New mortgage RIGHT after Ch7?

[ShorterSN]

So, read all the way through before you call me an idiot. I probably still am one, granted, but... humor me!

We filed Ch7 a few months back- long story short, schooling + premee + job loss = debt, mostly on credit cards. As a no assets case, the 341 meeting went fine, now we're waiting for discharge. We gave up the car (owed more than it was worth), but have kept the house (not quite enough equity to be forced to give it up). We're currently paying $1024/month on a 20yr / 7.25% loan for our manufactured home and .10 acres of land in a mobile home community. It doesn't take a genius to figure out that this is our biggest expense, and one of the biggest problems. My wife and I are both working 30+ hours weekly just to make ends meet. Yuck!

House / property prices are miserable here in Provo, UT, and apartments aren't much better. We've decided relocating to her small hometown in Idaho makes a lot of sense, both economically and for our peace of mind. There we can get a larger REAL home on four times the land for a measly $72k. So I came up with this idea: Sell our current place for $119,900. It was appraised at 117k a couple years ago, and supposedly has gone up in value, so that should be a fair price. We owe $99,900-ish on our mortgage. That leaves roughly $20k to put down on a new place. That would leave us owing half of what we do now, and paying $350 - $500 per month! Sounds wonderful! I could be stuck working part-time at McDonald's and still have no problem paying that

The challenge, of course, is getting a loan right after BK. Obviously, an FHA loan is out of the question. But would some institution somewhere give in? I think my credit score is somewhere in the 500's (thanks, ex!), and my wife's is in the low 600's now. But $20k would be almost 30% down, and our interest rate already sucks, so even getting 6.25%+ would still be great. We've never once missed a mortgage payment, regardless of what was going on.... I know all the good advice says to wait, and we would if we could, but this would really help us out in so many ways.

So what do you all think our chances are? Any recommendations? Advice? Numbers to call?
... 'kay, NOW you can call me an idiot

[justbroke]

Okay, you're an idiot, but in the nicest way possible.

First, yes, your options will be limited. The only people who will lend this money are usually hard money lenders and usually under some sort of land contract. Would probably need to be a 80% loan-to-value (LTV) like they do in commercial... meaning you have to come up with 20% down or gifted equity. In a land contract, it's easy to lose that 20% too.

Also, don't fall into the contract for deed (another land contract) or a lease to own or option (I am guilty as I've pushed these on some of my renters before). You could end up loosing a lot by a simple default (miss one payment by 1 day).

I would save your cash (put it in safer money market or a CD that's longer than 1 year -- so you get the Long Term gain rate), and try in 2 years. I know that all these home prices are tempting. I'm tempted to buy 10 homes in Detroit... just to see.

On the real estate sales side... you probably won't get listing price... and if you sell through a broker, there's their commission too. You may also have to pay some title fees as well, clear up any liens, and pay the selling agent's commission. I'm unsure if your $20K is realistic or not.

[ShorterSN]

Justbroke:

Thank you for your quick posting! You sound like you know your stuff. The really rough thing is, we're in a bind currently. We make just enough to survive... and that's it. No frills, no extras, no savings, and heaven forbid anything pop up unexpectedly (which it will, I know, eventually). I hate living like that, and it's very unwise to boot. So what options do we have?

Jobs are ridiculously scarce here now; we're both lucky to have what we do, so making more money unfortunately isn't an option currently.

We don't want to walk away from our home; besides screwing up our credit history even more, we'd lose everything we put into it.

If we successfully sell it and move into an apartment, we're still going to be paying 3/4+ of what we're paying now anyway, so won't be saving much (if any) for the future. Plus, then all our money disappears into the ether instead of at least creating equity...

I came up with this plan because it would solve the problem. If it's not feasible and no one will give us a loan... then I guess we're stuck. I wouldn't go with a realtor, as we need every dollar we can get, and I do understand we likely wouldn't get the full $20k after taxes, fees, whatever. I was planning to supplement the difference. Also, my listing price is quite low compared to others in the area. I'm hoping for a speed sale, skipping the negotiation part.

Do you think a USDA loan would work for us, or is your general opinion that we're simply out of luck?

[justbroke]

Do you think a USDA loan would work for us, or is your general opinion that we're simply out of luck?

I think your overall goal of moving to the land of potatoes is great! You certainly have thought this through and are looking to decrease your expenses. I hope that the jobs are good there too. (I have a friend who lives just outside Boise, overlooking some town.)

In any event, look to the USDA, FHA, and other lenders and see what the guidelines are. I'd stay away from hard money lenders (private investors) as that doesn't always work out.

