Buying a house after Bankruptcy

[JeepMom]

What state are you in?

[AfterBkMortgage]

Foreclosures and Bankruptcy

The foreclosure and bankruptcy dilemna is something I work with every day. Unfortunately, it is not always black and white. However, for the sake of this post, here are some general guidelines.

If you include your foreclosure in your bankruptcy, we can look at that as a single occurence. Giving you a better chance to get approved for a home loan. If your home went into foreclosure, was sold off, and then you filed for bankruptcy months later, that is looked at as both a bankruptcy and a foreclosure, making it much harder to get a loan.

As a general rule, if you have any inclination that you will lose your house, include it in the bankruptcy! Plus, if you are discharged from the bankruptcy and you get another notice of default, refinancing to pay your mortgage arrearages will be almost impossible.

Bottom Line: you can still get a home with a foreclosure and a bankruptcy, as long as both as completely discharged. But, it is better to include your house in the bankruptcy so it is looked at as one occurence.

If you have any other questions or need clarification, please let me know.

[AfterBkMortgage]

Reading futher into your message SF, it is generally better not to have a foreclosure on your record....but here comes the HOWEVER...

However, if you have a 120 day late reporting on your credit reporting or mortgage history, all banks look at this as a foreclosure, whether or not it actually was!

[SinkingFast]

Thanks to the brokers that chimed in.

Just for a little clarification,........

We paid our last payment in 12/05. Didn't make any this year.

Notice of Default and Acceleration came after our grace period ended for the Feb '06 payment. We had until March 18th to Cure our note.

We had accepted a contingent offer to purchase our home, so we applied for Forebearance to give our buyer time to sell his home.

When our buyer went 2 months with no showings and it did not look like he would proceed with the purchase of our house, we decided to file BK. We were going to let the house go in the BK.

Then the Lender proceeded with Foreclosure. Hired a Trustee Law Firm. Advertised the Auction. The whole 9 yards. We literally got an offer from a new set of buyers 6 days before the scheduled Auction on the Courthouse steps. Realtors were faxing paperwork like crazy as our Lender had several requirements to stop the Foreclosure.

Our Lender was satisfied with all the paperwork and the Foreclosure Tech called the Courthouse the morning of our Auction, 5/30, to cancel the sale. We have since closed with the Buyers on 6/19. So we were actually able to sell the house ourselves.

The buyers' offer, even with both Realtors taking commission cuts, left us short on the total costs to sell. We had to pay someone to mow the place. And, we had to pay to turn the utilities back on for the buyer's inspections.

I guess from the comments above, our attny was right. He said not to bother with the sale. Just proceed with the Foreclosure. The attny said the only thing we would accomplish was to make ourselves feel better.

Doesn't look like we saved ourselves a thing on our Credit and cost us $$$ to complete the sale.

The house was in Missouri, JeepMom. We had to leave it because Hubby lost his job there. Couldn't find one local. We had to move to Indiana for Hubby's new job.

2 years of HELL and it's still not getting any better.

[AfterBkMortgage]

Moving Forward After Foreclosure

SF,

I know sometimes it can seem like there is no hope to ever rebuilding credit, buying a home, etc. after a bankruptcy and foreclosure...but it just takes a little extra care and attention.

Giving other income, employment, and credit score considerations, I can still approve clients for 100% financing 1 day out of a bankruptcy AND a foreclosure. Truth be told, they are not great rates, but the cost of borrowing money for a home is still very low. (Borrowers with perfect credit were paying 18% interest with 20% down in the 80s!)

I work with people everyday that are in your type of situation. In fact, we created the Credit Builder program, free-of-charge, for our clients to learn, repair, and build new credit after a bankruptcy. Go to http://www.buyahomeafterbk.com or contact me and I will give you a username and password to read through our program.

Most brokers in this industry use a turn-and-burn technique - only working with people that are qualified for a home loan today. I work with my clients for 3 months, 6 months and even more than a year until they are ready to purchase or refinance!

[Spiritwovles_2]

AfterBkMortgage

The foreclosure and bankruptcy dilemna is something I work with every day. Unfortunately, it is not always black and white. However, for the sake of this post, here are some general guidelines.

If you include your foreclosure in your bankruptcy, we can look at that as a single occurence. Giving you a better chance to get approved for a home loan. If your home went into foreclosure, was sold off, and then you filed for bankruptcy months later, that is looked at as both a bankruptcy and a foreclosure, making it much harder to get a loan.

As a general rule, if you have any inclination that you will lose your house, include it in the bankruptcy! Plus, if you are discharged from the bankruptcy and you get another notice of default, refinancing to pay your mortgage arrearages will be almost impossible.

Bottom Line: you can still get a home with a foreclosure and a bankruptcy, as long as both as completely discharged. But, it is better to include your house in the bankruptcy so it is looked at as one occurence.

If you have any other questions or need clarification, please let me know.

