mortgage with existing debt and no deposit?

Question

i need to move out of my parents house due to overcrowding and insanity!!! my boyfreind and i are ready to get our own place but cant afford to because of existing debts. also we cant afford a deposit on a mortgage. We dont want to rent as the area we want to buy is more expensive to rent than buy!!! please help!any advice on how we can get a house would be much appreciated!!

i have rented before and fully appreciate the cost of living. im in uk so pounds not dollars and rent would cost around 600 a month whereas a mortgage would be around the same after council tax etc. i would rather pay my own mortgage than someone elses if you know what i mean!!

Answer 1

If you've never paid your own housing costs, I really reccomend renting regardless- it can be a shock how much rent/payment, sewer, water, electricity, garbage, cable, phone, gas/oil, etc costs.

If you dont have good credit you can get locked in at astronimical rates for 2 years with a prepayment penalty.

I've NEVER heard ANYWHERE that is is more expensive to rent than buy-- are you remembreing home owners insurance and yearly property taxes AND using a reasonable interest rate?? AND including PMI (with no money down you'll pay this) which can be well over a hundred dollars a month?

BTW, a mortgage you do a 'down payment', not a deposit. A deposit is something you get back and its used as collateral in a rental so you dont damage things.

Answer 2

You could get a mortgage with a lender that will offer more than 100%

ie if the property is worth 100k. you can lend 95k secured and 30k unsecured.

With this you would be able to pay off some or maybe all your debts and have the money for the deposit furniture etc as well.

To keep the payments down you can have it on repayment for the maximum term. Some do upto 35 years. You would be paying more in interest but you can change it when you want.

Or go on interest only (you just pay the interest so the outstanding loan would stay the same as the first day you got it) and then change to repayment a bit later when you are more secure.

(I can not give mortgage advice but do talk people through theie mortgage deal and different options for a high street bank)

Answer 3

Don't do it. If you get a house in the financial state you're in you'll regret it later. There are alot of expenses that come with home ownership that aren't in the monthly mortgage payment. What if the water heater goes up? What if the roof leaks? If you barely have money to pay for the mortgage, then you'll be destroyed if any emergencies come up.

Look for another area where rent is not so high, move in there, pay off the debts, save money for downpayment and look for a house then. I know waiting sux, but its better than bankruptcy.

P.S. Right now, if you have a high debt load, you'll probably get bad mortgage finance (balloon or interest only are very bad) options anyway.

P.P.S With regard to 100% mortgages, the following article may be helpful:
http://www.mtgprofessor.com/A%20-%20Down%20Payment/100%20percent_loans_blessing_or_curse.htm

Answer 4

In most area of the U.S., housing price stopped going up as inventory continues to build up. It is normal to see a correction as a boom that lasted for several years.

If you are investing new money in to real estate, this may not be a good time as the potential return on investment is small compare to the high risk of lower home price.

If you are doing a side way move, meaning you are selling one to buy another one, then it is acceptable.

Nothing is absolute, but housing market is very likely undergoing a correction and this is only the beginning. Some say this would be a soft landing (0 to 10%). Some say a big crashing is coming (10 to 20%).

http://money.cnn.com/2006/08/24/news/economy/newhomes/index.htm
http://money.cnn.com/2006/08/23/news/economy/homesales/index.htm

As housing market slump, it is easier to calculate "Rent vs. Buy" scenario. Because "appreciation" is no longer a factor.

Mortgage payment consists of two parts: interests and principal. Interests are like rent, which doesn't add to the equity to your house. It simply disappear as your pay it.

If interests portion of the mortgage payment is roughly equal to rent of equivalent property, then it is a decent buy.

For example, let's buy a $500,000 condo with 0% down and apply interests only loan (just like renting a place). Mortgage payment would be $3250/month. It is a bad buy, because you can enjoy same property for $2000/month.

Please note that I assume the tax benefits from home cancel out fees from home association and property tax. For more accurate calculation, consult with your CPA or accountant. But NOT your realtor, whom will say anything to get the deal to go through.

And again, if you like a particular property, then paying more may be reasonable. You are the only person who can decide how much more premium you are willing to pay.

Answer 5

You may be able to qualify for a mortgage, but it likely will be a very high rate. I don't know what area you're in, but let's just say you'll be paying several thousand a month. And if you're in debt, and living at home, you'll need a co-signer. Most lenders require 12 months housing history, and living at home with your parents and without proof of monthly payment will be a problem.

You also need 2 years consistent employment history, and most first-time homebuyers need to provide verified seasoned assets, so make sure you can provide all that.

Again, you'll need:

- A solid credit score (payment shock usually isn't allowed for credit scores under 660)
- Verified assets (probably $10,000+ seasoned in a bank account for at least two months)
- 12 months housing history

Even if you can somehow qualify, it sounds like a bad idea because as others mentioned, you will have definite payment shock. And any loan that you do qualify for will be skyhigh, and likely get you deeper into debt. And you could be the victim of predatory lending where you get into a really bad deal.

I recommend living in an apartment, at least for 12 months to get your housing history taken care of. And at the same time work on reducing your debt, and putting savings aside to use for a down payment or at least for reserves.

I know your parents are annoying, but defaulting on your mortgage is more annoying.

Learn more at http://www.thetruthaboutmortgage.com

Answer 6

Try a lease-option arrangement. Another term is 'rent to own' or 'try before you buy'.

You rent long term and given an option to buy. Advantage for the vendor is, it's long term rent, say 2, 3 or what ever number of years...and at the end of the period you have the option to buy the place.

This is good arrangements for people who needs to build a good credit rating. As long as you pay rent on time over the years, you build a good rating and can go to a lender for a loan and buy the house. Another good thing is, if you don't like to house you don't have to buy it, it's an option.

You can find more from the site
http://rent--to-own-property.blogspot.com

Of course, finding a vendor to do this is the next step, but there's always an opportunity.

And this method is a good way to get into the real estate game without using much of your own money.

Always have a good lawyer and accountants who specialise in property.

good luck.

Answer 7

Well, depending on how much debt you're talking about. There are 100% financing options available. Basically lender look at what is called a DTI or debt to income ratio. If your DTI is under a certain threshold (depending on the lender) then even what debt you have now would be alright. Also realize that when applying to buy a new house that the mortgage will also be included in that DTI so your price range might be limited by the debt you currently have.

Joe Hermann
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Answer 8

I would NOT recommend a 100% mortgage in the current housing market, you could very easily end up in negative equity. Try renting for a while, it is a good short term solution. I understand how frustrating it is when rents are so high, but could you move somewhere where the rent is lower maybe. Then try and save up for that all important 5% deposit, maybe you've got family who could help.

And Amanda H is wrong, it IS called a deposit in the UK.

Answer 9

Northern Rock do a product which allows you to borrow up to 125% the value of a property, with 95% secured and 30% in the form of a unsecured loan at mortgage rate. You might want to look at their web site to get an idea of how this product works. However I recommend that you talk to an independent mortgage broker who will be able to examine your situation and advise whether this product is suitable for your needs, and whether there are alternatives.

Answer 10

you can get 100% mortgages but if i were u i'd sit back and look at what yr taking on if yr already in debt now imagine taking a mortgage on too? if u want to live together so bad it maybe worth renting for now till yr finances r sorted also it'll give u an idea of bills etc u will have to pay