Should I even consider buying a house?

Question

I have been married and living with my husband, the breadwinner, for the last 5 years. We are separating and I am thinking about buying a modest home for me and my two daughters. But I have NO idea if I would even qualify for a loan. On paper, I can definitely afford to buy a small home. I have enough money coming in monthly. But I don't want to venture down that road if I don't even stand a shot.

Here are some basic facts of why I think the odds are stacked against me. I have a part-time job ($700/mo) and have only been employed since last September. Almost 3/4's of my income comes from child support or spousal support ($1800). My credit isn't fantabulous. And lastly, my husband and I together have a few vehicle loans and they are in my name, but he is paying for all of them. However, I'm pretty sure this counts against my debt-to-income ratio, even though I am not responsible for those loans. We can't get them in his name due to his credit.

To those with experience, is this insurmountable? Is there any way around it? Or am I just doomed for home ownership?

Thank you for any of your time and advice that you throw in my direction.

Josh Green · Answer

well, if your divorce decree states that he is to pay for the cars then a lender will take those out of your debt-to-income (dti) ratios. while you may qualify for a loan, it may not be the best idea. do you have anyother debt? any savings? plans to go full-time?

i would probably rent until things become a little more stable in your life and then take it from there.....houses will always be for sale.

Jon Holdman · Answer

I'd have to agree too that you probably want to avoid any major decisions until your life settles down somewhat.

You don't say where you are, but in many areas, rents are very cheap compared to ownership.  In effect, landlords are subsidizing tenants housing.

If the divorce decree isn't yet final, I'd try to get something into it that says your ex has to get the vehicles out of your name within some time limit.  Any one person having "a few vehicle loans" is just silly.  One per person is bad enough, multiple loans and bad credit indicates some very poor choices.  Those loans are dragging down your credit score, even if they eventually get excluded from your DTI.

You say your credit's not great.  Spend the next couple of years building up some reserves (six months of expenses in savings will go a LONG way toward creating a calm life) and cash for a down payment.  That will also give you time to clean up whatever's dragging down your credit.  Dave Ramsey's "Total Money Makeover" might be useful.

Shanti S. · Answer

I'd also add - before I bought my first home, people were telling me left and right that I HAD to buy a home, the tax advantages are tremendous.  Rent is like throwing your money away!

Sound familiar?

Well, while you can take deductions on your mortgage interest, it doesn't amount to that much.

I used to pay $475 a month for an apt, heat and hot water included.  Add on electric and cable tv and renter's insurance, not much more.

My mortgage is around $1100 a month for my home.  BUT, it probably costs me around $2000 a month after adding in insurance, taxes, electricity, fuel oil, dump fees, cable tv, plus maintenance costs, plus maintenance and yardwork time,  plus owning lawnmowers and tools, blah blah blah....

I love my home and it's a big step up in privacy and luxury from my apt but it was a LOT cheaper to live in the apt  :-)

Investment properties, bought and managed properly, are investments.  Your own home is a luxury, not an investment.

Mike V. · Answer

My first tenant in my nicest home (nicer than mine) was a single mom with 3 kids.  She rented from me for 15 months and then bought a house.  I remember talking to her when she was moving out and she was commenting how she was so glad she waited that 15 months to buy.  Her life had returned to a reasonable sense of normalcy and now she had 15 months history of child support and rent payments (her bank did check with me) that allowed her to get a good loan.  I know if she were here to give you some first hand advice it would be to wait it out.

Account Closed · Answer

Thank you everyone for your advice. I know it seems wiser to wait to buy a home. I'm just kind of stuck in a bit of a bind. I want to stay in the school district where my girls go to school. Apartments don't rent for less than $650/month, and there are so few of  them available. Currently...none.

I figured I could possibly buy a home, though it would cost a bit more for taxes, insurance, and any repairs, etc...
But no, I don't feel it's the wisest choice.

About the vehicle loans. One is for my car. One is for his car. And the other two loans are for his truck and our camper. The truck pretty much only gets used to pull the camper or in bad weather.

At the time, they weren't necessarily unwise purchases. My husband's company closed last year, so that was unavoidable and that is what contributed to trashing his credit. He is re-employed and has been for a while now making the same decent money he was making. But it's one of those things where once you are behind, playing the catch up game can wear on you.

Anyway, I looked at a couple of those cheaper homes today and they need so much work it isn't even worth it. So, I guess I still don't know what I'm going to do. Other than wish for lottery winnings...lol.

Thanks again!

Richard Warren · Answer

Waiting certainly is the wisest move in your situation.

I just want to echo Jon's suggestion that you get a copy of Dave Ramsey's Total Money Makeover.  You may find the financial advice to be life-changing.

:cool:

Mike McKinzie · Answer

Here is the advice I give my children, (ages 14-30).  To improve your credit, get ONE major credit card and one store card (Wal Mart, Target, Sears, etc...)  Then, MAKE ONE PURCHASE PER MONTH on the card, like one tank of gas on the major credit card and around $20.00 on the store card.  Then pay that off, EACH MONTH.  DO NOT MAKE MORE THAN ONE PURCHASE PER CARD.  I tell my kids to leave the card at home, at all times, except to make that one purchase.  Six months of on time payments to a credit card really helps the credit score.
          
          As for purchasing a home, your only choices would seem to be a Lease Option or an Owner Carry, both would usually require a down payment of some sort.  If you really want to work hard for a house in your school district, you might want to check the "For Sale By Owner" ads and see if any of the owners might be willing to work out a "Lease Option" or "Carry Back".  If the For Sale By Owner is a vacant house, they might be more willing to work something out with you.
          
          Good Luck!

Brian Levredge · Answer

Not much I can add that hasn't already been mentioned here.  You'll most likely be able to rent a nicer home that you could afford to buy.  Secondly, when you are renting, the landlord is responsible for the maintenance, which is not the case when you own.  If you are trying to do this on shoestring budget, what will you do when you have to replace an appliance or say, a roof?

Jon Holdman · Answer

I should clarify here:

I was referring to your ex.  From what you say he wrecked his credit then used yours to buy more vehicles.  I'd hazard a guess those are rather nicer vehicles rather than junkers.

Des Shei · Answer

i'm with Josh, while purchasing a home now may seem as a great venture; based on the information you've provided, i'd suggest you get on some firmer "ground" so to speak before you sign up for this long term commitment. The housing market will not turn around overnight so you've got time to get ready for your first home purchase. Alot of people have defaulted on their mortgages due to hastily jumping into the home ownership arena without being prepared. At least you are asking the RiGHT questions; so in that respect you are a step ahead of the crowd. Hope all goes well!

Should I even consider buying a house?

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