************************************
ty for your input AfterBkMortgage
losing a home after 16yrs of being there raising your children is a hard thing. We filed bk and incl our home so we basically walked away from our home after much thought,tears,etc.
anyways we rent right now and we were offered the opportunity down the line done know when could be next week next month next year but sometime soon im sure to buy the home were renting, who in there right mind (even though circumstances were beyond our control and it was the smart thing to do by filing bk) who in there right mind would give us a mtg??? i am sure that the bk and even though the mtg was incl in the bk it will show on the credit report as foreclosure. But u say that would only count as 1 instead of 2?
how would that have to read on a credit report?
filed 12/05 discharged 4/06 and closed.
any input would be most helpful. Thank you for taking the time to help us all here by ans. questions.

[AfterBkMortgage]

Lenders for Everything

filed 12/05 discharged 4/06 and closed.
any input would be most helpful. Thank you for taking the time to help us all here by ans. questions.

Spiritwolves,

Sorry to hear about your home... You WILL own again!

Now lets get to the nitty gritty of "who in their right mind would lend us money for a home???"

For starters, a home is a secured asset - meaning you are borrowing money against a real piece of property. If you average the booms, busts, and normal times of the market, homes appreciate by an average of 10% per year. And as you have experienced, if someone does not pay their mortgage, the bank takes the house. Who wouldn't want to lend money on something that gains 10% or more each year if the borrower defaults, PLUS the money they make each month on interest? It's a no brainer for lenders!

Secondly, the better your credit history, scores, etc, the better your rate. The lending situation is a risk/analysis model....the better your situation, the lower the rate, and vice versa. Did you know that some lenders will lend money without even having a credit score?!?! The rate is about 15% and higher, but they're out there.

So now that we understand the spectrum from Good Credit all the way down to no credit scores, there are definitely loan programs for you!!! And yes, your foreclosure, since included in the BK, only counts as a single occurence.

Per your message above, here is my recommendation:

Try to get in a Lease Option or Land Sales Contract for 12 months with your current residence you might buy. Pay with check every month and pay on time - NO EXCEPTIONS! At the end of the 12 months, you can actually refinance into the property, instead of a purchase. You can get better rates and possibly enjoy some appreciation gain!

During that 12 month period, start working on fixing credit issues and building new credit. I would offer you a link to a resource I use but I got scolded for advertising on this site. So if you are interested, you can private message me.

Hope this helps!

[Spiritwovles_2]

re lenders for everything

Spiritwolves,

Sorry to hear about your home... You WILL own again!

During that 12 month period, start working on fixing credit issues and building new credit. I would offer you a link to a resource I use but I got scolded for advertising on this site. So if you are interested, you can private message me.

Hope this helps!

AfterBkMortgage i have pm'd you on this ty so much....

[himey64]

you are actually eligible for a low fixed rate mortgage. try a mortgage broker and request an FHA loan. or apply at eloanservices.net

[JoyH]

take 2 yrs to prepare to buy a house

Hello Sara,

My husband and I filed CH 13 and are buying a home 2 years and 4 months after filing (we've also been discharged). From what I've learned through mortgage shopping, a CH 7 is a little different in that most lenders want 2 years from the date of DISCHARGE to elapse before they'll lend you money. With CH 13, it's 2 years from the date of filing.

Heed the words of another earlier poster. Look at your credit reports and correct everything on it. This will take time with many repeat letters mailed so start now. There will probably be accounts that are recorded as CHARGE OFFS when they should say INCLUDED IN BANKRUPTCY. This is very important. Look everything over carefully. Make sure the balance on each account included in your BK says $0. If you are listed as an AUTHORIZED USER on an account, make the credit agency remove it from your report. Same goes for your husband's report.

If you're still making CH 7 payments, make every payment on time! Your good CH 7 BK payment history may be a requirement of some lenders.

Next, join a credit union. They will almost definitely allow you to take out a small loan with a deposit as collateral. As you pay it off, your good payment history will be reported to the credit agencies and will cause your score to go up.

Get a credit card. Use it very lightly, don't pay it off completely, but ALWAYS make more than the minimum payment. Providian or Washington Mutual as it's now called is a good one to start with. Avoid Orchard Bank, Aspire and others. Capital One is another good company that is BK friendly but they're in trouble (along with the credit reporting agencies) for not reporting the credit limit of their card holders. This is a damaging ommision for the card holder because when you use the card, from a credit scoring point of view, it looks like you have a huge chunk of your available credit being used (even if it's just a little) because there's no credit limit reported to offset it. That reduces your score!! This benefits Capital One because it makes their card holders look bad to the competition so they get to retain you as a customer.

When you're ready for a mortgage shop around. Chase Manhattan offered us a 7.775 rate with a 7.9 APR, 1 point, and a 5 yr prepayment penalty. We went to a broker who got us a 6.75 rate, 0 pts, 0 origination fee, and a 6.87 APR, and no prepayment penalty. Big, big difference.

And of course, save, save, save!

The best of luck to you!

[Allen Greenspan]

Buying or Refinancing After BK

I'm amazed at all the misconceptions on getting credit after BK. I think that folks in the lending industry perpetuate these misconceptions in order to charge folks higher fees.
You can buy or refi 12 months out of BK and will pay a higher rate, but high fees are not part of the actual deal.
There are lenders that will go 90% loan to value 1 year out of BK.

