Posted on: 16th Jun, 2008 11:48 am
we have a monthly net income of about $7500 that is guaranteed (in writing) to increase to $7900 in jan 2009 and to $9000 in may 2009. our current monthly cc and car payments add up to about $1100 per month. our credit scores are 640 and 590 and we have never been late on or defaulted on our mortgage payment or any other loan. we currently own a home in az and are trying to build a home in ia.
we own land in ia that is currently financed on contract and will owe a $40k ballooon payment in 2010. the house we are trying to build will cost about $198k to construct and is estimated to appraise once completed at about $280-$300k. thus, if we were to roll in the remaining land payment into the loan we would be looking at a total loan amount of about $240k.
our original plan was to sell the house in az and use the funds towards the downpayment on a construction loan in ia. however, with the current housing market this has become, for obvious reasons, problematic. if we were to sell the house in az now we would either barely break even or possibly be even a little bit short - which leaves us little if anything for the downpayment. and to further complicate the situation we began this process before the market turned and now have one of us in each state and are, therefore, having to absorb the cost of running two separate households and renting property in ia while maintaining our home in az.
so, now we are wondering what we should do next. our only options (as we see them) are:
1) try to keep the house in az as an investment property and rent it out to offset the expense of 2 mortgages - we could probably get about $900 in rent and the mortgage/2nd mortgage is about $1800
2) continue living in dual states and wait until the market turns around so we can try to sell the house in az then (obviously our last choice!)
3) sell the house in az as soon as possible and take a loss
4) try to purchase a less expensive pre-exisitng home in ia and either turn it into rental property later, flip it when/if the market improves or refinance it in 2010 and use the equity for the downpayment on the construction loan
so, basically, our questions are these. first off, what would it take to enable us to build the home in ia? pay off the debts? save for a downpayment? wait until we can sell the az house?
secondly, with those credit scores and that debt load do we even have a prayer of qualifying for a loan that would allow us to keep the house in az and build in ia simultaneously at all?
lastly, are there any options we have overlooked?
we are just completely unsure of what our options are (if any) and what is the best way to make this happen now that we are in this complicated situation.
is there any hope?
we own land in ia that is currently financed on contract and will owe a $40k ballooon payment in 2010. the house we are trying to build will cost about $198k to construct and is estimated to appraise once completed at about $280-$300k. thus, if we were to roll in the remaining land payment into the loan we would be looking at a total loan amount of about $240k.
our original plan was to sell the house in az and use the funds towards the downpayment on a construction loan in ia. however, with the current housing market this has become, for obvious reasons, problematic. if we were to sell the house in az now we would either barely break even or possibly be even a little bit short - which leaves us little if anything for the downpayment. and to further complicate the situation we began this process before the market turned and now have one of us in each state and are, therefore, having to absorb the cost of running two separate households and renting property in ia while maintaining our home in az.
so, now we are wondering what we should do next. our only options (as we see them) are:
1) try to keep the house in az as an investment property and rent it out to offset the expense of 2 mortgages - we could probably get about $900 in rent and the mortgage/2nd mortgage is about $1800
2) continue living in dual states and wait until the market turns around so we can try to sell the house in az then (obviously our last choice!)
3) sell the house in az as soon as possible and take a loss
4) try to purchase a less expensive pre-exisitng home in ia and either turn it into rental property later, flip it when/if the market improves or refinance it in 2010 and use the equity for the downpayment on the construction loan
so, basically, our questions are these. first off, what would it take to enable us to build the home in ia? pay off the debts? save for a downpayment? wait until we can sell the az house?
secondly, with those credit scores and that debt load do we even have a prayer of qualifying for a loan that would allow us to keep the house in az and build in ia simultaneously at all?
lastly, are there any options we have overlooked?
we are just completely unsure of what our options are (if any) and what is the best way to make this happen now that we are in this complicated situation.
is there any hope?
Most construction loan lenders have left the market. There are still a few left but most will want better credit for this type of loan as it is a riskier product for them.
Renting with such a strong negative cash flow doesnt make much sense. Holding on until the market turns could be a very long wait. If you can absorb a small loss now and not ruin your credit I would suggest trying to sell. By eliminating the AZ property and combining resources you can then focus on credit repair and in time be ready to do the construction loan. Since you have a balloon in 1010 you really do not have a lot of time to do this.
