 10 months!!

[Miss Mousie]

I hate banks and I swore I'd never get another loan again. I have a seriously visceral response to the idea of interest. I don't like it and it just seems to be a way to stick it to people even more. I've been making calls this morning and its looking like its my only choice:( So I have questions:

 

<snip>

 

USDA Rural loans are out because you can't have a home based biz on the property or make it income producing which I plan to do.

 

As to the bolded ... would you take the risk of lending someone hundreds of thousands of dollars for free?  :blink:  It's a business ... it's supposed to generate some profit.  Why else would anyone do it?  If you think the rate offered to you is too high, you do not have to accept the deal.

 

As to running a business from your home - you would need to make sure that's allowed with any mortgage you might take.  They are not all the same.

 

 

If you pay off a mortgage early, you don't pay the full amount of interest. You pay the interest charges for the months you do have the loan, and any extra payments go toward the principle.  (You need to make sure the loan doesn't have a penalty for pre-payment.)

 

Again ... not all mortgages are the same.  As rebbyribs says, you will need to make sure your mortgage does not penalize early payment.  You will need to make sure you understand all the terms before you sign.

 

 

It might seem like owning a home is cheaper but that is just not true. Things that seem fine break in an instant. Plumbers are expensive. Roofs need replaced. There are millions of things just waiting to break. Were I in your shoes, I'd make peace with renting.

 

Just to give an example--we bought this house in March. It passed all the inspections and is in a nice area. We had to spend $3k on the brickwork. We had to have it sprayed for ants. Our sump pump went out causing a basement flood (don't have the bill from that yet). We have a water leak in the bathroom wall that still needs fixed. And this is all in just 10 months!!

 

This reminded me of what my brother said to me: "Congratulations on your new home. Now you have something to do every weekend for the rest of your life."  :laugh:

 

I would never say that owning is always more expensive than renting, and certainly with a landlord one can have problems of timely repairs, substandard repair vs. replacement, accusations of mistreatment by the tenant, etc. - but in my experience, owning has been less expensive in the long run, especially once I actually owned as opposed to repaying a mortgage. 

[KungFuPanda]

Running a home business is more about neighborhoods and zoning than it is about your mortgage.  If I was low income and didn't wish to incur debt, I'd rent in an area where I could have a home business.  Things break . . . expensive things . . .  and that can be tough when you have to fix it yourself.  Roofs need replacing.  Water heaters explode.  Dead trees have to come down.  EVERYTHING is a thousand dollars to fix.  That's almost not an exaggeration.  It seems like every repair is $1000.  If your furnace dies, you pay to get it fix or you freeze.  It's not all about decorating the way you want.  If money is very tight, home ownership can create more stress than it alleviates.  I still think it's a very good investment in most places, but it's tough.  if a job opportunity comes up that's far away, you can be trapped in an economically depressed area if your house won't sell.

 

I have friends who were looking to buy a home.  They are childless with good paying longstanding jobs.  They pay cash for everything.  They cannot buy a home for another year because they have NO credit.  They have to get a credit card and use it for a year to 'fix' their credit score so that they can buy a home.  This is WITH a V.A. loan.

[BlueTaelon]

As to the bolded ... would you take the risk of lending someone hundreds of thousands of dollars for free?  :blink:  It's a business ... it's supposed to generate some profit.  Why else would anyone do it?  If you think the rate offered to you is too high, you do not have to accept the deal.

 

 

Actually it wouldn't occur to me to charge interest on a loan, I can see a reasonable flat fee but interest? No, at this point I almost see it as immoral to charge interest.

[KungFuPanda]

Actually it wouldn't occur to me to charge interest on a loan, I can see a reasonable flat fee but interest? No, at this point I almost see it as immoral to charge interest.

Immoral in what way?  

[Miss Mousie]

Actually it wouldn't occur to me to charge interest on a loan, I can see a reasonable flat fee but interest? No, at this point I almost see it as immoral to charge interest.

 

What do you see as the difference between a flat fee and interest?  And how is it reasonable to give it one name and immoral to give it the other?  It is still paying back more than you borrowed, in exchange for being allowed to borrow what you don't already have yourself.

 

If you were charged a flat fee on a mortgage instead of interest, then it would make no difference whether you paid it off early ... you'd still owe the whole fee.  Right?  Or am I missing something?

[BlueTaelon]

Immoral in what way?  

 

To me it feels like cheating a person.

 

What do you see as the difference between a flat fee and interest?  And how is it reasonable to give it one name and immoral to give it the other?  It is still paying back more than you borrowed, in exchange for being allowed to borrow what you don't already have yourself.

 

If you were charged a flat fee on a mortgage instead of interest, then it would make no difference whether you paid it off early ... you'd still owe the whole fee.  Right?  Or am I missing something?

 

Say $100 per year or something to cover the cost of someone to keep a record of the payments or something. By the time you finish paying off a house in 30 years you have paid for that house 2-3times over in interest which is insane.

