20 percent down 6 months after BK

[Priceless ProSe]

Is it possible given....

1) 30k down on a 150k house, plus 5k set aside for closing

2) Filed BK in March and chapter 7 discharged in June

3) 570 FICO

4) House appraised at 195k

5) earns approx 4x mortgage payment before taxes

6) 6 months on the Job

I understand you guys are not the bank, but just curious (no not for me, I dont have a red cent). One would think that regardless of how long post BK it would be hard for the bank to pass up 20 percent down plus closing costs, especially considering the market has already fallen most of the way, on a house that would have like 60% LTV (120k vs 195k).

[cool33097]

I asked a friend for you and she said it is possible. You might not get the best rates, but yes.

[HHM]

If you can bring significant money to the table, you WILL get financed. But as cool already mentioned, you probably won't get the best rate.

I would strongly caution anyone from buying at this time that soon after BK. The general rule for home buying after BK is two years. Also, in the big picture, you are just setting yourself up to get stuck in the refi trap that landed many people in BK and foreclosure in the first place.

As far as the real estate market is concerned, (1) prices are not done dropping, (2) even if they are, the prices are NOT going to suddently shoot back up. No point in making a bad deal now based on emotional desire to have a house.

[Priceless ProSe]

Thank you both, some very good advice.

As for me, I live with family for the time being, and pay rent. As for my friend, I think the motivation is that even with a 12% interest loan it is actually cheaper to own a house where we live than to rent, which is rare in southern california if im not mistaken.

I also agree that the median home (sales) price is not going to shoot up anytime soon, but I do believe that there will be a point when the forclosures slow down, and this will happen pretty much all at once as opposed to a trickle. Once these slow down I think it is a matter of time before the really low end properties that are so abundant right now will be thinned out. I guess all im saying is, if your in the market for "the cheapest house" now is a good time. That being said, its probably cheaper to get it when it is more expensive vs. when your interest rateis crazy high.

Thank you again

[HHM]

Well, let's illustrate the point with some numbers. (note the interest rates are merely used to illustrate the point of how the difference in rate effects the situation, I do not mean to imply that someone just out of BK would or would not get better or worse than 8%)

Purchase today with only being 6 mos out of BK.
$170,000 financed.
30 year fixed (assuming this person could even get such a loan)
8%
Payment: $1247
Total Interest Over Life of loan , $279,063

Wait 2 years, purchase same house, and lets assume some appreciation in value.
$185,000 financed
30 year fixed
6%
Payment: $1109.17
Interest over life of the loan, $214,300

Total interest savings, $64,763.

Ok, you could argue that this person could refi in 2 years, but it would probably be a wash because, like most people, they would probably want to take out equity, then there are the fees to consider. Also, in the span of two years, you barely pay down any principle so when you refi, you are essentially buying the house a second time. It really is better to wait if you are credit challenged and improve your credit. A 1 to 2 percent drop in the interest rate you can get will save you FAR MORE money than trying to time the purchase of a house to be at the bottom of the market.

You are really bringing a speculators mind set to a transaction that is not speculative in nature. Unless you are a real estate investor, home buyers should not be trying to "time" the market and "especially the credit challenged" should NOT be jumping into this market based on an irrational belief that the market "might" have bottomed. That is the type of poor financial decision making that bring people to BK. Most real estate markets have stabalized in the sense we are not going to see huge price drops, but there is still some downward momentum as the high inventory and rampant foreclosures work themselves out.

[Logan]

You will most likely have to get an exception and with the low DTI you have a chance but it will depend on your current trade lines. Would you lend someone money who is fresh out of BK without reestablished credit?

Logan