Make a plan. Looks like you have one, but now take that plan and combine it with your opportunities with lending. Maybe you can do something creative like a property swap (that's really creative, and I don't necessarily say to do that). But don't get too creative (hard money, land contracts).

I think your heart is in the right place. Now you just need to get a workable plan... and start working the plan!

[HHM]

Hard money lenders tend to loan at 60% LTV (at least the smart ones).

You can always apply, but I wouldn't hold your breath.

[monkatom]

What about USDA loans? Aren't they usually easier to get if you qualify income and area wise out of bk?

[ShorterSN]

What about USDA loans? Aren't they usually easier to get if you qualify income and area wise out of bk?

That's what I'm wondering. If my wife's credit score is hanging at or just above 620, isn't that the cut-off (read elsewhere in this forum)? We are definitely lower income, and the little town in Idaho is certainly rural. If I read the map on the USDA website correctly, that area is approved. If we sell this place off, we will certainly fall into the "without adequate housing" category. I'm not sure it matters, but as I said before, we kept the house through our BK, and haven't even been late on a payment. I would think that would be in our favor...

But where to go from there? Whom would I contact to set things up?

[ShorterSN]

Just an update: NO ONE is even remotely interested in lending money for a home if you've declared BK recently. The few websites I've found that say they do actually changed their website when I emailed them about it.

I'm trying everything I can think of. Not many bites for our home at $119,900, so I dropped it to $114,900. Now there is some interest, but everyone needs the home to be FHA approved, which it isn't. It needs a permanent foundation to qualify. I'm getting bids for putting one in- looks to be about $4,500. Obviously we don't have that kind of money...

I called Wells Fargo (they hold our mortgage) to see if we could get any kind of a break or reprieve for a month or two, so we could save up the money for the foundation. They were WAY less than helpful. Guy wouldn't even talk to me until verified I'd paid this month's payment. Then rattled off a list of things I had to fax them (proof of income, hardship letter, list of financial expenses, consent letter from attorney) then it would be about two months until I'd know if they could do anything

They have an online "Request Payment Help" page, but it's entirely based on our having missed several payments, and how to try and get them forgiven or rolled into the loan. We've stayed caught up- is that now a bad thing? All I'm looking for is an adjustment to our lousy interest rate / twenty year loan, or a couple months break. They have to make everything so difficult...

Can't find anything owner financed, and apartments are over $800 everywhere as well. The only thing I can think of now is to improve this place, sell it, then buy a used manufactured or mobile home with the profits. I think my wife's family will let us throw it on their land for now...

[justbroke]

Sorry to hear. I have no other options that I personally know of. Most lenders won't work with you... until you are behind in payments. But, being behind in paymnets, put you at risk of foreclosure. A truly proverbial, Catch 22.

[chrismackenz]

Mortgae rights!

The new mortgage rights are not so god i am not happy!

[Flamingo]

So, read all the way through before you call me an idiot. I probably still am one, granted, but... humor me!

We filed Ch7 a few months back- long story short, schooling + premee + job loss = debt, mostly on credit cards. As a no assets case, the 341 meeting went fine, now we're waiting for discharge. We gave up the car (owed more than it was worth), but have kept the house (not quite enough equity to be forced to give it up). We're currently paying $1024/month on a 20yr / 7.25% loan for our manufactured home and .10 acres of land in a mobile home community. It doesn't take a genius to figure out that this is our biggest expense, and one of the biggest problems. My wife and I are both working 30+ hours weekly just to make ends meet. Yuck!

House / property prices are miserable here in Provo, UT, and apartments aren't much better. We've decided relocating to her small hometown in Idaho makes a lot of sense, both economically and for our peace of mind. There we can get a larger REAL home on four times the land for a measly $72k. So I came up with this idea: Sell our current place for $119,900. It was appraised at 117k a couple years ago, and supposedly has gone up in value, so that should be a fair price. We owe $99,900-ish on our mortgage. That leaves roughly $20k to put down on a new place. That would leave us owing half of what we do now, and paying $350 - $500 per month! Sounds wonderful! I could be stuck working part-time at McDonald's and still have no problem paying that

The challenge, of course, is getting a loan right after BK. Obviously, an FHA loan is out of the question. But would some institution somewhere give in? I think my credit score is somewhere in the 500's (thanks, ex!), and my wife's is in the low 600's now. But $20k would be almost 30% down, and our interest rate already sucks, so even getting 6.25%+ would still be great. We've never once missed a mortgage payment, regardless of what was going on.... I know all the good advice says to wait, and we would if we could, but this would really help us out in so many ways.