 

If I didn't think the kids would kill each other I'd be happy to go live in a Tiny House on an acre of land because that would be well within our budget:)  I'm not looking for a big or fancy house, just a place to call our own:)

[Mergath]

It might seem like owning a home is cheaper but that is just not true. Things that seem fine break in an instant. Plumbers are expensive. Roofs need replaced. There are millions of things just waiting to break. Were I in your shoes, I'd make peace with renting.

 

Just to give an example--we bought this house in March. It passed all the inspections and is in a nice area. We had to spend $3k on the brickwork. We had to have it sprayed for ants. Our sump pump went out causing a basement flood (don't have the bill from that yet). We have a water leak in the bathroom wall that still needs fixed. And this is all in just 10 months!!

Don't forget fluctuating property taxes, too. Those can go up a huge amount every year in some areas.

[KungFuPanda]

Nobody can afford to take a financial risk for $100 flat fee.  There would be no mortgages under those conditions.  If it was a sneak attack, I'd be opposed to it too, but we're talking about written contracts where the mortgage lender agrees to finance your house right now and you agree to pay it back with interest.  You CAN pay it early and avoid LOTS of the interest.

 

[plansrme]

To me it feels like cheating a person.

 

 

Say $100 per year or something to cover the cost of someone to keep a record of the payments or something. By the time you finish paying off a house in 30 years you have paid for that house 2-3times over in interest which is insane.

 

If I didn't think the kids would kill each other I'd be happy to go live in a Tiny House on an acre of land because that would be well within our budget:) I'm not looking for a big or fancy house, just a place to call our own:)

But then no one would loan money. Why would I loan you money for free when I could invest it elsewhere in a manner that will make me money? I could, for example, buy rental property and charge a ridiculously high rent because no one could afford to buy as an alternative to renting because no one could pay cash.

[QueenCat]

I hadn't had a single thing go on my report in 5 years and I couldn't even rent an apt much less get a car loan:( Don't believe them about 3 years unless your doing things to raise your score like using a credit card.

 

7 years is the general rule of thumb for when something negative comes off of your report. You need to be doing positive credit actions as well. Getting a small credit card, charging it with a few things monthly, and paying it off in full monthly will help build your credit score. Car loans are also good for this. No action, positive included, hurts your score.

[Scarlett]

Actually it wouldn't occur to me to charge interest on a loan, I can see a reasonable flat fee but interest? No, at this point I almost see it as immoral to charge interest.

 

 

:huh:   So you think banks should just do favors for people?  How could they pay their employees, pay for the building where the loans are generated?  Honestly, very confused here.

 

As to getting a mortgage....I've been thinking seriously about calling around to see if we can qualify.  In our case, I have the excellent credit but no job....dh has the job but bad credit.  We own our house free and clear but it needs so much work and it is very hard to cash flow it.  Of course it is nice to have no payment especially when something goes wrong like sickness or job loss.

[Moxie]

If banks couldn't charge reasonable interest rates, only the few very, very wealthy would own land.  What a nightmare that would be for the rest of the country looking for a place to live.

[Miss Mousie]

BlueTaelon, if you have not done so already, I'd recommend going to annualcreditreport.com and getting reports from all three credit bureaus (everyone is entitled to one free report annually from each bureau). 

 

Look at the information carefully.  For the old/closed items, you will see a line that says "this account is scheduled to continue on record until [month/year]."  Whatever date is latest will tell you when you can start investigating mortgage possibilities. 

 

Until then, keep your credit clean, build as you can (as recommended above with credit card), and save as much as possible.  I know how hard that last bit is on low income - but even $10/month adds up, and even if you end up not needing a downpayment you will need substantial savings.

 

:grouphug:  

 

ETA:  I'm sorry, I missed the part about losing SSI if you have too much savings.  That's a tough position to be in, for sure.  I can't see how you'd be able to have both SSI and a mortgage.

 

 

[shawthorne44]

Is there anyway you could live in a smaller cheaper house than you'd like for a few years.  Like maybe a trailer?  Pay it off as soon as you can, then use the value of that place as a really large down payment on a more reasonable place to live.  

 

Because really, living without a mortgage is cheaper than renting or a mortgage.  Buying a not new but recent trailer had been my back-up plan if I didn't find a house I could buy for an extremely reasonable price.  I did find the house, and I paid the mortgage off in 7 years.  

 

I find it terribly ironic that my financial position is MUCH more secure now that I've paid off the mortgage, but my credit score took a nose-dive when I did.  

[Moxie]

Is there anyway you could live in a smaller cheaper house than you'd like for a few years.  Like maybe a trailer?  Pay it off as soon as you can, then use the value of that place as a really large down payment on a more reasonable place to live.  

 

Because really, living without a mortgage is cheaper than renting or a mortgage.  Buying a not new but recent trailer had been my back-up plan if I didn't find a house I could buy for an extremely reasonable price.  I did find the house, and I paid the mortgage off in 7 years.  

 

I find it terribly ironic that my financial position is MUCH more secure now that I've paid off the mortgage, but my credit score took a nose-dive when I did.  

 

Dave Ramsey would say that that is because the credit score just proves how much you like to play kissey-face with the bank--it is NOT an indicator of wealth or stability.