Good Luck
Brian
Renting with such a strong negative cash flow doesnt make much sense. Holding on until the market turns could be a very long wait. If you can absorb a small loss now and not ruin your credit I would suggest trying to sell. By eliminating the AZ property and combining resources you can then focus on credit repair and in time be ready to do the construction loan. Since you have a balloon in 1010 you really do not have a lot of time to do this.
Good Luck
Brian
Hi sglave.
Welcome to the forum.
I have to agree with Brian that you should wait until you can sell of the property in Arizona so that you can reduce the amount of you debt and save some money for the down payment. Now you have very good income and your income is going to increased in future. That will help you to pay off the loan.
Now if you want to buy a house in the state of Iowa now, you need to need to think whether you can afford it or not. BTW you can check your affordability through the calculator at http://www.mortgagefit.com/calculators/howmuch-afford.html
Hope this helps. Keep us posted and feel free to ask if you have any further questions.
Best of luck,
Larry
Welcome to the forum.
I have to agree with Brian that you should wait until you can sell of the property in Arizona so that you can reduce the amount of you debt and save some money for the down payment. Now you have very good income and your income is going to increased in future. That will help you to pay off the loan.
Now if you want to buy a house in the state of Iowa now, you need to need to think whether you can afford it or not. BTW you can check your affordability through the calculator at http://www.mortgagefit.com/calculators/howmuch-afford.html
Hope this helps. Keep us posted and feel free to ask if you have any further questions.
Best of luck,
Larry
Hi sqlave,
Selling off the home is AZ looks ok to me because even if you can get little for down payment, you can still get a mortgage, especially if you can try out with the FHA insured loans.
Also, considering your credit scores which aren't good enough to get a competitive rate in today's market, I think FHA insured loans would be the right option. But for that, your monthly debt payment shouldn't exceed 41% of your income; find this out by calculating the debt to income ratio .
Finally, if you think you'll be able to afford mortgage payments besides paying for credit cards and the car, only then you should proceed to build the home in IA. But to find this out, you need to talk to some lenders and find out how much you need to pay monthly if you take out a mortgage or construction loan. If that suits you, then it's fine. Otherwise, it's better to treat the AZ property as an investment, use the rent payments to pay off the mortgages, wait for a few years and pay off cc and car payments thereby improving your scores; and then proceed to buy the home.
Good luck
Selling off the home is AZ looks ok to me because even if you can get little for down payment, you can still get a mortgage, especially if you can try out with the FHA insured loans.
Also, considering your credit scores which aren't good enough to get a competitive rate in today's market, I think FHA insured loans would be the right option. But for that, your monthly debt payment shouldn't exceed 41% of your income; find this out by calculating the debt to income ratio .
Finally, if you think you'll be able to afford mortgage payments besides paying for credit cards and the car, only then you should proceed to build the home in IA. But to find this out, you need to talk to some lenders and find out how much you need to pay monthly if you take out a mortgage or construction loan. If that suits you, then it's fine. Otherwise, it's better to treat the AZ property as an investment, use the rent payments to pay off the mortgages, wait for a few years and pay off cc and car payments thereby improving your scores; and then proceed to buy the home.
Good luck
Everyone is making good points -- however, we don't know the WHY from your end. Are you retiring to IA, are you simply going back home, or are you relocating for employment?
If you are retiring, sell in AZ now, rent something in IA while you build.
If you are simply going back home, rent the AZ, rent in IA while you build.
If you are relocating for employment, you have tax incentives; and, I'd suggest selling in AZ and renting in IA. Your employer may pay your costs to sell as well as your moving costs.
Waiting for the marketplace is like hoping for rain! It'll happen when it happens, my friends. Get on with your lives and lick your wounds, if necessary. The air is cleaner in IA. Good Luck!!!
If you are retiring, sell in AZ now, rent something in IA while you build.
If you are simply going back home, rent the AZ, rent in IA while you build.
If you are relocating for employment, you have tax incentives; and, I'd suggest selling in AZ and renting in IA. Your employer may pay your costs to sell as well as your moving costs.
Waiting for the marketplace is like hoping for rain! It'll happen when it happens, my friends. Get on with your lives and lick your wounds, if necessary. The air is cleaner in IA. Good Luck!!!
