New mortgage DURING chapter 13?

[Orangedog]

Yes, I know it's possible but in this credit market has anyone been able to do it?

The FHA rules say a loan is possible with:
1. FICO above 620
2. 12 months of on-time payments to trustee
3. Approval from trustee

I'm good on all the above. I'm looking to purchase something cheap (anything!). Have enough for 10% down (but could go higher). Good income. 10 years at same job. No other loans. Recently divorced single parent so I think I can also get 1st time home buyer preference.

I sent a few inquiries out thru the "When banks compete..." service, and another national lender. (can we mention names here?) but I'm not hearing much back.

[HHM]

You will probably need a local broker to help you. Someone that has some experience dealing with troubled lenders.

As for buying a house in general; realize that the real estate market has changed. Location is everything and you should plan on staying in the same house until it is paid for. (just like our grand parents and parents did). If you don't see that happening, it makes very little financial sense to "buy."

[Flamingo]

A refinancing is usually possible with Trustee permission during a Chapter 13 but purchasing a new home? Have you discussed all this with your attorney? If it is actually possible you are going to have to provide a heck of a lot of documentation to the Trustee explaining your funds for the downpayment, etc., how you are able to afford the home, etc., and your attorney and the trustee will have to file a Motion to allow for the purchase.

Most banks/lenders won't touch you in an active 13; you will need to find a broker and your attorney is always a good source for that information as a start.

[Orangedog]

It seems in this area that rent prices are high compared to mortgage. I'll take a look at the rent/buy decision a little closer. If the real estate market has changed so much that buying a starter condo then selling it 5-10 years when I can afford to live in a better area won't work out then I may need to rethink this. There has been minimal backward economic slide in this area (about -2% job growth and -2% housing values) but nonetheless I understand the days of buying a home and riding the fast market are long gone. Homes are to live in not flip.

I haven't talked with my attorney yet but I will contact him. Maybe he has some hints.

The money for a down payment came mostly from a gift. I disclosed it. Atty and trustee talked about it and I was allowed to keep it.

Right now I'm gathering information to see what it will take. I was inspired by a friend who with little income and down payment was approved to buy. I have a much higher income but what a difference a Ch 13 makes.

[HHM]

The thing is, you need to think long term....

I don't know how old you are, but if you are in your 30's or older, you really need to think about this better.

Let's assume you are 35 and buy a starter condo.
Live in condo for 7 years...
You move up, and get a new, 30 year mortgage
Let's assume you live in that home the rest of the time, the home won't be paid off until you are 72. Odds are, you will be struggling to make the mortgage payment around age 65-68 (unless you think you will have a good job that late in your life). If not, only options, reverse mortgage, or sell and move into a cheaper rental at that point.

Also, homeownership costs more than renting. You are responsible for all up keep. The new model that makes the most sense, buy a home as soon as you can, but make the ONE home you plan on owning, so you can have it paid off before your are 60. If not, either way, you lose the house once you hit retirement, either because you cannot afford the payment, or you do a reverse mortgage.

[Orangedog]

My needs are really in reverse. I need the bigger house now for room for my two children every other week. Then in 10 years I can sell and move to a smaller place alone.

I'm running a few of the rent vs buy calculators.

[HHM]

My needs are really in reverse. I need the bigger house now for room for my two children every other week. Then in 10 years I can sell and move to a smaller place alone.

I'm running a few of the rent vs buy calculators.

That's fine, but it doesn't change the underlying principal that you need to consider that by the time you reach age 65, most people will not be able to afford their mortgage, so if you keep up-buying such that the life of the mortgage extends beyond age 65, I don't see that you gain much out of it.

[Orangedog]

Understood:
1. I'm 40 so I need a 15, 20, or 25 year mortgage.
2. Try to stay in one place.

I worked with the Rent / Buy calculators (there's a good one on NY Times) and a lot of information from Craiglist and MLS. I could not get the numbers to come out in favor of renting unless the time frame is under five years or unless the RE market backslides significantly.

There is simply very little difference in this area between rent and mortgage costs. On the lower-end (condos and small homes) mortgages are cheaper than rents. I found this discussion on another forum:

I believe you can still rent for much less than your mortgage would be. That is especially true in the higher prices. A $300,000 dollar home rents for almost 2/3s of what it's mortgage payment would be.

I have been searching Craigslist for months and I can't see the type of rentals your talking about. Using current interest rates of approx 5% a 300k home with a 10% down 270k loan would be approx $1,850 a month, putting the rental rate for a home like that around $1,200. I have very good credit and would likely qualify for a loan with terms like this. I haven't been able to find anything in the 3-4 bedroom range in the (Outlying City) for $1,200. (Big City) is even worse. $1,200 gets you a 2 bedroom apt, 2-4plex, or condo in a decent part of town in (Big City) , for a 3 br single fam. residence (~$300k) you're looking probably more around $2,000 a month rent.

The problem is that the mortgage payments on homes for rent are not decreasing with the concurrent loss in value. Gotta keep up the payments to the banks so that they can lose more money in bad loans.

I understand that people who are currently in mortgages aren't going to see their rates go down, what I'm referring to is the comparative advantage to renting seems to be very miniscule in (State) compared to other real estate markets. Likely one of the reasons that your home prices haven't fallen so far is because it's not much cheaper to rent. In markets where rentals are 2/3 the price of a similar mortgage it makes sense to get foreclosed if you can't make it and rent to save 33%. In (State) from what I can tell there really isn't an advantage to renting aside from not being in charge of maintenance fees (also, unlike a lot of other markets, a lot of cases in (State) renting does include gas, water, sewer etc...).

Here are a few ~$300k houses for rent:
$1975/mo "Beautifully Remodeled Home for Rent"
$2100/mo "Huge 3 Bedroom on (Hill)"
$3000/mo "(Suburb) Large Single Family Home"

Here's what ~$1200 gets you:
2nd level of a 6-plex you: "(Big City) mid town"
950 sq. ft. 3 bedroom in a 6-plex " Remodeled Sunny Upstairs 3br/1BA in Quiet (area) 6-plex"

Are there other places to look? To me it just seems that almost everything on Craigslist rents for almost exactly what it would cost to take out a mortgage on it. About once every 2-3 weeks I see a really well priced rental."

I currently pay $1595/mo to rent a 2br house with garage downtown (extra room downstairs is almost a 3rd bedroom). That seems high but the means test for someone in my area allows $1475/mo for housing excluding utilities. If I move to the burbs or a so-so area of town I can save a few hundred but some of it would get eaten up in transportation expenses; I walk to work and my kids walk to school.

I need to bite the bullet and go for a cheaper place when I find it. I don't have an easy way out of this.