[Excelsior! Academy]

When we purchased three years ago we had excellent credit and a good down payment. We were barely able to secure the loan because we hadn't sold our previous home first. We knew that it would sell immediately after we moved out, but it would be hard to sell while we were still living it. The hoops we had to jump through were ridiculous. Unless you have excellent credit and a sizable down payment it is next to impossible to get a mortgage these days.

[Bootsie]

To me it feels like cheating a person.

 

 

Say $100 per year or something to cover the cost of someone to keep a record of the payments or something. By the time you finish paying off a house in 30 years you have paid for that house 2-3times over in interest which is insane.

 

If I didn't think the kids would kill each other I'd be happy to go live in a Tiny House on an acre of land because that would be well within our budget:)  I'm not looking for a big or fancy house, just a place to call our own:)

When someone makes a loan, they are letting you use their money; basically they are renting their money to you.  Yes, you pay a lot over 30 years to rent someone's money, but you also pay a lot to rent if you rent a TV, car, house, etc. over 30 years.  Is it cheating a person to charge them rent to live in your house?  Why is charging them to use your money any different?

[LucyStoner]

Interest is based on the time value of money. Honestly if you don't understand why interest is necessary then you are really better off just sticking your money in your mattress until you can pay cash for a home...but wait, most people will never be able to do that, especially people with a very low income. Access to capital is what you pay for with interest. A product like any other. Not only would a bank not make money on an interest free/admin fee only "loan", they would be losing it because it would be tied up in someone's home rather than earning them money elsewhere and even keeping up with inflation. I am all for laws against usury and predatory lending but our entire economy would come crashing down without capital and capital has a price. The "interest free" banks of certain theocratic countries make their money with sizable fees. It's interest by a different name.

 

I would investigate Habitat for Humanity. They will have you take a financial class and they have coaching available to help people get ready to buy, including helping people increase their income.

[BlueTaelon]

But then no one would loan money. Why would I loan you money for free when I could invest it elsewhere in a manner that will make me money? I could, for example, buy rental property and charge a ridiculously high rent because no one could afford to buy as an alternative to renting because no one could pay cash.

 

You mean there are places with decent houses/apts that have reasonable rent that don't involve living in crack neighborhoods? I haven't found to many of those. I think people need to be paid a living wage so they can afford their houses and I don't really think banks should be involved in the process. I come from the school of hard knocks and I've come to believe in paying cash out right for things. A lot of people do it, its a matter of getting out of the consumer mindset.

 

7 years is the general rule of thumb for when something negative comes off of your report. You need to be doing positive credit actions as well. Getting a small credit card, charging it with a few things monthly, and paying it off in full monthly will help build your credit score. Car loans are also good for this. No action, positive included, hurts your score.

 

I will NEVER buy a new car again, thats what made me start realizing what a scam banks are.

 

:huh:   So you think banks should just do favors for people?  How could they pay their employees, pay for the building where the loans are generated?  Honestly, very confused here.

 

As to getting a mortgage....I've been thinking seriously about calling around to see if we can qualify.  In our case, I have the excellent credit but no job....dh has the job but bad credit.  We own our house free and clear but it needs so much work and it is very hard to cash flow it.  Of course it is nice to have no payment especially when something goes wrong like sickness or job loss.

 

I don't think banks really should be involved. Pay people a living wage so they can afford to actually save up to buy a home.

 

If banks couldn't charge reasonable interest rates, only the few very, very wealthy would own land.  What a nightmare that would be for the rest of the country looking for a place to live.

 

Thats kinda how it is now already imo. We are very low income as are most of the people I know, it is a nightmare trying to find a place to live that you can afford and isn't a health hazard.

 

BlueTaelon, if you have not done so already, I'd recommend going to annualcreditreport.com and getting reports from all three credit bureaus (everyone is entitled to one free report annually from each bureau). 

 

Look at the information carefully.  For the old/closed items, you will see a line that says "this account is scheduled to continue on record until [month/year]."  Whatever date is latest will tell you when you can start investigating mortgage possibilities. 

 

Until then, keep your credit clean, build as you can (as recommended above with credit card), and save as much as possible.  I know how hard that last bit is on low income - but even $10/month adds up, and even if you end up not needing a downpayment you will need substantial savings.

 

:grouphug:  

 

ETA:  I'm sorry, I missed the part about losing SSI if you have too much savings.  That's a tough position to be in, for sure.  I can't see how you'd be able to have both SSI and a mortgage.

 

You can, you just need to have perfect credit and go though the USDA and they put strict rules in place like no home based business or things to produce income on the land you bought which I plan to do so that rules out the program for me.

 

Is there anyway you could live in a smaller cheaper house than you'd like for a few years.  Like maybe a trailer?  Pay it off as soon as you can, then use the value of that place as a really large down payment on a more reasonable place to live.  

 

Because really, living without a mortgage is cheaper than renting or a mortgage.  Buying a not new but recent trailer had been my back-up plan if I didn't find a house I could buy for an extremely reasonable price.  I did find the house, and I paid the mortgage off in 7 years.  

 

I find it terribly ironic that my financial position is MUCH more secure now that I've paid off the mortgage, but my credit score took a nose-dive when I did.  

