Buying a house after Bankruptcy

[Fedler]

ANYONE can buy a house no matter if they have a job, money, or credit. Only those with one or more of the above get to keep that house.

[brokemommy]

ANYONE can buy a house no matter if they have a job, money, or credit. Only those with one or more of the above get to keep that house.

That is an awesome post Fedler, can't stop giggling about it. I can't comprehend people that lose there home and then go back out and buy another one shortly after.

[Minnymouth]

Brokemommy - There are many reasons "why" people will let a house go in bankruptcy and then later purchase another...... but since you can't "comprehend" this, why explain it too you!! (giggle)

And Fedler, how many homes have you bought - "without" - MONEY, JOB, OR CREDIT? Yes, it takes money, job, and/or credit to buy a home and money to keep it!!!

Your comments offered "nothing" to this thread.........................

[HRx]

...

[debtjumper]

Buying a house after BK

After reading what HHM wrote,

it just bugs me to see people rush right out to make major purchases on credit (i.e. house or car) just months out of BK. It makes little financial sense to do so since you end up with these lousy deals.

I question the value of purchasing a home right now. I reside in Michigan where home values have rapidly hit the deck. "Everyone" is now saying that it has bottomed out --- do I take HHM's advice or would buying a house now be like "polishing brass on the Titanic"?

I was discharged at the end of May and I'm just itchin to get my own place and stop renting (granted I only pay $400 total a month including utilities and cable-'net at my buddies house).

[FilingOnMyOwn]

The questions you need to ask yourself are: How stable is your job? How long do I want to live in this area? Would I be able to find another job if needed and still be able to continue living there comfortably?

Remember, once you buy a house, you're stuck there. So if you are still wanting to buy knowing the answers to these questions, then why not? You can always refinance at a better interest rate in a couple years, provided rates don't go much higher (very unlikely). Then you can rent your bedrooms for $400 a month to other people, rather than paying other people $400 a month to rent theirs. Its getting to the point where it really can't get much worse in michigan, as far as housing goes - Its getting too cheap. Sooner or later, people who are retired or wealthy will start looking to Michigan for summer homes, just because its cheap there... Just like people buy winter homes in florida. And remember, real estate in michigan takes a major dip in january-february during the winter months. Its not outrageous to think that you could get a nice little starter fixer upper for 50k during this time frame. And have a mortgage of around $500.

[HHM]

I give my advice in absolutes, but I understand there are caveats. The problem is, when people buy a house right out of BK, there are too many traps that lay ahead.

The main trap is the refi trap...generally speaking, if you refi a loan that is less than five years old (unless you refi to a 0% APR), you are losing money over the length of the loan.

FOMO has good advice. I'd add this, if you would have to take two mortgages to buy, then don't. I realize that probably means coming up with 20% down to avoid PMI (which you should avoid), but your better off in the long run. Also, your probably right, prices have probably bottomed, but they are not going to appreciate like they did a few years ago, price growth will be relatively low and stable over the next few years. So it's not like your going to miss out.

Despite your itch to get into the market, just be realistic.

[debtjumper]

Yeah i'm saving cash like a stingy old lady right now; I could tighten up even more to hit damn near the 20% mark by feb for a decent house around here.

My friend's dad is a realtor and he was telling me about $70k houses in very decent condition in decent neighborhoods...I NEVER thought that I would see any of those in my lifetime...

[FilingOnMyOwn]

Yeah i'm saving cash like a stingy old lady right now; I could tighten up even more to hit damn near the 20% mark by feb for a decent house around here.

My friend's dad is a realtor and he was telling me about $70k houses in very decent condition in decent neighborhoods...I NEVER thought that I would see any of those in my lifetime...

Nice. What city do you live in/near?

[bkdone]

Here is just my 2 cents...

Since the market isnt going to turn around any time soon...maybe you should wait another couple of months. The problem with getting a fixer-upper is that getting the loan is just one part of being a homeowner.

It is almost certain that after you get into the house, something will fail...the A/C...a water line...the appliances. Something unexpected...its the way of the house gods.

Right out of bankruptcy, the chances of being able to finance a major renovation or fixing a major problem are slim. By waiting just a bit longer, you can save a nice chunk of change and designate it as an emergency fund for the house. That way, if a disaster hits and you need a couple grand for repairs, you have it.

And, I'd recommend getting the home warranty that you can purchase with the mortgage. Its an extra $35 per month but if anything in the house breaks (A/C, appliances, plumbing...) you pay just a small service fee per incident, and they come and fix whatever. This is just a bit of peace of mind if you may not have the money saved for unexpected repairs.

Good luck to you.

PS... I just refinanced to get out of BK13. I used a mortgage broker (local) and I submitted one application and got several offers to choose from. The nice part of that is that there was only one credit inquiry on my report, and the process was pretty easy. We had been with Countrywide for 8 years and when it came time to refinance, they were the company with the highest fees and interest rate. Totally tried to scam us. So I say to you...SHOP AROUND FOR THE BEST DEAL. TRUST NO ONE...

[onlineuse]

I wouldn't buy a home now if I could. Not only are we/you paying a higher APR due to bankruptcy, but APRs are dropping. They are going to continue to drop over the next 1 or 2 quarters at a minimum. Second, home values are diving. Here in New England they've depreciated by 20-30%. I don't care what the "news" reports, actual homes that sold for 600k last year can't get 480k right now. Zillow and other sites show 10k drops per period. Why buy now?

