Home purchase w/someone else while in 13

[getback]

If I was to purchase a home while in 13 with other person who is not in BK, does anyone know how the trustee will treat the petition?

My understanding is that they would want to know the source of the downpayment as this might suggest additional disposable income by which to fund and larger monthly plan payment.

I might have an opportunity from a family member to help out with the down payment. how will that be taken by the trustee? Or should a gift or loan of that nature be an issue?

How would they treat the petition with respect to the disposable income? Will they treat us a couple subject to different spending?

[justbroke]

If I was to purchase a home while in 13 with other person who is not in BK, does anyone know how the trustee will treat the petition?

Are you actually in a Chapter 13? If you are planning to file one, it wouldn't matter unless you are already in one. To create new credit obligations in an active Chapter 13 requires approval from the Trustee and court. If you purchase a home before filing, it is treated no differently than any other purchase -- regardless of whether you are a co-owner with a non-debtor (non-filer). The problem would be if you don't live there; some could complain that it's not "necessary for an effective reorganization" since you don't need it for shelter. I'm going to assume that you are going to live there.

My understanding is that they would want to know the source of the downpayment as this might suggest additional disposable income by which to fund and larger monthly plan payment.

Not exactly. A home, in most cases, is protected by homestead exemptions (state or federal). These can be sizable. In fact, many Floridians have sheltered money in their exempt homestead by moving cash into their home. Some Trustees have fought this, but so long as it was legitimate, then they don't care. What is the source of your downpayment anyhow?

I might have an opportunity from a family member to help out with the down payment. how will that be taken by the trustee? Or should a gift or loan of that nature be an issue?

Actually, this is the part that may get interesting. Depending on the Trustee, they may see it as income and try to bother you about it. However, if the best way to protect the family member is to have them record a lien and properly perfect it immediately upon closing. Perhaps working with the title / escrow agent, you can get this all done at closing. That would mean a promissory note and mortgage needing to be draft and recorded as part of the process.

Now, if I were Trustee, I'd be asking why you're buying a house when you're insolvent anyhow? Could raise a "good faith" objection, but it really depends on the situation, Trustee, and circumstances.

How would they treat the petition with respect to the disposable income? Will they treat us a couple subject to different spending?

They can't treat you as a couple unless you are married.

Why do you need to file Chapter 13? If you don't have any money (under the median) and high expenses... why not just file Chapter 7? Or, are you worried that filing before buying will hurt you with expenses?

This would certainly be an interesting case for an attorney. Too many what-ifs if you were to ask me.

[HHM]

Out of curiosity, how far along are you in the process, is this purely hypothetical, or did you find a lender that would actually approve you for a mortgage while in chapter 13 (cosigner or not)? There is an FHA refi program in 13, but I am hard pressed to think of anyone that has ever bought a house while in an active 13.

Honestly, I don't think the trustee is really going to care about any of it; but you will need to get permission and modify the plan.

[justbroke]

I guess if this is an active Chapter 13, then they would just follow the normal process for incurring new debt. This seemed to hypothetical for me.

[getback]

I am 3 years into chapt 13.

The trustee said that they want to know the specifics about where the down payment orginates because they would want to see if I have or will have too much disposal income.


There are fha loans out there for ch13. I spoke with a broker and they offered me this suggestion.

[justbroke]

Yes, there are loans for people in Chapter 13 that have good payment history for at least one year. It always requires Trustee and court approval. The Trustee is correct. They are wondering where you are getting this money for a downpayment. I would seriously work with my attorney. The Trustee may be thinking that's a "gift" and is otherwise "disposable income" for purposes of the plan. This may make it a non-starter.

[HHM]

I am 3 years into chapt 13.

The trustee said that they want to know the specifics about where the down payment orginates because they would want to see if I have or will have too much disposal income.


There are fha loans out there for ch13. I spoke with a broker and they offered me this suggestion.