I've thought about it, I read the book "Trailer Steading" and found it inspirational, I just can't find any places like that with seller financing. I hear about lots of folks who have done but I can't seem to find any of those deals myself or the property is very overpriced and wanting at least $10k or more down. My bio dad bought land back east and paid it off before moving to it, lived in a converted school bus until they could afford to move a trailer in. Those things are $$ to  move, at least $3k just to move them. Then he slowly built his house while living in a very run down trailer, I spent 1 summer there and it was not pleasant, I remember lots of mold and rot:(

[Guest]

You mean there are places with decent houses/apts that have reasonable rent that don't involve living in crack neighborhoods? I haven't found to many of those. I think people need to be paid a living wage so they can afford their houses and I don't really think banks should be involved in the process. I come from the school of hard knocks and I've come to believe in paying cash out right for things. A lot of people do it, its a matter of getting out of the consumer mindset.

 

 

I will NEVER buy a new car again, thats what made me start realizing what a scam banks are.

 

 

I don't think banks really should be involved. Pay people a living wage so they can afford to actually save up to buy a home.

 

 

Thats kinda how it is now already imo. We are very low income as are most of the people I know, it is a nightmare trying to find a place to live that you can afford and isn't a health hazard.

 

 

You can, you just need to have perfect credit and go though the USDA and they put strict rules in place like no home based business or things to produce income on the land you bought which I plan to do so that rules out the program for me.

 

I've thought about it, I read the book "Trailer Steading" and found it inspirational, I just can't find any places like that with seller financing. I hear about lots of folks who have done but I can't seem to find any of those deals myself or the property is very overpriced and wanting at least $10k or more down. My bio dad bought land back east and paid it off before moving to it, lived in a converted school bus until they could afford to move a trailer in. Those things are $$ to  move, at least $3k just to move them. Then he slowly built his house while living in a very run down trailer, I spent 1 summer there and it was not pleasant, I remember lots of mold and rot:(

 

I don't think you fully understand how economics work in a capitalist system. 

 

I understand the "living wage" argument, but think through the eventuality of what you're saying. Where I live, if you don't have at least $100,000, you cannot hope to buy any kind of home (unless you are incredibly handy and can afford significant renovations). If the grocery clerk "has" to be paid $20/hour so they can afford to live in a home, where do you think the grocery store gets the money to make the adjustment in salary? They have to raise the grocery prices, lay off workers, increase the workload of existing workers or all three things. The money to pay employees more doesn't fall from the sky. 

 

You don't think a bank should charge interest to front $100,000 for 30 years? That's insane. My dh works in the home building field and sometimes we have built homes on a "Cost-Plus" basis for people who struggle to get a loan. What that means is, we agree to build their home and charge them as the home is built for the cost of our labor and materials, plus an interest commission. Do you realize the significant risk this is for US? We are fronting ALL the costs of building the home, on the "promise" that they are going to pay us interest as we go to make it worth our while. Why would we do it and charge no interest? We're not going to build someone a house for free just because they're nice folks and we would really like for them to own a home. 

 

We own rental homes. We lease them out to good people who either cannot afford or do not wish to assume the expense and responsibility of owning and caring for the home themselves. This isn't usurious of us; it's providing someone someone needs under terms they're willing to agree to. 

 

I do not like debt, either. I am debt-phobic. But if I were in your shoes, I would get a secured credit card and use it to buy groceries or pay the electric bill to improve a credit paper trail. In fact, this is exactly what I did in my early 20's. I had a credit card that was secured by a $300 certificate of deposit and that was my credit limit - $300. This is one area where I seriously disagree with Dave Ramsey and think it is bad advice to steer clear of all credit unless someone has a manic disorder and cannot handle having access to credit. 

[BlueTaelon]

I somewhat agree with your sentiment overall, but not with this in particular.   I honestly believe plenty of places could pay better.  They would perhaps make less profit or charge more, but I call foul that they HAVE to pay people peanuts.

 

Many places line their pockets while paying peanuts. Look at Australia, they pay a much higher wage, something like $15-17hr and BigMacs are still only $5. I don't buy the whole prices will go crazy thing when I look at other countries. 

[Guest]

I somewhat agree with your sentiment overall, but not with this in particular.   I honestly believe plenty of places could pay better.  They would perhaps make less profit or charge more, but I call foul that they HAVE to pay people peanuts.

 

I hate to disagree with you, SU, because I puffy heart you in cyberspace!  :001_wub:  But here's the way I see it: If we're talking about unskilled labor, we can't just say, "Let's give them more money because shucks, it's impossible to live on $7/hour!" It just inflates all prices all the way around. Dh is in business and we have employees. We've had a couple of very valuable, reliable employees and we help them out the best we can, but in a couple of cases, they are not able or willing to ever get higher certification in their fields. So there is a salary max that makes sense, even if they are great employees. We can't pay a plumber's helper $40/hour if we're paying a journeyman $24/hour, kwim? The journeyman went through the additional skills training and certification and therefore earns the higher wage. If they want to get a master's, they can earn even better. But we can't just say, "Oh, Jim Bob works hard and is a really great guy, so we'll give him a $10/hour raise so he can own a home." No. That makes no economic sense. 

