Home Buying in Victorville>Question Details

Outsicktoday, Both Buyer and Seller in Victorville, CA

I currently can purchase a new construction home with an FHA loan in Southern California.

Asked by Outsicktoday, Victorville, CA Fri Feb 19, 2010

at 5.75%. I can pay interest only or the 30 year payment. I have been paying the interest only because the value of the home is horrible.

I am concerned that I might not be able to rent the current property, and that if I do it might get torn to pieces and then be worth nothing.

Also the new home I am looking at is about $230,000 but there are foreclosures of the same home that are a couple years old going for $40,000 less. The builder also has more homes to build and I'm concerned that they will drop the price.

I'm also eligible for the $6500 tax credit so my %3.5 down is almost covered by that, although I would have to wait to get the thing that happens is that my current home forecloses, and that I'm in the new on fixed for 30 at a good FHA rate of 5 or a little lower. However when I move in the home will drop by about $40,000 right off the bat.

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Outsicktoday’s answer
Well, I went and finally purchased a home. James below helped a little. I ran the numbers, and even if I refinanced my current home, I would be paying about the same as the new one (the Bank won't let me refi the current one to a 30 year fixed, but they will apparently let me buy a new home for slightly more at a lower rate than my current note).

Nothing really makes sense, except that I can buy a much bigger home, with hardly nothing down (6500 tax credit with 8000 down FHA). Only concern is the current (1st home) going under due to rental issues. The worst is that I lose that home and sit in my current one with a 30 year fixed. Really it seems to be a no lose situation.

My 1st home appears to be a non-recourse loan, I refinanced but took nothing out (no cash out) and had no second (put 20% down on it that's all gone -$60,000 )

To me I can't see a downside. I think I am buying very close to the bottom. Houses are selling and requiring multiple bids, so a new one is a little premium priced, but nearly the same as what my payments would be with a 30 year fixed on the current home.

If only I can rent it out......

My plan is to put the for rent sign up, advertise wherever I can, and as a last resort go section 8.

To me the worst that happens is that I lose the first home that I worked hard for and did all the right things for. Put improvements into, put 20% down on. The bank was able to get 0% billion dollar loans and I can qualify for 5% for my paltry amount.

If they want to sue me for what they can't get on the first loan, then by all means have fun doing so. They would have to first show that the loan was recourse, when in fact I can't find any reason why it would be. An attorney I consulted with actually advised me to let it foreclose and to not agree to short sale or any other type of arrangement. he advised em that it was a non-recourse loan. My bank also stated that it is a non-recourse loan, so I don't see very much risk.

I was the only purchaser on the first home, so at least my wife will have good credit should the worst happen. I suppose I should be nicer to her to hedge my bets.
0 votes Thank Flag Link Sun Mar 21, 2010
*off discussion*
It happens, I worked for a fortune 300 company, put in 60 hour weeks.
14 years later, new management shows up and pinkslips all old management, implants their new management and the employment politics start.
It's not like in the 1950's when your employer took care of you.
Now a company grows and is sold. Next thing you know, you are out of a career.
You didn't do anything wrong for 39 years. It's just that we are too loyal and didn't think it was going to be like this.

Don't look back, just keep on trucking!

Jes Sierra, B.Sc.
0 votes Thank Flag Link Thu Feb 25, 2010
Best advice and best answer. Try to do the right thing and you can still get screwed. Certainly no guarantees any more.

I was actually happier when I had way less, no mortgage and rent only sounds good right now.
0 votes Thank Flag Link Thu Feb 25, 2010
......and yes I'm just now pushing 40........

and wondering what the hell I was thinking for 39 years
0 votes Thank Flag Link Wed Feb 24, 2010
I think many voted for Che thinking that the Gov would include them in the group considered "in need" (I was one of the middle class fools). Now we are finding out that the rich are the middle class and that bottom feeders are considered the only ones in need.

Income taxes this year made that clear, so did my payroll taxes. However, someone can live in my same hood for $100 a month on section-8. I have a friend that rented section-8 and purchased another upside down mortgage, his current renter is supposed to come up with $80 a month and still stiffs him.

I'm starting to believe that if you're still a liberal at 40 you have no brains, or you're so rich that you don't notice more taxes.
0 votes Thank Flag Link Wed Feb 24, 2010

Awesome, I am glad everthing is working out for you. There are many distressed home owners that don't have it so well.

Best wishes,

Jes S.
0 votes Thank Flag Link Sun Feb 21, 2010
I am in agreement with your synopsis. I took a sabbatical from real estate during 06-08 due to the overpriced market.

There are reasons to buy houses, but ONLY get a fixed rate mortgage (assuming that the government can't change these at whim--like with the AIG bonuses or the defrauding of investors on the Chrysler bankruptcy). If you need an ARM, you can't afford the mortgage.

Reasons to buy:
You're moving up for the same cost as your paying now.
You're getting a property that is safer/more self sufficient: better neighborhood, solar/wind power, well water, or more land on which to grow your own food.
You can afford to buy an investment and you aren't afraid that your "extra" property won't classify you as "rich" and subject to forfeiture to a special constituent of some government agency: Pfizer (Kelo vs. Arizona), Acorn (community organizers deserve your assets), or whatever they can think of next.

