Caught between restrictions and financial limits.

I was so excited when I finally saved up enough for a down payment on a home. My credit scores had recovered from a bad period several years ago and my bank approved us for way more than we needed with an incredible interest rate. I couldn't have been more excited....


And then the search began. Pure land was off the table since they wanted 30% down for that, but I thought that surely good land could be had with a home already on it. Four months later, we still haven't found anything that we like that the bank will also approve. They have a laundry list of things they won't approve. No this, nothing with that, nothing older than such and such. We've found a dozen homes that we really liked. Three of those we actually tried for. One we decided against once it was clear there was a major septic backup issue that had been ongoing for an unknown (but long) period of time. The other two we got heavily outbid at well over asking price. One in particular we tried going 10k over asking and still got outbid by two people.

Time and again so many of the places we want prove unavailable because of the bank's conditions. It was with that we went hunting a bank that would be okay with more options, but not ask outrageous amounts of down payment or insanely high interest. Amazingly, we did find one that had reasonable interest and would be willing to work with us on any number of odd homes we pointed out as examples of ones we'd been interested in. Wonderful, great, amazing!...

And now the other shoe drops. They aren't being unreasonable in asking 20% down considering they're willing to take on riskier homes, but when we did the math, we don't have enough in the bank for that high of an interest rate. We really only have enough for 10 to 13%. Best case, we would be looking at another 4 to 6 months of non-stop saving to get our funds up to that point. That assumes we save nothing else at all for the move or closing though.

It's so frustrating to have a great loan on one hand that I can't use and a so-so loan on the other hand that I can't afford. Forgive me. It's a bit of a rant, but I kind of needed to vent. I've been barely present the last few months as I work ridiculous hours and spend my free time digging up information on houses and properties. The prospect of many more months of this feels like a weight around my neck. I know wherever we end up, it's where we are going to be for the rest of my children's growth until adulthood. I want the right place where we can really live the way we want and do the things we've long desired. Still, it sometimes feels like I am just running into a wall over and over.

I'd love to hear other people who've faced this same cycle of hope and failure and made it out through the other side. It's one thing to believe logically in a future, but another to hear from people who've been there talking about the light on the other side.

I was quite frustrated many years ago when a banker told me if I couldn’t afford 20% down and a max of a 15 year mortgage that I couldn’t afford the house.  No, I was outraged. It was also the best advice I ever got.

Since I became an expat I basically gave up on trying to buy property outright. I am also caught between financial limits and in my legal restrictions involved with being an expat (very annoying, but probably cider press if I go into any details).

Anyway, we decided to live with my wife's parent who had a very reasonable sized home and moderate garden space (for Japan).

I have since realized that multi-generational living situations are extremely eco-friendly, although trying at times. I'm blessed with a very forgiving in-law. It is certainly a challenging compromise, but there are a lot of benefits for everyone involved.

Everyone has different goals and aspirations though, I hope yours works out for you soon!

If I were in that position, I would go back to the first bank.  

Then I would ask for a list of homes that they have foreclosed on.

I am sure they will want someone to take over those loans.

If that idea didn't turn out well, I would then start saving every penny I could.  I would pay off all existing debt.  I would look to Dave Ramsey for help.

A 10-13% interest rate? Is that a typo? That is insane on any loan. What a totally frustrating place to be.

Our first home purchase was in 2016 after two years of searching and over 70 homes we looked at. We tried to buy three, and wanted to try for more but could see issues that would be denied. Sometimes the denials on a home would be something so minor and stupid. As we were both in trades, a small piece of rotted siding did not make or break our interest, but absolute no from the bank. We ended up doing repairs pre-purchase to get the house we bought finance worthy. We found a local contractor who let us work under his license. By the time we got that place we had went from our 'forever' home to letting go of a lot of our requirements and finding something that would work for us right then. Two years will do that to you. Side note, I gave birth to our daughter two weeks after occupancy. We barely made it, lol. So we made a five year plan. Fix up house, gain value, find actual 'forever' home. In May of this year the five year mark passed. We discussed our plan, accepted the time wasn't right and transitioned to an eight year plan.