 

Places that pay peanuts - why apply there? If I'm a valuable employee, I'm not going to job-hunt someplace that is offering me peanuts. IME, the people earning peanuts are not worth cashews, that's why they earn peanuts. 

 

There was a little grocery store nearby where I'd stop in from time to time if I needed to pick up something quick. I never do my main shopping there because the clerks suck. The word about town is they pay the cashiers peanuts. Guess that is why the staff are all cheek-pierced emoes who throw my watermelon on top of my bread.  :001_unsure: By contrast, there is a Harris Teeter in a posher part of town. I don't know what they pay their clerks, but I wouldn't be surprised if they offered to give me a massage while I stand in the check-out line. They are the best clerks ever. I don't go there very often, either, because the groceries are too expensive. But it's nice when I just need to pick up something good quick. 

[Guest]

Many places line their pockets while paying peanuts. Look at Australia, they pay a much higher wage, something like $15-17hr and BigMacs are still only $5. I don't buy the whole prices will go crazy thing when I look at other countries. 

 

WHO are you talking about, Blue Taelon? Do you mean unskilled labor? All jobs should pay at least $15/hour, no matter how little skill/certification it takes to do it? 

[plansrme]

So you are low income, have no savings, and hate banks. I am confused on how, exactly, you were hoping to pay for this house. I gather that you were hoping to do it without a loan, but how?

[LucyStoner]

The existence and/or reasonableness of very low wage jobs has very little to do with the issue at hand and how to secure a more stable housing arrangement for your family. Low wages do not mean that banks are bad for making money on loans.

 

You can:

 

-improve your credit

-figure out how to increase your income

-secure alternative financing

-explore charitable programs for affordable housing like Habitat for Humanity.

-explore land trust programs

-explore building a small house on land you buy from a family member or friend

-relocate to a state with more economic opportunities and better affordable rentals.

 

Or not. But you will need to do several or more of the above to get on firm ground economically.

[LucyStoner]

"You mean there are places with decent houses/apts that have reasonable rent that don't involve living in crack neighborhoods? I haven't found to many of those."

 

Yes, there are good rentals. We have opted to downshift for a couple three years so that I can stay home with the boys (one has special needs and was not doing well) and my husband can finally get the professional education he needs/wants. My husband works 32 hr a week while in school and we rent a small, safe, clean 3 bdrm/2 bath with a dishwasher and w/d hookups in a nice walkable close in suburb for less than $800 a month. It is not subsidized directly, but my state offers excellent tax credits to developers for their more upscale buildings if they build and maintain decent housing that is affordable to low and moderate income people making a certain percentage of the area median income. Where you live makes a big difference. There is a similar building for an even lower income point near us where a 2 bedroom is in the $500 range. For this county, these are very low rents. There is certainly no illicit activity or high level of danger. The places are well maintained (the developers are accountable to the state to keep up the properties for the ongoing tax benefits.) The wait from when I indicated interest until we moved in was less than 5 months. Affordable does not need to mean unsafe (crack area) or substandard (moldy trailer dragged onto some land nowhere near jobs.) we did this so that we didn't have to go into debt or drain long term assets and because my income was coming at too high of an opportunity cost for our children. The budget is snug but manageable. I pick up some contract work here and there. We have health insurance, a reliable car and are able to still put money into our retirement accounts. We are really fortunate in many ways. We do not carry any big debts.

[Plateau Mama]

Why would a bank loan any amount of money long term for a flat fee? They can invest it and make 8-10% annually in the stock market.

 

Owning a house isn't a right. If you don't have the $$$ for the down payment or the mortgage why should someone loan you $$ ? You are a huge risk and the bank will lose money when you can make your payments.

 

When figuring out your mortgage you also need to figure you property taxes. My mortgage is low, but my property taxes almost double that payment. And guess what, when you pay off your loan you still have to pay taxes.....forever.

[zoobie]

When someone makes a loan, they are letting you use their money; basically they are renting their money to you.  Yes, you pay a lot over 30 years to rent someone's money, but you also pay a lot to rent if you rent a TV, car, house, etc. over 30 years.  Is it cheating a person to charge them rent to live in your house?  Why is charging them to use your money any different?

 

This is an excellent analogy. You want to buy a house that costs $100,000. I have $100,000. I can either loan you the money at 5% over 30 years, or I can buy the house and rent it to you. If I loan you the money, I get repaid at a rate of about $550 per month. I cannot force you to repay me early, and I cannot increase the amount you owe on a monthly basis. I get no benefit from the property value increasing. If I buy the house and rent it to you, I would get about $1000 per month in rent. I would increase the rent as the property value increases. I receive the benefit of the increased property value. How is loaning the money for the home immoral absent a usurious lender? I don't understand.

 

General rule of thumb is that your debt to income ratio should not exceed 35%. This ratio is important for getting a loan as is your credit score. Your credit score will not improve if you aren't actively improving it. Waiting until the bad things drop off without doing "good" things will not improve your score.