Up here tons are unloading there 2nd homes to the rental market. Just last week I saw one home in the paper, 4k square feet, 3 fireplaces, 5 bedrooms, 3.5 baths for 1900. It was gone in a flash, but you can't get a 200k home up here for that type of mortgage payment, nevermind after bankruptcy. Right now there are upper tier homes leasing for 1-3 years from private owners for 1300-1800 a month, many with lots of perks. These were peoples dream homes that they cannot afford. Take the $1000 a month you save on the mortgage, the $500 a month in home depreciation over the winter, and put it towards a nice 1 or 2 year lease.

Homeowners are desperate right now for revenue. If you see a home you like that's been on the market inquire about renting it. We've asked on 4, all 4 were open to the idea. People need the $$$.

[Grace]

... but APRs are dropping. They are going to continue to drop over the next 1 or 2 quarters at a minimum.

According to whom? Has the Fed made an announcement?

Second, home values are diving. Here in New England they've depreciated by 20-30%. I don't care what the "news" reports, actual homes that sold for 600k last year can't get 480k right now. Zillow and other sites show 10k drops per period. Why buy now?

Maybe you missed it. The poster is in Michigan. What happens in New England does not automatically apply to what happens in Michigan. Some markets in the US are actually increasing. Pick up a copy of the Wall Street Journal or real a couple of sites online that talk about personal finance.

[lrprn]

Maybe you missed it. The poster is in Michigan. What happens in New England does not automatically apply to what happens in Michigan. Some markets in the US are actually increasing. Pick up a copy of the Wall Street Journal or real a couple of sites online that talk about personal finance.

Here are several reliable online references saying the the Michigan home market is not doing well and home values are decreasing:

http://www.usatoday.com/money/economy/housing/2006-08-23-july-sales_x.htm

http://www.detnews.com/apps/pbcs.dll...IZ03/601170367 (this one is from almost a year ago)

Grace, in the future please take your own advice and do some research yourself before posting. Took me about 10 seconds to find these.

[onlineuse]

lp thank you kindly for posting that information.

Grace, I really don't understand your anger issues but I will answer the questions you posed.

First, rates overall have been dropping. Last week they are at a six month low. Core inflation pressures have eased and there is virtually no chance of the fed raising rates. In fact most are saying, and logic dictates rate drops in 2007. Most of the time when the fed rate is lowered, our mortgage rates also are stable or drop. Forgetting the overall trend, if this person just got out of bankruptcy 10-12 months ago all other things being equal he or she will qualify for a lower rate as time passes. If rates are dropping and credit scores improving is it not fair to say the APR on a mortgage will drop?


Second, the housing market is soft. It's just a matter of how soft in each region but I'd argue it's much worse than the numbers indicate nationwide. Sure, in MI where the average home is $175k the pure dollar shock drop will not be as high as MA where the average is almost 300k, but it's still a large percentage drop. We are also heading into the slow season, which is why proclamations that the bottom has been reached are foolish (on tv etc). Even if things are near the bottom, it won't turn until the next buying season beginning in March. That's 4 more months, and 5 more reporting periods of hurting first. It's a buyers market today, it will be more of a buyers market in 6 months everywhere.

Rents are often a function of prevailing costs of ownership. If my comparison of a $2500 mortgage payment versus $1800 in rent does not work in MI, perhaps $1500 versus $1000 would. Either way you pay significantly less to rent and with homes depreciating and rates dropping there is absolutely no reason to rush into buying a home. In fact financially it's probably a terrible thing to do for someone out of bankruptcy.

[SinkingFast]

According to whom? Has the Fed made an announcement?

Actually, rates have remained stable:

http://www.money-rates.com/fed.htm

Maybe you missed it. The poster is in Michigan. What happens in New England does not automatically apply to what happens in Michigan. Some markets in the US are actually increasing. Pick up a copy of the Wall Street Journal or real a couple of sites online that talk about personal finance.

True! What happens in one part of the country does not necessarily reflect events in another part of the country. But,........ All you have to do is a little research yourself, maybe listen to the news, you'd know the housing market in Michigan has tanked.

Here's one recent article about the Foreclore rates in the Detroit Metro area:

http://detnews.com/apps/pbcs.dll/art...DATE/611100326

And from another site/article:

Michigan reported 7,846 properties entering some stage of foreclosure in September -- a 14 percent increase from the previous month and nearly three times the number reported in September 2005 -- boosting the state's foreclosure rate to third highest among all the states, according to RealtyTrac. With one new foreclosure filing for every 538 households, Michigan's foreclosure rate replaced Florida's foreclosure rate among the nation's top three.

http://www.centralvalleybusinesstime...s/001/?ID=3251



In our case, Online, where we live, it actually costs more to rent than to own. Just the reverse of your market.

We could buy our Condo for much less per month than we pay in rent. But, if all goes well with our BK, we are not thrilled at the prospect of buying a home here. Our town has one of THE highest foreclosure rates of the entire country with declining existing home values.

Homeowners selling today have to ask less than they paid 3-4 years ago. New construction going up like crazy. It's not local builders driving the insanity. It's 3-4 outa State Mega Construction firms that have swooped in, buying up farm land right and left, and building like crazy. And the local City/County Councils aren't planning the growth. They just hand out building permits like they are candy.