Then a few things changed quickly. Our workplace (shared but seperate agencies) became very toxic. Our family there was all but non existent. Our friends were wanting to move away. Crime rates, drug use were skyrocketing. We didn't see any part of life where we were improving. We found a place we loved in the midwest (though it didn't work out) so at the end of June we found ourselves on a long roadtrip exploring the area, up through northern prairies and back thru the PNW. Back at home the seed was planted. Found out our land improvements had greatly increased the value of our house and the remaining repairs were minor costs. So we dove, found work and now a home far from where we started hunting. By August we were in a new state, with a new life began. Now I sit in my forever home planning all the things to do on our new little acre. Everything here is better for us. Our kids are safe at playgrounds, we have more land, great neighbors and a healthy work environment. We also have less debt than ever before. I'm pretty sure a greater force had some influence. And we stuck to our original goal!

Okay, rambling with my story...I guess my point is look at options. Repairs can raise value quickly. As can land improvements. Go back to wherever interest was not double digits, find something that has potential and make changes. Obviously not always possible, but could be!

Also, many sellers are willing to help make something financeable. If your bank won't finance many others won't either.  Do not be afraid to negotiate those terms. "My bank won't finance until the roof is repaired. Can you have that done, we offer this in return (higher asking price, cover closing costs, whatever)? "We spent $6k more once we had a buyer say, ready to purchase but need this to get financing. I'll give you full asking and pay for inspections if you can make it happen. To us it was totally worth it to get the house sold so we could buy another.

Don't give up. Keep saving, searching and exploring all the options.

Some years ago when my kids were very small we were approved for a mortgage of 100K. Today it seems like a joke, back then that would only buy houses with major problems- flood zone, cracked foundation, fixer upper, etc. Money was really tight, we both worked as much as possible and it was still not enough. I remember being amazingly frustrated and wondering how on earth we would ever get out of that horrible apartment we lived in.
In the end we decided to leave the area and make a major change. It took us a long time to get to buying a house again, but when it happened, we paid it off in 5 years.

right now in many parts of the US this is a terrible time to be buying, especially if you're in one of these "escape zones" people flocked to during the pandemic and bought up everything available (my mother wants to sell her house, and would make a bucket of money doing it, but is rightly concerned there won't be anything for her to buy and she'll be stuck). I think it's a great excuse for you to sit tight and save a bit more while a way opens somewhere else.

(I understand 100% being excited to get out and make a move. It's frustrating. But with time this crazy market has to drop a bit. I also love the idea of going back and finding out about foreclosures. If you don't ask, you'll never know!)

theres been a boost to down payment assistance programs, low income housing, homeowner's assistance type programs. its a lot of paperwork and weirdness but you may be able to get that extra 10% downpayment as a grant through USDA rural home loans or another of the first time home buyer's programs. right now those programs are being heavily funded...as part of the the latest shifts in politics etc...that some money went into funding those assistance programs. i cant give you more specifics.....but i just know that those have all been well funded recently.

you would have to research your area to find out who to talk to....and also what the criteria for "low income" is...its usually quite high, everything is relative. i mean they obviously arent just for super low income, really they are middle income programs. theres generally something in there for first time home buyers, like a partial grant or down payment assistance where you pay 3 % down instead of 20%

if you want to look into this ---> https://www.rd.usda.gov/oh

or also https://www.cfgohio.com/home-loans/usda-loans-in-ohio  <--- thats a mortgage broker site but it has good specifics.

actually talking to a mortgage broker or 2 of them...is probably a good idea. if you qualified for a loan with your local bank you will probably be qualified anywhere. mortgage brokers shop around for you and can offer you multiple options. i guess keep in mind they make a bit on each loan they broker, but a good one ...well if you find a good one they will really look around and consider what you want to find you the best deal that will help your situation.
or possibly, if you are interested in the USDA or FHA -these are loans that sometimes have repair costs written into them, more paperwork, but probably better for the sort of fixer type stuff you are actually wanting - you may want to contact that local branch of the usda rural home loans...or a "housing counselor" at your local place that does the down payment assistance help...ask for references to a good mortgage broker or just general references to things that are available in your area.

D. Logan wrote: but when we did the math, we don't have enough in the bank for that high of an interest rate. We really only have enough for 10 to 13%.

This bank is charging an interest rate that is way out of line. They are doing you no favors at all.

We were able to get good interest rates by building our credit score so that we were considered a good risk for a loan. If your credit score is bad, the lending institutions will ream you with high interest to mitigate their risk. In the long run, it will be cheaper to build credit, pay off debt and then apply for a loan with a decent interest rate. Sheer drudgery but it will pay off for many years.

Robin Katz wrote:

D. Logan wrote: but when we did the math, we don't have enough in the bank for that high of an interest rate. We really only have enough for 10 to 13%.

This bank is charging an interest rate that is way out of line. They are doing you no favors at all.