 

If your total income right now is limited to your child's SSI(SSDI?) income, this amount will not count toward a mortgage application. The income is not yours, and it is not guaranteed. The $2000 savings max is also a killer. FHA loans have the lowest downpayments I've seen, and they're 3.5%, which would limit you to a home under $58,000. You'd immediately need moving expenses. A week after we moved in to this house, we had a plumbing issue that resulted in raw sewage backing up into the basement. $1500 poof, and that was not something we could wait to repair. We spent well more than $2,000 in emergency home-related expenses last summer that we couldn't wait to fix until we had the money. A huge tree was falling into the street. That tree alone was over $2000 to get removed, and it wasn't the only tree we had to deal with in a month's time (we should've gotten a fruit basket or something from the dang tree service this Christmas!). That's not counting the necessary, maintenance costs. Or other life expenses--cars, medical, etc. 

 

Anyway, if you look at only the check you write to the bank or to the landlord, owning a home is cheaper. Over time, owning a home is likely cheaper. Likely, but we've lost money on two houses. One we owned for 2 years and one nearly 10. 

 

There are reasonable, safe rentals. Maybe not in your area. Maybe not in Manhattan. But in the US, yes, there are. You may have to move to find an area that better suits your family's needs. 

[BlueTaelon]

So you are low income, have no savings, and hate banks. I am confused on how, exactly, you were hoping to pay for this house. I gather that you were hoping to do it without a loan, but how?

 

Thats where owner financing comes in, there are places out there, you just have to find them. I'm just feeling the pinch because its tax return time (I did work a lot this year so I will get a decent return), pretty much the only time of year I will have money and I'd like to use it to make a very small down payment and be able to actually plant a garden this year and be able to can and take some stress off of feeding us.

 

I was looking at properties today that are back east that are affordable to me and are owner financed, I'm just worried about moving there and what happens if we don't make it? I had hoped to find a small house on land but it looks like I will have to do plan B which is start with land and travel trailer then go from there. I could always just live in a green house like one family did while saving money:) Seriously they did! I talked with my dad and he went over what he did when he first moved back there to raw land and it sounds reasonable and a lot of others have done the same thing. I spent a month living off the grid last summer out on my parents property before the house was built and it was really nice. It could actually be a good bonding experience for us without all the electronics keeping everyone busy. This isn't possible in the area were in now, my parents were not even allowed to live in the travel trailer on the property while the house was being built so can't just pitch a tent so to speak in this area due to an obscene amount of rules/permit issues. Very possible back east.

[BlueTaelon]

This is an excellent analogy. You want to buy a house that costs $100,000. I have $100,000. I can either loan you the money at 5% over 30 years, or I can buy the house and rent it to you. If I loan you the money, I get repaid at a rate of about $550 per month. I cannot force you to repay me early, and I cannot increase the amount you owe on a monthly basis. I get no benefit from the property value increasing. If I buy the house and rent it to you, I would get about $1000 per month in rent. I would increase the rent as the property value increases. I receive the benefit of the increased property value. How is loaning the money for the home immoral absent a usurious lender? I don't understand.

 

General rule of thumb is that your debt to income ratio should not exceed 35%. This ratio is important for getting a loan as is your credit score. Your credit score will not improve if you aren't actively improving it. Waiting until the bad things drop off without doing "good" things will not improve your score.

 

If your total income right now is limited to your child's SSI(SSDI?) income, this amount will not count toward a mortgage application. The income is not yours, and it is not guaranteed. The $2000 savings max is also a killer. FHA loans have the lowest downpayments I've seen, and they're 3.5%, which would limit you to a home under $58,000. You'd immediately need moving expenses. A week after we moved in to this house, we had a plumbing issue that resulted in raw sewage backing up into the basement. $1500 poof, and that was not something we could wait to repair. We spent well more than $2,000 in emergency home-related expenses last summer that we couldn't wait to fix until we had the money. A huge tree was falling into the street. That tree alone was over $2000 to get removed, and it wasn't the only tree we had to deal with in a month's time (we should've gotten a fruit basket or something from the dang tree service this Christmas!). That's not counting the necessary, maintenance costs. Or other life expenses--cars, medical, etc. 

 

Anyway, if you look at only the check you write to the bank or to the landlord, owning a home is cheaper. Over time, owning a home is likely cheaper. Likely, but we've lost money on two houses. One we owned for 2 years and one nearly 10. 

 

There are reasonable, safe rentals. Maybe not in your area. Maybe not in Manhattan. But in the US, yes, there are. You may have to move to find an area that better suits your family's needs. 

 

I get it people, I don't expect you to understand and I know most people do not share my beliefs/feelings about taking a mortgage from a bank, especially a long term one is just not something I am comfortable with. I am of the mind set of not being a consumer, call me a hippy if you will. SSI is not my only income, I do have a JOB, one I work hard at because heaven knows SSI alone does not pay the bills, especially in this state. However its causing family issues and I'm going to have to quit to care for my disabled child, she has not done well at all the past 6 months while I was working a lot of hours so we need to reevaluate and make a plan and get the bills down even more while still meeting her needs, our current situation is not sustainable and will burn though that tax return quickly if I am not working. Buying a home would be one way to cut the rent in half and free up a lot of money so I was exploring the option more. Some of you obviously have some very strong feelings and thats fine but you need to respect that others don't share them. Its a pass the bean dip issue.

