by Hope
My marriage failed six years ago this summer. You can read that story on my personal blog if you are curious, but it does not belong here. At the time, my business was just two years old and I did not make enough to support us. We ended up moving in with my parents.
Now if you have ever moved in with your parents after being independent for over 10 years, you can imagine how hard that was. Of course, I was grateful to them, but it was hard. Over the next few months I worked hard at my business and was able to begin pulling in a full time work load and salary. I found a rental house.
The kids and I moved out in November that year. We had been with my parents for five months. I loved my new house. It was a rental, but I could choose to buy it if I liked down the road, I had five acres, in the middle of nowhere, the kids could play outside, it was perfect. In the meantime, my husband did a spousal buy out of our marital home, which he kept by choice, and I was able to buy some new furniture to get started in my new life. One month later, it fell apart.
The owners who had moved states away, lost the job they had moved for and asked if they could have their house back. Of course, I gave it back. But I didn’t have anywhere to go. I went back to my husband. I just felt that maybe it was God’s way of telling me that I needed to give my marriage another chance.
Six months later it was his dad who told him to get his hands off me. I was leaving and this time, really for good. I moved into yet another rental house and signed an 18 month lease, hoping that would give us time to settle a divorce. At 12 months into the lease, while the kids and I were away at a family reunion, my landlords came in, packed up some of my belongings, painted the walls and did some repairs and called to tell me that I would need to live in a staged home while they attempted to sell it. (Oh, and did I mention that right before I left town, I mentioned to them that I may want to extend my lease.)
Now living in a staged home would not be a problem if I was single with no kids. But as an entrepreneur who worked from home, homeschooled her two kids (then 4 and 5,) and had just gotten certified as foster family (with their permission to bring other kids into the home,) this was overwhelming. I told them that this would not work for me and I moved out.
The problem was, I had nowhere to go. All this back and forth, two failed rentals and no savings to put toward a purchase (and my divorce was still not final.) I sold or donated most everything big, put everything in a POD and the three of us became homeless.
My dad stepped in then. He saw me trying. I was completely independent and self sufficient. He offered to help me get into a home, purchase a home, give us some stability. The kids and I traveled for about 3 months as nomads, which was actually a lot of fun as we found the perfect home. That was 3 1/2 years ago now. We are home.
But now I need to get my home in my name. I’ve been paying the rent, the taxes, the insurance, but my dad put a sizable amount of money down so I didn’t have to pay PMI, but my name is not on the title or the financing. As far as I have been able to tell, this will be just like any other purchase. If anyone knows of any other way, I would LOVE to hear about it.
Needless to say, without a significant down payment, which I don’ t have, and stellar credit, which I don’t have, but am working on, my payment is going to go up. I HAVE to get this debt journey in firm hand, because the clock is ticking on this goal for both myself and my dad. As he says, he didn’t want to be my landlord, just my dad, and he’s perfectly right.
So this is yet another motivator and a place where ANY guidance or suggestions you might have would be so greatly appreciated.
Two things I want to be clear on:
First, purchasing my house will only come to fruition when I’ve got a firm handle on my debt load, hopefully within months of paying it off.
Second, moving so often is very expensive, but I was blessed that in both cases where my rental fell through the landlords were gracious enough to give me my full deposit in a very quick time frame and the first one even moved me out themselves.
Hope is a creative, solutions-focused business manager helping clients grow their business and work more efficiently by leveraging expertise in project management, digital marketing, & tech solutions. She’s recently become an empty nester as her 5 foster/adoptive kids have spread their wings. She lives with her 3 dogs in a small town in NE Georgia and prefers the mountains to the beaches any day. She struggles with the travel bug and is doing her best to help each of her kids as their finish schooling and become independent (but it’s hard!) She has run her own consulting company for almost twenty years! Hope began sharing her journey with the BAD community in the Spring of 2015 and feels like she has finally in a place to really focus on making wise financial decisions.
Can you quantify exactly what it would take to achieve the goal of owning the home you live in? Can you break it out between the downpayment you’ll owe your father and the money you’ll owe the bank to re-finance? Have you talked to a loan officer at the bank to find out what credit score you will need to qualify for their best financing?
Once you have this information, list it right up with your debts. Quantifying the situation is the first step to making it a reality.
Hi Walnut,
I wish I could. I know my credit score needs to come up significantly and my dad has stated that he is willing to apply the payments I’ve been making towards a down payment (minus the interest, etc.)
I attempted to apply last fall right as I lost a hefty part of my income, needless to say, I did not qualify.
I will definitely do some more digging on where exactly I need to be to make this happen AFTER the bulk of my other debt is paid off.
