Applying for Mortgage...delimma

[quoc3719]

Hi guys I need some homeowner advice. Me and my Fiance are looking to buy a house around 230K. She's a current owner of another house that she's living in with her parents. I've never been an owner so this is going to be my first time. Anyways they're saying that she must put a lease out to a non-family member in order to sign on to this new house. I was wondering if there are any other ways to go about this smoothly? We are thinking of applying for FHA, because we don't have enough for 20% down. Any advice?

They won't let me sign by myself cuz of my 40K income.

[disneysteve]

What do the two of you earn combined?
What will happen to her current house when the two of you move in together? Will she sell it to her parents or will it stay in her name with her parents paying her rent? If she is going to keep it in her name, that is going to impact your ability to get a loan on the new home. What does she earn and what are the payments on her existing house?

Also, if you can't afford 20% down, I'm of the opinion that you aren't financially ready to buy a house. You also need a 6-month emergency fund in place.

[quoc3719]

We make like 100K combined. Her current house will be paid by her sister but still gong to be under her name. her payment is around 1700 right now.
The mortgage guy said either she has to transfer her name out of the current house or I have to get a co-signer.
Are there any programs out there for first time buyer?

[disneysteve]

You guys can't afford to buy the new house if she still owns the current house. She absolutely needs to get it out of her name. If her sister is going to take over the payments, then she needs to take over the loan. Sell the house to her.

At that point, with a combined income of 100K, you should be able to afford a 230K home. Just don't buy it until you've saved up the 20% and have your EF in place.

[scot184]

Unless they refinance that mortgage, she'll be stuck on it...and is liable, which kills her income. If you're saying they can get rental income to cover part of it, get a rental contract...

[kalimaniac]

To use the rental income to qualify probably won't be as simple as showing a lease made to a non-family member. Generally speaking, you have to show a track record of generating the rental income and be able to document the rental income on your tax return.

[jpg7n16]

Have you ever watched the show 'The Unsellables' on HGTV?

It's a very interesting show, with plenty of people who end saying 'I bought the home of my dreams without selling this one first - and it's not selling. What can I do??'

Obv not every person is that way, but enough to make me truly believe that the 1st home should sell before making an offer on the 2nd.

[disneysteve]

the 1st home should sell before making an offer on the 2nd.

Absolutely! You should NOT buy a home unless you have already sold your current home unless the purchase agreement includes a provision for you to get out of the deal penalty-free if your house doesn't sell.

[moneybags]

Also, if you can't afford 20% down, I'm of the opinion that you aren't financially ready to buy a house. You also need a 6-month emergency fund in place.

We bought our house with only 5% down. We never had trouble making our mortgage payments. I think the key is make sure you can afford the mortgage payment.