 

 

[Mergath]

I get it people, I don't expect you to understand and I know most people do not share my beliefs/feelings about taking a mortgage from a bank, especially a long term one is just not something I am comfortable with. I am of the mind set of not being a consumer, call me a hippy if you will. SSI is not my only income, I do have a JOB, one I work hard at because heaven knows SSI alone does not pay the bills, especially in this state. However its causing family issues and I'm going to have to quit to care for my disabled child, she has not done well at all the past 6 months while I was working a lot of hours so we need to reevaluate and make a plan and get the bills down even more while still meeting her needs, our current situation is not sustainable and will burn though that tax return quickly if I am not working. Buying a home would be one way to cut the rent in half and free up a lot of money so I was exploring the option more. Some of you obviously have some very strong feelings and thats fine but you need to respect that others don't share them. Its a pass the bean dip issue.

 

 

 

:grouphug:   People do seem to be touchy about this.  Not sure why.

 

If I was in your situation, I think I'd probably stick with renting.  It may cost more, but you get that back in stability and predictability.  You don't have to worry that your area is going to jack up property taxes, or pay for a new furnace in the middle of January or any of that.

 

I'm not sure if you mentioned this, but have you looked into disability housing?  We have a ton of that around here.  If someone in your family is disabled, they'll let you move in, and the units are either super cheap or income based, I think it varies.  But around here the neighborhoods with that kind of housing are extremely safe and friendly because they're 99% elderly folks.  Very nice housing, too.  Most of it in my part of town is all these adorable little duplex cottage-looking things.  They're really cute.

[Guest]

I get it people, I don't expect you to understand and I know most people do not share my beliefs/feelings about taking a mortgage from a bank, especially a long term one is just not something I am comfortable with. I am of the mind set of not being a consumer, call me a hippy if you will. SSI is not my only income, I do have a JOB, one I work hard at because heaven knows SSI alone does not pay the bills, especially in this state. However its causing family issues and I'm going to have to quit to care for my disabled child, she has not done well at all the past 6 months while I was working a lot of hours so we need to reevaluate and make a plan and get the bills down even more while still meeting her needs, our current situation is not sustainable and will burn though that tax return quickly if I am not working. Buying a home would be one way to cut the rent in half and free up a lot of money so I was exploring the option more. Some of you obviously have some very strong feelings and thats fine but you need to respect that others don't share them. Its a pass the bean dip issue.

 

 

 

Hey, I'm not in the mindset of being a consumer, either. My fondest dreams have solar panels and beef cattle in them, plus rows and rows of canned goods. 

 

But still. I don't feel the big, bad banks are immoral for charging interest to loan folks hundreds of thousands of dollars for decades at a normal interest rate. After all, they also pay me interest when I let them use my money until I need it for braces or tuition or repairing the car that was broken into this past summer. 

 

I can tell you why some people get touchy about "living wage." Because we are the people who employ others and are not eating caviar while pay our plumbers and ranch hands pennies. Paying an employee's payroll is only one facet of having an employee that costs money. We also pay payroll taxes and Worker's Comp. We also have to put vehicles on the road and provide a gas allowance. We have given employees phones. We have let them use company tools to earn side-job money so they can hope to get a leg up. I know when we have held meetings with the other officers, everyone is trying to find a way that we can help get an employee's teeth fixed or help them find a place to live or get a better health plan or save for retirement. Good employees are valued by ethical employers. But that doesn't mean we can just pay them whatever amount they think would be sufficient for them to live comfortably on one income. 

 

You said what you feel the solution is "pay a living wage" and I'm responding with my opinion. It's not pass the bean dip. It's dialogue; that's what we do here in a "Chat" forum. 

[plansrme]

Thats where owner financing comes in, there are places out there, you just have to find them. I'm just feeling the pinch because its tax return time (I did work a lot this year so I will get a decent return), pretty much the only time of year I will have money and I'd like to use it to make a very small down payment and be able to actually plant a garden this year and be able to can and take some stress off of feeding us.

 

 

 

You are aware that owner financing involves interest also?  Owners will sometimes finance with fewer credit restrictions and a lower down payment.  Unless the seller is your mom, however, you'll be paying interest to which, if I understand correctly, you are morally opposed.

 

I do hope you find what you are looking for.  

[regentrude]

 Buying a home would be one way to cut the rent in half and free up a lot of money so I was exploring the option more.

 

I am concerned about this assumption. Have you considered the following two issues:

1. Owner financing would involve interest as well. The owner could sell to somebody who pays in full (because he gets a mortgage and the bank pays the owner) and could invest the money and could have it earn more money this way. If he chooses to accept your offer instead, he would charge you interest to compensate for his loss of investment. The only advantage of owner financing is that he may be willing to accept somebody with a low down payment and be less strict about credit score. But he won't lend you the money interest free.

