The most affordable housing debate

elohimrules · Post by **elohimrules** » Sun Jul 08, 2012 5:51 pm

I've gone over in my mind several options: mobil homes - dont like the rules and renting someone elses land. Plus they are not always that cheap.
Tiny houses - em, actually they are tooo small for me, and some of them area also not that cheap.
This is what iv'e come up with.
Cheap real house on its own land. 35k or less. Ive found a nice new england farm house fixer upper and am thinking about it. Its 35k. I have the 20% down saved. Of course it would need work but emm, im paying 800 for rent now, rents very expensive in new england. I could camp in the house and my monthly payment is so cheap I would save tons while fixing it up.
Anyways, this is the way im leaning for the most affordable housing, btw, this is not a HUGE farmhouse so the utilities would not be outrageous. I also think at some point solar panels would be a good investment...heck, I could even use the old fashion kerosine lanterns at night;) lol To save on electric bills.

George the original one · Mon Jul 09, 2012 5:03 am

Only $35k and you're not paying cash? Yeah, I know I'm one in favor of using a mortgage, but when the cash price is so low, I don't see much advantage... after all, $35k isn't a big income generator (my leveraged income experiment might get you to $500/mo, but the 4% rule suggests $116/mo is all that would be safe).

elohimrules · Post by **elohimrules** » Mon Jul 09, 2012 7:40 am

Well, I don't exactly have 35k cash on hand. I could come up with 8k max. I don't want to buy a more "normal" price home say 140-180k because I don't trust banks. I don't want to have to rely on a bank for my mortgage. So an inexpensive one I could get out of the debt relatively faster than a normal priced home. Of course, there will be costs of fixing things, but I can do that at my own pace. It's just an idea, because the alternative....continue to toss 800 mo in rent away with fees for all my pets each mo! or emm...a mobil, which has fees, and rules, or a cheap house that I can pay off fast. I can't think of a better solution. And def will go with a credit union not fannie mae or mr mac!

ICouldBeTheWalrus · Post by **ICouldBeTheWalrus** » Mon Jul 09, 2012 2:55 pm

It may shock you, but credit unions resell their mortgage loans to Fannie Mae, etc. At least the one we got ours from did. They still service the mortgage (payments go to them), but we got the notice that it was sold about a week after closing.

elohimrules · Post by **elohimrules** » Mon Jul 09, 2012 3:39 pm

Wow! That's terrible. I wonder if they all do? What is a gal to do in these times?

ddrem · Post by **ddrem** » Mon Jul 09, 2012 4:50 pm

They ALL sell their mortgages to Fannie and Freddie. It's a win/win for them. They get to lock in their profit, and they pass on the risk to the federally-guaranteed institutions/taxpayers.

elohimrules · Post by **elohimrules** » Mon Jul 09, 2012 5:27 pm

Who audits Fannie and Freddie? So, if they wanna forclose on someone they can just do it. I guess its better to save cash for a house if u can.

dragoncar · Post by **dragoncar** » Mon Jul 09, 2012 7:18 pm

Hmm, I knew they all sold the mortgages, but I never really thought about what that means.
They charge you an origination fee... ok.
Then they sell the mortgage for... what? How much do those things go for?

jennypenny · Post by **jennypenny** » Mon Jul 09, 2012 7:42 pm

edit: parts of last year's article

Banks don't make enough money on a new mortgage at historically low rates, and origination fees barely cover the expense to process a new loan....They [banks] immediately sell the loan to one of the government agencies. In turn, the agencies pay the originating bank to service the loan for a recurring fee. The Fed is assuming all of the risk on the loan, and the bank's role in servicing the loan is now an income source for the bank instead of an expense.
To the OP--what are the real estate taxes on the property? Taxes never go down and you pay them forever.

elohimrules · Post by **elohimrules** » Mon Jul 09, 2012 8:35 pm

Good point about the taxes

Ill make sure to look at that info as well.