If your loan person want to charge you more than 1% of the loan amount, find another loan person.

Brokers will serve better than Bankers if you find a good one. You can tell by looking at their licence. If the license says BK########--it is a banker and you may pay more. If the license says BR###### it is a broker and if it is a good one, you can save a ton of money in rate and fees.

Don't buy into the misconseptions that will lead you to pay more fees--have your broker show you the rate sheet, and secondly be prepared to get more than one offer.

For example GMAC (recently purchased by Homecoming Financial) has a niche lending to folks 1 yr after BK, but several smaller lenders sell their loans to GMAC and give the client a lower rate based on bulk purchasing power.

Even folks facing forclosure can get a decent loan if they have not gone more than 120 days late.

My mother lost our family home to forclosure after her BK in 1984, and based on what I've learned since then, she had many options and did not have to loose the home. It makes me sick......

Allen Greenspan

[Kim21]

I used First Franklin (a division of National City). I make 40K a year and was approved for 100% financing for 182K within 30 days of my Ch. 7 discharge. I pay 6.75% on ~146K (it's an interest only loan) and 11% (interest and equity) on the remaining 36K. My payments are 819 and 346, respectively.

My FICO scores at that time were 575-605. They are now 675-705 and I will refinance at the end of this year. Once you reach 2 years past BK, you can qualify for non-subprime lending. That is, of course, assuming your credit history since the BK has been impeccable.

[MTG_BANKER_OH]

I used First Franklin (a division of National City). I make 40K a year and was approved for 100% financing for 182K within 30 days of my Ch. 7 discharge. I pay 6.75% on ~146K (it's an interest only loan) and 11% (interest and equity) on the remaining 36K. My payments are 819 and 346, respectively.

My FICO scores at that time were 575-605. They are now 675-705 and I will refinance at the end of this year. Once you reach 2 years past BK, you can qualify for non-subprime lending. That is, of course, assuming your credit history since the BK has been impeccable.

The only problem with the loan with First Franklin is there is usually a prepayment penalty 3% for the first year and 2% for the second year if you are doing a 2 year fixed, If you have a 30 year fixed you may not want to do anything, ocnsiderinf that is where rates are currently. For a conforminng 30 year fixed.

[MTG_BANKER_OH]

I've been wondering about the same thing too, Miss P.

We went thru all the lates, Notice of Default and Acceleration, and the actual Foreclosure process. We got a last minute offer that literally saved us on the day the Foreclosure Auction was supposed to take place. Our Foreclosure Tech called the Courthouse and stopped the Auction from happening. We've since sold and closed with the buyers.

I've PM'd a couple of the Lender Reps that post on here about our situation.

I want to know if we really saved ourselves anything or not, Credit wise, by selling the house ourselves.

I've read at several Credit reporting websites, you get dinged for the lates, you get dinged for the Notice of Default and Acceleration, you get dinged when your property is moved into Foreclosure. The only thing we dodged in the way of dings was the actual Foreclosure itself.

Did selling the property ourselves really salvage anything on our Credit??

But of course, the Mortgage Reps that post here never check their PM's. So I haven't gotten an answer to my question.

On your situation did you do a short sale or did you sell it for what you owe? The problem is once your mortgage goes 120 days late it is considered a foreclosure no matter if it went into foreclosure or not. It is negligible whether you saved anything on your credit, by selling it your self you may have saved youself a year or more of nevative credit, many times they report the mortgage late until they sell the home at sheriff auction, in many cases they usually buy thier property back at auction so they can collect on the mortgage insurance, they they put it back up for sale. If you filed for BK and did not include the home in the BK then lost it it is counted as 2 separate instances. If anyone is filing BK and they do not think they can save the home after the fact they are probably going to be better off including the home in the BK and having it discharged through the BK. You can buy a home less then a year after this happens, or you can buy a home with a conforming loan 2 years out on a my community loan. FHA needs 3 years from date of sale of the home.

[Isellhomes]

There's a mortgage out there for everyone...

It has been my experience over the years that because so many of us are in over our heads in debt, almost every lender out there has made a loan program that can pretty much suit your individual needs.

For instance, if you go with a Limited Income Verification program your rate will be higher, but you wont have to show W2's, pay checks, Verification of Rent or a mortgage (incase youve been late!). You do need to show 6 months of bank statements so be prepared to have 3 months of mortgage payments in there!!!But if your credit score is 640+ , you can borrow 100% without PMI! if your score is below 640 but above 580, you will probably be approved for 80% of the purchase price!

So many subprime lenders DO NOT require any seasoning on discharged Bk's!

So really, there truly is a loan out there, you need to find the right Broker. Try places that friends or family have used, ask around. BUT REMEMBER DONT EVER GIVE YOUR SS# ON THE INTERNET TO ANY COMPANY! Sure they'll shop for the rate for you, but it will be at your credit's expense!!!