We were able to get good interest rates by building our credit score so that we were considered a good risk for a loan. If your credit score is bad, the lending institutions will ream you with high interest to mitigate their risk. In the long run, it will be cheaper to build credit, pay off debt and then apply for a loan with a decent interest rate. Sheer drudgery but it will pay off for many years.

i could be wrong here but i think that was a typo. i think they meant down payment, they have enough for 10% down payment, idk in context it seemed they meant the down payment was 20%. that is a standard on a conventional home loan, but there are other loans with lower down payment.

because yeah 10% interest rate would be ridiculous.

Like has been said many times, if your interest rate is 10% your credit isn't good enough yet. It's hard to hear, sure but you have to shut it down and fix that before you buy. I saw Dave Ramsey suggested above. I can't say that I know anything specific about that guy but I have heard of him. You need to turn somewhere to fix your credit score though because they are trying to screw you. Don't settle.

EDIT: Well I wish I would have seen the comment above before I started typing... Anyways, I forgot to say good luck and don't try to push it too far. It's fine to be "house-poor" but there is a point where it's just not fun anymore. I have been there, because luckily(?) I found a bank dumb enough to give us a helluva interest rate on the junk house of our dreams. Nice view though...

Melonie Corder wrote:A 10-13% interest rate? Is that a typo? That is insane on any loan. What a totally frustrating place to be.  

10 to 13% down. It was referring to the fact that those loans need 20% minimum.

D. Logan wrote:

Melonie Corder wrote:A 10-13% interest rate? Is that a typo? That is insane on any loan. What a totally frustrating place to be.  

10 to 13% down. It was referring to the fact that those loans need 20% minimum.

Looking at how I wrote it, it was a typo. The numbers on our limiting loan are 3% down, 3.25% interest. On the loan that lets us do anything we want, it is 20% down and 5.something% interest rate. It's the down payment that is the major limitation there, not the interest itself.

well hang in there, something will work out.
i know it's hard but you just have to have faith that the right place will be there at the right time. this is the way it always works out, not how you think it will...sometimes quite unexpectedly, and not perfectly, but perfectly imperfect. =) everything always works itself out, somehow.

if i were you i might be still hanging on to the place you said that you liked but had screwy septic. people are unreasonably freeked out by anything with septic, and it is a PITA to fix those issues. but then again you dont have to do that work, you pay someone else to deal with it!  and it may not be as bad as you think - work wise or price wise. i once fixed a screwy septic that wasnt draining and had failed the TITLE V by feeding it...right into the tank -- this special stuff i got a few gallons of at recommendation from a construction worker friend. it worked like magic.
there are different treatments available, some work better than others. someone later asked me what that one was...i do wish i had been paying more attention. i know this was something that wasnt available to the general permies, he bought it for me at a store for contractors, it was like 200$, we were trying to help sell this house. as i remember it may be was a kind of ??? organic ? enzyme? bacteria? ah see i do forget. but it did work and took a backed up failing septic to a functioning passing title V septic, by pouring these 5-10 gallons directly into the tank after digging it up. there are possibilities.

and you (or someone) might have to spend - maybe some 8-20k to fix it or build new- BUT considering it as part of the purchase price of a house...you know still doable. it is the sort of thing that sellers hate though because it really will limit who is willing to take it on...the buyer is responsible for the title V or whatevers...
and quite possibly thats the reason its still on the market -- if it is still available.

if you go price the job, call around...get someone to write an estimate for what it would take to fix, have that in writing in hand --- then...go back to people and say this much less...say your estimate is 12k for fix or 15k for new...take that off purchase price with offer...then go back to the 3% down loan people with written estimate and saying its dealt with through immediate fix...another words you show them solid plan...with the estimate and its lined it up that you have someone ready to fix.

ah some thoughts. i may be getting carried away.
but basically getting at...that may be a passable obstacle. it also may be...why you get the house for 30k less than asking and then fix it for 10k-
and especially as winter rolls on...towards the end of winter if they havent sold it yet they may even be willing to accept lower offer, be more anxious about it all.
throw in it also gives you a chance to maybe do a greywater diversion or some such, if you find a hip septic designer type who will sign off on that...or ? i wouldnt tell the bank or anyone that part though =) but you could even redesign.

When we bought our place we did not have enough for a down payment but the property was way under our limit that the bank gave us. We ended up taking out a personal loan to use as a down payment for the mortgage. This is in Canada and I know the two banking systems between our countries have vast differences.