Mo · Post by Mo » Mon Jul 09, 2012 8:44 pm

I'll bet that if you have $8k total available to you, that you'd only be offered a conforming mortgage from any institution-- meaning a mortgage conforming to the GSE rules (GSE: government sponsored entities, aka Fannie and Freddie). So probably any mortgage you get will be able to be sold to the GSEs.
As for who audits the GSEs, their finances are pretty well disclosed and reviewed... they ran into some pretty big financial problems a few years back, and the government supported them in such a way to prevent them from going defunct, because if they didn't exist the mortgage industry would be significantly different.
No lender can foreclose on a borrower without certain criteria being met. The deal is: if you pay, they can't foreclose on you, regardless of who owns your mortgage. For the most part, there really isn't much incentive for a lender to want to foreclose on you, or anyone else for that matter. For the most part, when a lender forecloses on a home, the lender has already lost money-- foreclosure is just a way to attempt to limit the amount of loss.
You may be thinking of a thing called eminent domain-- whereby the government can force you to sell your property. To my knowledge the GSEs are typically not involved in this.
A few thoughts about a $35k house with land: The house may not be very habitable. While you may be okay with camping in the house, a bank may not actually loan you money for a badly deteriorated house. There is nothing wrong with trying to get a loan for such a place, just saying it might not happen. Things can happen to houses that make them essentially unable to be financed-- i.e. no one will give you a mortgage on it. At $35k you're in a territory where most houses will have serious issues. It's easy to think by looking that it just needs a new coat of paint and new carpet, but in reality, it may actually need something like a new foundation-- or worse, it may be on land that is unsuitable for building, sinkholes, or ground contamination can do this to sites.

mikeBOS · Post by **mikeBOS** » Wed Jul 11, 2012 12:23 am

@op Your post made me get in gear and write a blog post about my house I just moved into: Home.
I'm about 90 minutes outside of Boston now. I paid $25k for the house and about $8k fixing it up. I used cash. It's pretty hard to get financing on the sub $100k houses around here. They don't typically pass the bank inspections because they have leaks, are missing plumbing/electrical or heat, have septic system issues, border issues, etc. There are rehab loans but I think you might find it easier to just wait and save up than try to go through that bureaucratic headache.
But I'm very happy with my new little home. So it's definitely possible to have a nice place on the cheap.

elohimrules · Post by **elohimrules** » Wed Jul 11, 2012 1:05 am

true, maybe ill reconsider mobile...nothing wrong with em.

M · Post by M » Wed Jul 11, 2012 1:48 am

Six years ago I was in a nearly identical situation, and was comparing my options. I decided to buy a small house on an acre of property at the edge of town for <30k. The house is/was in great shape, was made when a 2 x 4 was actually a 2" by 4" board. It was a foreclosure with some cosmetic issues that were easily fixed.
Looking back today, this is one of the best decisions I've ever made. I could give my house away today and I would still come out ahead when compared to renting an apartment. I don't have to live by anyone's else's rules. My property taxes are about a quarter of what it costs to rent a lot for a Mobil home, my house is substantially more insulated than a Mobile home so I save a lot of money on heat and cooling, my house is better constructed, appreciates in value, and protects me better from the elements than a mobile home would...And, I can't hear or see most of my neighbors due to being in a heavily wooded area, I don't have to worry about people shooting at me, or the neighbor trying to break into my house and hurt my family, etc.
The biggest problem I had with this is the financing. I had >800 credit score, no debt, high income, and barely enough cash to buy the house, but no bank in the world would finance me to buy the house...so I paid cash, which was cheaper anyway. The reason the banks wouldn't finance me? The house was too cheap to qualify for the mortgage! The bank literally told me that they would finance a $200,000 house, but not a 30k house.

Dragline · Post by **Dragline** » Wed Jul 11, 2012 2:02 am

I wonder if credit unions would make loans for such things. I suppose you could also try a peer-to-peer lending site like Prosper or Lending Club. But you would have to pay more than for a traditional mortgage, because those loans are unsecured. You might also try to get seller financing. I bought my first house that way.
Somewhere here lurks a business opportunity.

secretwealth · Post by **secretwealth** » Wed Jul 11, 2012 2:04 am

I can tell you from personal experience that credit unions will give mortgages that big banks wouldn't touch. I qualified with my CU although about 3 other big banks wouldn't touch me. And I paid back the loan in a little over a year--they love me now.

M · Post by M » Wed Jul 11, 2012 2:23 am

@Bigato - this is an astute observation. Food is about half of my expenses also. I should probably add that the one thing that I regret most about my house is that I am still technically within city limits. Even though I can throw a rock and hit the city limit, I'm still not allowed to have chickens,goats, etc.

If I could do it over again I would definitely buy a house in the country, instead of in the city.