Obama has said that he's "agnostic" on taxes on the middle class. I would say he's a polytheistic or pantheistic on taxes on the middle class--he believes in all of the taxes possible. Consider the fact that if government "health reform" passes, it will be enforced by the IRS. Don't do what the government likes, and you potentially lose your bank account, cars, and house.

Real Estate moves in cycles. We are on the bust slide, though that is being interfered with by the Keynesian led government. They are trying to prop up prices (and hence, tax revenues) until the economy recovers. But, like FDR, they are extending the recession, by transferring money from the successful to the people that voted for them (or who they hope to woo in the next election cycle).

You might be interested in my other blog, wherein I substitute 'radicalforfreedom' for 'equityguy'.
0 votes Thank Flag Link Sun Feb 21, 2010
Well, to update I talked myself out of it. I ran a search of foreclosed homes in new track I was going to buy into and there were several, all about $40,000 or more less. So I would be buying a home that I know would drop by almost 20% when I moved into it. Then the costs associated with a new home make no sense.

I think it will get worse also. Rates are going to go up at some point, and the tax credit will be gone soon (I get the extend it again since the Feds can always print more money).

Obama is going to save us by spreading out $1.5 billion to five states. They will then have advocates to call the banks and ask for lower payments. Even if the money were used for principal reduction only it breaks down as follows:

$1.5 Billion

15,000 people could write off $100,000 (many are worse off than that, my situation of 100,000 is really 160,000 for anyone that purchased a home in my area and didn't put down $60,000 like I did)

There are 15,000 cases probably in the high desert and the inland empire alone. Forget about the rest of California, Florida, Michigan, etc.

That money will help no one.

Also, still no jobs.

ARM resets are coming to with commercial real estate problems. We might be only halfway done.

Could houses go to zero? Maybe they will be listed as -$10,000 meaning the bank will give you $10,000 to move in. Ah, but then there will be no banks outside of the GOV, and Che Guevara will hold your lease.
0 votes Thank Flag Link Sun Feb 21, 2010
The other issue, If I buy in VV and the first forecloses, then I'm stuck and VV isn't such a good place to be stuck.
0 votes Thank Flag Link Fri Feb 19, 2010
"If you are buying a second home, your first home has to have at least 35% of equity. "

For FHA? That requirement has not come up.
0 votes Thank Flag Link Fri Feb 19, 2010
Yes Joe, I have the 3.5 I was thinking that the money will come back from the tax credit. I need about 8 or so to get in. I have to have the money 5 days before close of escrow. Not an issue.

I'm current on my payments on my current home, never missed.

Bank of America gave me the thumbs up, the builder forced me to use them for the incentives (paying closing costs).

No not an investor, just questioning if I should put money into a home that would drop right after purchase. Although values won't rise soon I could always try and buy in 5-6 years or we get lucky and the market turns up.

The builder is pitching in with a $15,000 allowance for upgrades, all appliances (washer dryer fridge), and about a 5% FHA 30 year Fixed. I thought it was funny that B of A would accept the loan since they hold my current loan on my upside down house. However I'm current and me and my wife's FICOS are 700+. We had to show that we could afford both payments.

I talked to an attorney and was advised to do it.
0 votes Thank Flag Link Fri Feb 19, 2010

Write down the pros and cons and weight them out.

Do you have the 3.5% for the downpayment. (You can't use the buyer's tax credit for that.)
You just can't put money in the bank without a paper trail. And, if there is money in your account, it has to be seasoned.

Hopefully your foreclosure doesn't hurt your chances of purchasing another home.
Have you talked to a direct lender about the loans programs that are available.
If you are buying a second home, your first home has to have at least 35% of equity.
Best bet, talk to a lender.

To buy or not to buy, that is the question.

Are you an investor that is going to sell in a couple of months?
If not, why are you worrying about the value of the house dropping?
It will take possibly take more than 8 years for the property values to rise again.
If you rent, you will not build any equity.

We can't decide for you, we can't get a good picture by typing back and forth.
For your best interest, talk to a real estate attorney and see what are the tax and credit ramifications.

Best regards,

Jes Sierra, B.Sc.
Century 21 Beachside
Chino Hills, California

If this helps you out, give me a thumbs up.
0 votes Thank Flag Link Fri Feb 19, 2010
We go to sign to loan docs tomorrow, and I think I'm going to pass. However, if I sit in the current home for 8 years and it resets then I'll probably lose it.

It's an option ARM 10/1 no negative AM. No recourse. I refied at the owed amount in 2008 because I had a 5/1 and I thought the rate was high for the 30 year. At that time the house was worth $300,000 now it's worth $120,000 and I owe 227,000

Maybe it's stupid to keep it.
0 votes Thank Flag Link Fri Feb 19, 2010
Basically I'm stuck, I'm thinking that I should wait, I don't want the foreclosure risk, but maybe it means little now?

However it seems stupid to buy a home and put money into it as it drops.

0 votes Thank Flag Link Fri Feb 19, 2010
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