It’s definitely not something you should act on now, but it may be helpful to know exactly where the end goal is and how far away you are from achieving it.
CreditKarma.com is a free site that will give you a ballpark for your current credit score, so you can monitor that to see when a good time to refinance might be.
wow, that’s a lot of moving and some unfortunate incidents.
I don’t know much about home ownership so unfortunately, nothing really constructive to say. So are you trying to put a downpayment on the house before finishing your debt payments? If I remember correctly, you owe your dad about $4k. Is that separate from this housing business? I assume the rent just goes to him then?
Not sure how your dad will feel about this and you obviously will have to take that into consideration, but i’m thinking maybe focus on getting rid of your debt and building up a nice savings before thinking too much about the downpayment. If you’re paying pretty much all the other house expenses and it’s just that the house is in his name, maybe you could have a conversation with him to just go along with the situation as-is till you reach some goals.
Have you ever sat down and plugged your numbers into a debt snowball spreadsheet? It might be useful and a good exercise to see your potential debt free day to get an idea of how long it will take.
Good luck with it all and I must say, good job on taking care of all those kids and being so involved in their lives.
Debtor,
This is more of a informative “where I’m at with housing” post as I will not attempt to take on the debt of the house until I am VERY close to pay off of all existing debt. I cannot put our home at risk.
I will definitely continue to research to see where I need to be to purchase the home, but it’s more motivator than actual reality at this moment.
Hope, that was a riveting story. (I went to your blog.) I’m glad you and your children are in a safe place now. Perhaps the best goal, at present, would be to knock off some of your debts and be in a better position to take on the mortgage yourself. I agree with Walnut about talking to a loan officer. It could be the first step in getting those ducks in a row and for making a viable plan.
Kiki,
I agree. I fear that attempting to take on the home loan now would be a really bad decision. We are leaving pay check to pay check while I throw everything I’ve got and get at debt. When I’m closer to the end on this existing debt this will be something that comes up for sure though.
Thank you for the feedback.
Has your dad considered selling you the home on a land contract basis? Basically, he would act as the bank and you would make payments to him and be building equity at the same time. It would be a great investment on his end (I know, I’ve done it – best investment I have ever had!).
When I did it I was selling a property and the buyers wanted to buy it, but had to sell their home first, so we set up the land contract with terms that were good for both of us (they paid a lower interest rate than a bank would charge, but it was still higher than I was getting on most of my investments). They also put a sizable down payment down that, had they backed out of the deal or defaulted, was mine to keep… probably not a big concern for your dad but as I was dealing with strangers it put my mind at ease. Also, because this is considered a sale, the buyer pays the insurance and taxes, just as you would do if you were borrowing the money from the bank… so in your case your dad would no longer be responsible for those expenses. In my case, the buyers paid off what they owed once their other house sold, but some people have long term land contracts that go for 15 or 30 years. It is really a GREAT investment, especially at the first half of the loan period where the buyer is basically paying all interest and little principle. Like I said, best investment I have ever had and I would do it again in a heartbeat, especially in a situation where I knew/trusted the buyers (such as, if the buyers were my kids). If you or your dad have any questions, feel free to email me.
Wow, never heard of a land contract, I will definitely check that out, thanks for the suggestion!!!
Yeah, I think that if your dad is itching to formalize this agreement and you know that you need special financing but he is willing to be your bank (but formally) this is a good way to go. You should consult a real estate attorney.
This is basically like a lease with option to buy, am I not correct Denise? Oh no I don’t think it is… Lease with option to buy, basically says a certain amount goes to the down payment while the owner keeps the rest, then you get a loan for the rest of the amount. This seems like just an owner financed sell? The owner would be the bank… that is usually a great deal!
This is our problem with the other house with the ex. For some reason our lawyer told us she was going to do a partition act, basically this would get my wife’s name off everything. In reality this would have only got us off the deed, and we would still have been on the mortgage. Basically saying we are responsible for something we don’t even own. :-/
The thing about your idea stated above, would this be considered as income for Hope if she went this route? You can only receive “gifts” under a certain amount I thought without being taxed on it.
This does not need to be like two unrelated parties buying a house. There is no requirement that the person who is on the deed (ownership) is also on the mortgage. So your dad could gift you 13,000/year in home equity, and put you on the deed. Then when you are in a better financial position, you re-finance the house into your name, and the equity that your father has given you will form the 20% “downpayment”. The gift money could either be a gift, or come from 1) rent money you have paid 2) appreciation of the house. I suggest getting in a better place financially, and then consulting a real estate lawyer about how to do the transfer.