 

2. There are costs of home ownership aside from simply paying the mortgage. You need home owner insurance (the seller will insist on this to protect his investment), pay property taxes, and you will need to build a fund from which to finance repairs and maintenance.

Home ownership may be cheaper in the very long term; I doubt very much that in the short term you would end up with cost of only half your rent.

[BlueTaelon]

:grouphug:   People do seem to be touchy about this.  Not sure why.

 

If I was in your situation, I think I'd probably stick with renting.  It may cost more, but you get that back in stability and predictability.  You don't have to worry that your area is going to jack up property taxes, or pay for a new furnace in the middle of January or any of that.

 

I'm not sure if you mentioned this, but have you looked into disability housing?  We have a ton of that around here.  If someone in your family is disabled, they'll let you move in, and the units are either super cheap or income based, I think it varies.  But around here the neighborhoods with that kind of housing are extremely safe and friendly because they're 99% elderly folks.  Very nice housing, too.  Most of it in my part of town is all these adorable little duplex cottage-looking things.  They're really cute.

 

I wish it was an option, this past year was the first time we've lived in a house in a quiet area and its been the best we've had. dd can not handle the noise from the neighbors, it over stimulates her and sets her off. The kid can't handle the trees outside making noise at night or the stupid raccoon on the roof. Neighbors set her off badly, we have some that like to sit out on the deck sometimes and talk, those are not good nights for us:( She REQUIRES silence to help keep her calm:( There are other issues too like smoke which comes inside our unit and sets off everyones asthma. They also don't allow you to have your own w/d and dd has a severe detergent allergy so I would be stuck washing all her stuff by hand which she then complains is to stiff because its lined dried (were having to line dry right now which she doesn't like, sensory issues suck) We lived in apts for 12 years of her life and it was horrible with her sensory issues. Trying to get her an eval again to start working with a therapist, was supposed to get the Autism stuff done this week but little one has the flu and our ride understandably wouldn't give us a ride to the clinic an hour away for the eval so we had to reschedule for Feb. Lots going on with this kid:( Our life is dictated by her needs and I'm just trying to figure out how to meet those needs within a very limited budget. My grandma owns a cabin next to my dads land, I'm guessing my dad will buy his sibs shares when she passes (she's not doing well according to dad, I've only seen her twice since I was a small child) like he did to the land she already transfered. Wonder if he would sell it to me? He owns all the land around it on that side of the road. Its something to think about..

 

Anyway, turns out I'm not the only crazy one, did you know Muslim law forbids interest? I didn't but I totally agree with the thinking on why its forbidden http://islam.about.com/od/business/a/mortgage.htm

 

You are aware that owner financing involves interest also?  Owners will sometimes finance with fewer credit restrictions and a lower down payment.  Unless the seller is your mom, however, you'll be paying interest to which, if I understand correctly, you are morally opposed.

 

I do hope you find what you are looking for.  

 

I will, just need to look in the right places, my dad said he would pick up the local freebie papers and have a look since he understands what I'm looking for.

[zoobie]

I get it people, I don't expect you to understand and I know most people do not share my beliefs/feelings about taking a mortgage from a bank, especially a long term one is just not something I am comfortable with. I am of the mind set of not being a consumer, call me a hippy if you will. SSI is not my only income, I do have a JOB, one I work hard at because heaven knows SSI alone does not pay the bills, especially in this state. However its causing family issues and I'm going to have to quit to care for my disabled child, she has not done well at all the past 6 months while I was working a lot of hours so we need to reevaluate and make a plan and get the bills down even more while still meeting her needs, our current situation is not sustainable and will burn though that tax return quickly if I am not working. Buying a home would be one way to cut the rent in half and free up a lot of money so I was exploring the option more. Some of you obviously have some very strong feelings and thats fine but you need to respect that others don't share them. Its a pass the bean dip issue.

 

 

 

You asked a question about MORTGAGES. My answer was NOT a value judgment on your life. It's reality that a lender is not going to take a child's SSI income into account for a loan for her parent(s). Buying a home will not cut your living expenses in half if you are looking in the same area. The expenses will shift to other categories: taxes, insurance, maintenance, and mortgage. The overall costs may be less; they may be more.

 

We looked into lease-purchasing our home to a buyer who had declared bankruptcy and couldn't qualify for a mortgage. It would have cost him more per month than renting because he would have been paying the rental cost plus an extra monthly amount that we would put into an escrow account and save for him to eventually buy the home.

 

Long term contracts between individuals are legally complicated, and there's significant risk involved for both parties. Unless it's a family member, there aren't many people who are going to give you a home and land for free or nearly free. You asked about mortgages, but it seems now like you're looking someone who will say, "You look like a nice lady. Here's a house! Pay me whenever." 

[LucyStoner]

 

 

Anyway, turns out I'm not the only crazy one, did you know Muslim law forbids interest? I didn't but I totally agree with the thinking on why its forbidden http://islam.about.com/od/business/a/mortgage.htm

 

Muslim run banks charge interest by a different name- fees.  And not low fees either. These are very profitable banks.  They make money off their customers.  6 of one, half a dozen of the other.