So what do you all think our chances are? Any recommendations? Advice? Numbers to call?
... 'kay, NOW you can call me an idiot

I am amazed at your last sentence in your second paragraph above...you are both working only about 30 hours each per week and you say, "Yuck?" There are folks out there right now holding down 2 and 3 jobs trying to make ends meet and not right after filing Chapter 7 either...sorry, I don't get it... If you are having this difficulty now and only working part-time hours, plus you don't know what your mobile home may sell for, if it sells at all, how do you expect to possibly get a mortgage which, with principal, insurance, taxes and interest, will not be cheap at all if you can possibly even get one right out of Chapter 7. Time is your friend...let some time go by, work on your credit and your credit history for the next few years and then apply. Creditors want to see some history in place before lending and in these economic times, they are very picky.

You are not an idiot - you just need a reality check. You would have to first sell your mobile home if you can do that and for the amount you want if that can be done. Then you would have moving expenses, have to locate jobs and be able to afford all that and find a new place to live...you are struggling now after filing Chapter 7. What you think could help you out could make things worse so take your time with this and as I state further above, time is your friend after filing BK. You don't want to end up again in the place that put you where you were to file BK so think things out carefully in your situation.

[ShorterSN]

I am amazed at your last sentence in your second paragraph above...you are both working only about 30 hours each per week and you say, "Yuck?" There are folks out there right now holding down 2 and 3 jobs trying to make ends meet and not right after filing Chapter 7 either...sorry, I don't get it... If you are having this difficulty now and only working part-time hours, plus you don't know what your mobile home may sell for, if it sells at all, how do you expect to possibly get a mortgage which, with principal, insurance, taxes and interest, will not be cheap at all if you can possibly even get one right out of Chapter 7.

Flamingo:
Firstly, I say "yuck" because I'd LIKE to work more. I was doing 70 hours a week here, while it was available. Two part times job suck, hence, YUCK. Of course I'm glad we have them; the job market here is wretched. My wife's hours are continuing to deteriorate, and mine aren't improving. Also, the more we both work, the more our jobs overlap, and the more daycare we need to pay for (have kids). Very much diminishing returns, even with the cheapest we could find, and on public assistance.

Secondly, if you read what I wrote, we have a lousy interest rate 20-year mortgage on a $110k property; $1024 per month. If we could have gotten a new home in ID, it would be a 30-year on a $72k property. Huge difference, even if the bad interest rate stayed exactly the same. Half or less than what we're paying now, AFTER taxes, fees, etc. We could easily pay that with only one job, if needs be, and I'm wisely trying to plan for the worst.

Thirdly, I've looked at 3 bedroom apartment prices, both here and in Idaho; it's more expensive than paying mortgage. Sad, but very true. We obviously have to live somewhere, so if given the choice, I'd always rather gain equity than throw money away on rent. Paying your landlord's mortgage is never fun.

I've thought about this a great deal. I'm not jumping into the same position again. A relocation to where there is cheaper living, more work, and less unemployment is simply smart. Trying to salvage what equity we can from this place, and paying off our mortgage instead of just letting it foreclose is also smart, and in my opinion more ethical.

It's all a moot point anyway as there are now NO loan programs until 2 years+ out... I just don't want to be painted up as one of those people ready to dive back in above their heads. This post was about solving the problem, avoiding the same issues, not trying to figure out how to grab another $100k+ home in the same area with no work. Our time here in this house is limited, so a change is already being forced on us. I'm just trying to plan the best I can for it, improve our situation.

I've already had my reality check; no new home for us.

My next plan is this: stay here a month or two, let the mortgage lapse while we save our money. I hate doing that, we've never missed a payment. But we aren't getting offers on our place (which is a manufactured home, not mobile home, by the way... it doesn't have wheels and never had) even listed at $109k... so eventually we'll have to walk away anyway. That should let us scrounge up about $3,000, and give us time to acquire jobs in Idaho. Then we move in with my wife's mother up there for a few months, and save another $3k - $4. We then purchase a used, simple three bedroom mobile home for $7k. Her family has a plot of land we should be able to use temporarily, already set up for a mobile home.

Then we are only paying utilities- no rent, no mortgage, just monthly bills. We'll stay there for 2-3 years until our credit is better, our job(s) secure, and we find a house we'd like to own. During that time we'll also save up on a down payment.

Still smarter than renting and never getting ahead... feel free to critique again though