Jim, a land contract isn’t exactly a lease with option to buy, but similar. With a lease the property still belongs to the owner and the one leasing is still a renter, though it is understood that some of the rent will go towards the value if they choose to buy. At that point the buyer has to secure financing or pay cash. With a land contract, the person buying actually buys the house, just as you would normally. The only difference is that instead of borrowing the money from the bank, you are basically borrowing from the person selling. At that point, the house is “yours” just as it would be if the bank gave you the loan. And if you default on the terms of the contract you can lose the house through foreclosure, just as you would through the bank. With a land contract you are no longer renting. You are a homeowner (with all the trials that come with it) and you still pay a mortgage, just not to a traditional bank.
Sorry to hear about your housing situation but I’ll tell you what I did and maybe that might help you. I divorced 14 years ago and am a single parent to our son who was born severely mentally and physically disabled (random gene mutation, we thought 2 healthy parents equal healthy kid but it didn’t work out that way). Shortly thereafter, my son started going down medically and I ended up having to quit my corporate job and stay home with my son; that was a 95% pay cut. Anyway, I worked part time when I could and started a small business but with his health issues and frequent hospitalizations, I barely made ends meet because I couldn’t find a sitter for someone disabled with this many health issues, so I couldn’t leave him; but I also had no debt or credit cards. As rents started rising, I knew I wanted to buy a home but with virtually no money, no income, no credit cards, a disabled child and no credit score, the odds were stacked against me. How do you explain to the average person that you stay with your kid so you don’t have to put him in a home? I checked HUD’s website for the $100 down payment homes (not sure where I’d come up with $100) and there were phone numbers of lenders for those homes. I contacted a lender in my area to see what I’d need and how much money I’d need to come up with. He was nice enough to spend 25 minutes with me (even though there wasn’t any way I’d qualify for a mortgage!) to walk me through some things (my son receives SSI so I wasn’t sure if that counted as income for a mortgage) regarding how much I’d need for one of these homes and what they’d need in order for me to qualify for a mortgage. I didn’t meet any of those requirements since I didn’t even have a credit card since I barely made ends meet caring for my son. I had owned two homes when I was married and never had any issues with them and paid them on time but that was years ago so all of that payment history had fallen off my credit record.
A few months later, things changed and I had an income (long story). It was 2012 and I knew that I wanted to purchase a home before my lease expired in 2013 so I called him again and went through the numbers with my new income and this time, I got more specific on what I needed. I had a tall order since I didn’t work full time, had no credit, no credit history, no employment history to speak of (other than my small business) and I had new income plus my son’s SSI (which if he died, I’d no longer have) so I wasn’t the greatest in terms of qualifying. He worked with me and told me he thought I could qualify for an FHA mortgage if I met certain steps. I needed to open 3 credit cards, build a credit score, save money for my down payment and closing costs and I had to a year to do this. This would mean at the time I applied for my mortgage, I would only be on my new job 1 year. I wanted to move from my apartment in one year and they FHA rules were changing as of April 1st last year and after that, all FHA loans charged PMI for the “life of the loan”. It was hard but it worked. It was hard to get a credit card when you don’t have one and hard to get one when you’ve only been on the job 30 days, etc.I also cut every corner and saved every possible penny that I could since I only had one year to do this. I called this man every few months with my progress and in February of last year, I applied for a mortgage, was approved and closed on my new home in around 30 days or so. My interest rate is 3.5%
So my tip would be to check the HUD website for the $100 mortgage lenders in your area. They are pre-approved lenders that are probably used to helping people with poor credit, no credit or whatever. Call them to ask some questions and explain your situation. If you like them, let them map out a plan for you and then that way, you’ll know that as long as you execute your plan and debt payoff, you can get a loan. I think if you share your story about you home and that you are paying the mortgage, taxes and insurance, you’d have a great shot. I should also say that this mortgage lender was terrific. He was a total class act and they (him and his firm) did an amazing job. I would say it was probably one of the best experiences I’ve ever had with a company. I referred several people to him after that and they said the same thing. I could not have had a better experience. Anyway, I hope this helps.
FYI-To clarify, I purchased a regular home (meaning not a HUD home); I just used one of HUD’s pre-approved lenders.
Hi Hope:
You said you want to purchase the house before you are fully out of debt. I hope your plan involves building up a substantial savings before taking on the house. Home ownership is expensive, and I’d hate for a setback (such as needing a new roof) to send you back to your parents/ leave you homeless once again. I assume your parents want to see you safely back on your feet before they expect you to take over the mortgage. Is that right?
I used to work for a mortgage company. If you go the traditional route you should look for a lender who has experience with self employed borrowers. Don’t be afraid to ask the lender outright, “Have you worked with a self-employed borrower before?” If they say “no” move on.
Sounds like you have a good goal and motivation for getting that debt paid off!