Time to buy, 1 yr out, tax credit , but how?

[monkatom]

Quick question lets say he can get a 10% rate which is what I was offered now the delta is about 12K. Then say he gets the 8K credit so we are looking at a 4K delta. lastly could he figure out what the tax write offs could be on a 50K loan at 10% vice a 50K loan at 6.5% and see what the savings were to see if overall maybe getting a loan right now could be better if everything fell into place. I know its a long shot but just curious? Plus its a good math exercise. Lastly I too am torn like the OP since I do not like the idea of paying rent. I was going to do the private lender option and still may. Thanks LRPRN for doing that comparasion as I will now do the same for my situation to decide if the inlaws do not come through what my best option is. Here in San Diego rent is pretty high even for a small two bedroom so that may offset my delta some.

[Logan]

You are looking short-term, not long-term.

Let's take an example - you rent a house for $600/month for two years after your bankruptcy is discharged. That equals $14,400. Then you buy a house with a decent mortgage rate of let's say 6.5% for a 20-year mortgage for $50K. You can control your tax hit during the rental time by adjusting your withholdings. Total payout for the house - prinicipal and interest = $375/month; property taxes $58/month; homeowner's insurance $25/month for a total monthly payment of $480.00 for the life of the loan. So over 22 years, you pay $14,400 + $115,200 (total paid for the house over 20 years) = $129,600.

The alternative - buy the same $50K house now but at a 12% interest rate. Total payout for the house - principal and interest $550/month; property taxes $83/month; homeowner's insurance $25/month for a total monthly payment of $660/month. Over 20 years, you'll pay $158,400 for the same house. That's a difference of $28,800.

Overall renting first saves you $28,800 - not an insignficant chunk of change.

Obviously you are going to do whatever you think is best for your personal circumstances. But at least make the decision understanding that you are better off financially in the long run if you rent for two years first to get a better interest rate on the home loan.

May I add that the $8000 credit and the real estate bust seems to be rushing people into one of the biggest purchases in their lives.

An $8000 credit is great but if it's the main reason you're buying a home you shouldn't be buying.

Also, anyone who thinks they should be in a hurry to buy because the real estate market has dropped needs to do a little research on real estate prices and you'll realize there is NO hurry.

IF you are in a position to pick up a foreclosure at a dirt cheap price you may not want to pass that up but in my experience most of these properties will go to cash/pre-qualified solid borrowers over us we might get financing/don't have much cash BK people.

Good luck,

Logan

PS...Monkatom is in a completely different place financially than most BK people so don't expect to qualify for the same kind of loan.

[Logan]

We should be Who in the second to last sentence.

[BRAUNSTEN82]

You are looking short-term, not long-term.

Let's take an example - you rent a house for $600/month for two years after your bankruptcy is discharged. That equals $14,400. Then you buy a house with a decent mortgage rate of let's say 6.5% for a 20-year mortgage for $50K. You can control your tax hit during the rental time by adjusting your withholdings. Total payout for the house - prinicipal and interest = $375/month; property taxes $58/month; homeowner's insurance $25/month for a total monthly payment of $480.00 for the life of the loan. So over 22 years, you pay $14,400 + $115,200 (total paid for the house over 20 years) = $129,600.

The alternative - buy the same $50K house now but at a 12% interest rate. Total payout for the house - principal and interest $550/month; property taxes $83/month; homeowner's insurance $25/month for a total monthly payment of $660/month. Over 20 years, you'll pay $158,400 for the same house. That's a difference of $28,800.

Overall renting first saves you $28,800 - not an insignficant chunk of change.

Obviously you are going to do whatever you think is best for your personal circumstances. But at least make the decision understanding that you are better off financially in the long run if you rent for two years first to get a better interest rate on the home loan.

Yeah but why would i be at 12% for 20 years, after a couple years and rebuilding my credit, i would refinanace for the same better rate as i would get renting for a couple years first. So recalculate it that way and now buying now comes out saving me money and the $8k.

[mynextlife]

That is assuming your property appreciates or retains the current value. If you purchase a home now with the market not being stable, you could find yourself "upside down" like thousands of homeowners that can't refi so it is worth taking your time to look at. Also note, it is UP to $8k.

[BRAUNSTEN82]

true, but the advatange still seems to be now and math also, if i can find lots of homes now for %75 of value then i would think that the liklyhood of them going down in value is slim.

But what about a co-signer, does that work for financeing after a year.

[HHM]

You are right, it's a numbers game. First, you might be overly optimistic about even being able to get a mortgage. You need to go apply at a mortgage broker and see if you can even qualify. Minimum down-payments are 3.5% Just in the last 4 weeks, rates went from 4.875% to 5.35+%. And that is for people with stellar credit. Except in the most depressed markets, realize that you probably won't actually be able to buy a house at 75% below value. Appraisals are based on CURRENT MARKET VALUE, and the new appraisal guidelines just went into effect May 1 that requires the appraiser to be completely indpendant of the real estate agent, mortgage broker, etc.

Don't make a bad deal now.

[BRAUNSTEN82]

You are right, it's a numbers game. First, you might be overly optimistic about even being able to get a mortgage. You need to go apply at a mortgage broker and see if you can even qualify. Minimum down-payments are 3.5% Just in the last 4 weeks, rates went from 4.875% to 5.35+%. And that is for people with stellar credit. Except in the most depressed markets, realize that you won't actually be able to buy a house at 75% below value. Appraisals are based on CURRENT MARKET VALUE, and the new appraisal guidelines just went into effect May 1 that requires the appraiser to be completely indpendant of the real estate agent, mortgage broker, etc.

Don't make a bad deal now.

So who has a good brokerage, that has experience with newer bankruptcies.

And is there anyone who used a cosigner 1 year out.

[HHM]

I usually hate to tell people they "can't" do something, but you need to be prepared that you are going to get a lot of no's. Unless you have really good "mitigating" circumstances that explains your BK, you are dead in the water as far as a mortgae. The ONLY mortgages out there are
FHA (requires you to be 2 years post discharge)
Fannie/Freddie (3-4 years post discharge), this is conventional financing.
VA (I don't recall, but I think it is more than 2 years post discharge).
That's it, there is no truly private money out there doing mortgage.

Maybe you can get hooked up with a hard money lender (I wouldn't recommend it), but you need significant downpayment as they only loan at aroudn 60% LTV, and you will have a double digit interest rate.

All you can do is try. I hope you are able to get something, but don't get overly hopeful.

[TheBrokeCouple]

You should check into the USDA program. We are applying now for a home and were discharged 7/08 with a forclosed home (money pit) as well.

There are income guidelines, and your credit score must be at least 620 to qualify.

[All Cash]

I am working with a private lender ( hard money) not convetional. the interest rate will be high about 10% and it will include about 5-7 points.

That is totally insane.