What are our options to purchase a home within the next 6 months? (Read the summarized details about our case)

Asked by Jose Garcia Gomez, San Jose, CA Sun Feb 24, 2013

My parents recently became legal residents. Both my parents owned a home prior to the housing market crash. They lost their home to a short-sale back in December 2009. My parents combined income is just below 90k a year with my brother and I as recent college graduates. There is a total of 6 members in our family. We're searching for a home where mortgage payments, utilities, etc to be below 2k per month. We do not have much for a down payment but could possibly change due to pending lawsuit. We have slight above average credit scores between the four adults. Thank you.

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Grace Hanamoto’s answer
Grace Hanamo…, Agent, Cupertino, CA
Mon Feb 25, 2013
Hi Jose,

Thanks for your post.

Given the number of people in your family, current interest rates, the possibility of sufficiently high down payment to meet your goals, and the potential monthly income to cover the costs, I do not think there is anything here in the Bay Area proper (all the counties that touch the bay) that will meet your needs. There are homes in Tracy, Sacramento, Antelope, Stockton and south to Gilroy and Hollister that might have some older homes that could be purchased, but without a really large downpayment, it is not going to be easy or financially feasible to be $2000 a month or less including mortgage, mortgage insurance, utilities, insurance, property taxes and repairs.

As much as I would like to see everyone own a home, there are times, Jose, when such a goal is simply not appropriate for the time. This is not to say that you and the family won't eventually own a home again, but you should only do so when the home is affordable and can actually house and accommodate the number of family members that will live in it for the next 10 years. With two of you already heading out into the world as college graduates, it's very likely that any home large enough for all of the family members now may soon be too large for your family's needs, and too expensive for your parents to pay for by themselves and without your intervention.

Although you mention money from a pending lawsuit, it might be much better (considering the ages of the family members) to consider waiting until things settle down. The money from the lawsuit, if it arrives, can be invested and allowed to grow to ensure a suitable downpayment for the next home. This way, your parents are assured of a home in their retirement. The younger family members have plenty of "earning years" in front of them, so funds you earn should be used to cover your own expenses and should go into a savings account to cover your future home purchase too.

At this time, without knowing all of the circumstances surrounding your family and income, I would strongly suggest that you speak--not with a Realtor--but with a financial planner to determine how to invest now to purchase a home that your family can truly afford later.

Good luck!
Grace Morioka
Allison James Estates & Homes
1 vote
Juliana Lee…, Agent, Palo Alto, CA
Sun Feb 24, 2013
A $350,000 mortgage would have a monthly payment of roughly $1700 per month. There are currently 10 single family homes listed for sale in San Jose priced below $350,000. Of the six homes which are neither a short sale nor an REO, the largest is a 996 square foot 3 bed, 1 bath house priced at $349,000. It will probably be quite challenging for you to find a home in Silicon Valley large enough for your 6 member family.

If moving to the east bay is a possibility, talk to some experienced real estate agents in the area you would consider. They would be able to recommend lenders. You could probably find a comfortable home.

San Jose real estate statistics at http://julianalee.com/san-jose/san-jose-statistics.htm

Juliana Lee
Cell 650-857-1000
Top 2 agent nationwide at Keller Williams Realty

Over 30 years experience
Over 1,000 home sales completed in Santa Clara and San Mateo Counties
Web Reference:  http://julianalee.com
0 votes
charles butt…, Agent, san jose, CA
Sun Feb 24, 2013
Thank you for your question Mr. Garcia Gomez:

I recommend that you talk with Doug Jones

Mr. Jones is the owner of Mortgage Magic and Mr. Jones has been a lender for over 40 years. Mr. Jones has an enormous amount of experience as a lender and with the particular issues that are involved with your case.

I recommend that you go to Mr. Jones website: http://www.mortgagemagic.com

Thank you,
Charles Butterfield MBA
Real Estate Broker/REALTOR
American Realty
Cell Phone: (408)509-6218
Fax: (408)269-3597
Email Address: charlesbutterfieldbkr@yahoo.com
0 votes
, ,
Sun Feb 24, 2013
Hi Jose, thanks for the summarization.

If your parents will be on the mortgage then the short sale they had back in 12/2009 will play a factor into the mortgage financing options. FHA financing has a 3-year requirement after a short sale, so since it's been over 3 years then they could have FHA financing as an option, which just requires a 3.5% down payment (with a minimum score of 580, 500-579 scores require a 10% down payment, less than 500 can't qualify for FHA). The majority of lenders offering FHA loans are requiring 620 or 640 scores, with some going down to 580/600 and very few going down to 500.

Conforming financing, which are Fannie Mae & Freddie Mac loan programs, are typically the most coveted type of mortgages since, other than VA & USDA mortgages, they have low interest rates & mortgage insurance rates. Most people call these types of loans "conventional financing", since they technically are, but more specifically they are called conforming. If there was no previous short sale, then just 3% down is possible with conforming loan programs. However when there was a prior short sale then increased down payment requirements apply - after 2 years then 20% down is required, after 4 years then 10% down is required, after 7 years then the short sale is disregarded and then just 3% down is permitted.

Now if you and your brother are going to be living in the home, one idea is for you two to qualify for the mortgage without your parents, as then your parents short sale wouldn't be a factor. Of course you and your brother would qualifying employment & income, however you wouldn't need a very long employment history as long as the job you are getting is related to your college degree. As little as one paystub & a copy of your employment contract would be fine. Typically a 2-year employment history is required, but graduating from school can substitute for that requirement.

With the funds you could expect from the pending lawsuit, I'd strongly consider trying to make conforming financing a goal of yours as it'll allow for lower payments + make your offers more appealing to sellers.

Shane Milne | Lending in all 50 states | NMLS #81195
shane@thebesthomeloans | 949-273-4161 direct
0 votes
Sally Blaze, Agent, Eugene, OR
Sun Feb 24, 2013
I would suggest you talk with your county or city to see if they offer "affordable housing programs" or Below Market Rate programs. For example, go to the Livermore city website (below) to see if they have any homes available for sale. Or check out communities close to where you want to live.

You should also talk with a lender to see what loan options might be available to you.

Sally Blaze
0 votes
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