There is a difference between the programs being "available" and actually qualifying. Like I said, I know FHA has these programs, but I am hard pressed to think of anyone that has ever been approved (at least, not for a purchase, I have seen people approved for the refi). In any event, why the rush, why not wait two more years and let that family member earn a little more return on the money. It is not as if real estate prices are going up, if anything, they are still declining.

[getback]

There is a difference between the programs being "available" and actually qualifying. Like I said, I know FHA has these programs, but I am hard pressed to think of anyone that has ever been approved (at least, not for a purchase, I have seen people approved for the refi). In any event, why the rush, why not wait tow more years and let that family member earn a little more return on the money. It is not as if real estate prices are going up, if anything, they are still declining.

Just spoke with a broker and I was pre-approved..

The question is how much will the trustee will allow me to take on...
Does anyone have any suggestions on an acceptable mortgage amount??

[mountanddo]

Just spoke with a broker and I was pre-approved..

The question is how much will the trustee will allow me to take on...
Does anyone have any suggestions on an acceptable mortgage amount??

My opinion would be zero. Since you are in a Chapter 13 why would you want to risk "life happening" and not being able to complete your plan? Sounds very risky to me. I only say that because I just watched 18 people who thought they had jobs for life pack up their desks and take taxis home after losing their jobs. Just my .02.

I was once approved for a mortgage for 250k. We ended up buying a house for 79k because that's what our budget allowed. I would be sure to write down all your expenses right down to the Starbucks coffee and then shave 10% off of that.

[LadyInTheRed]

Just spoke with a broker and I was pre-approved..

The question is how much will the trustee will allow me to take on...
Does anyone have any suggestions on an acceptable mortgage amount??

My guess is that the mortgage will have to not raise your housing expense. If you buying the house means less will go to your unsecured creditors, your going to have a problem.

Are you pre-approved by a specific lender or pre-qualified by the broker?

[getback]

My guess is that the mortgage will have to not raise your housing expense. If you buying the house means less will go to your unsecured creditors, your going to have a problem.

Are you pre-approved by a specific lender or pre-qualified by the broker?

I meant to say pre-approved by direct lender, not broker...

[HHM]

My opinion would be zero. Since you are in a Chapter 13 why would you want to risk "life happening" and not being able to complete your plan? Sounds very risky to me. I only say that because I just watched 18 people who thought they had jobs for life pack up their desks and take taxis home after losing their jobs. Just my .02.

I was once approved for a mortgage for 250k. We ended up buying a house for 79k because that's what our budget allowed. I would be sure to write down all your expenses right down to the Starbucks coffee and then shave 10% off of that.

It has to be reasonable and not too adversely affect your chapter 13, it can be more than what you are paying now, but not much more.

As practical guideline, I strongly encourage everyone that your mortgage payment should not exceed 20% of your gross monthly income. (I know lending guidelines allow 31%, but if you really look at the math, that is too much), so as practical guideline, you only want to spend in PITI, 20% of gross, Think about what that means, if you earn $5000 per month, that means a mortgage payment of $1,000 per month. However, amount above 20% and you put yourself in a financially precarious position.

[getback]

It has to be reasonable and not too adversely affect your chapter 13, it can be more than what you are paying now, but not much more.

As practical guideline, I strongly encourage everyone that your mortgage payment should not exceed 20% of your gross monthly income. (I know lending guidelines allow 31%, but if you really look at the math, that is too much), so as practical guideline, you only want to spend in PITI, 20% of gross, Think about what that means, if you earn $5000 per month, that means a mortgage payment of $1,000 per month. However, amount above 20% and you put yourself in a financially precarious position.

this is good info. How did you come up with 20%?

So the $1000 would include mortgage and taxes?

[justbroke]

this is good info. How did you come up with 20%?

Not speaking for HHM, but look at other expenses for a household. Do the math, but 20% of your gross income could be 25% of your actual take-home pay (net pay). Then you need to account for maintenance, emergency repairs, taxes, insurance. This could get you to 31% of our gross income really quickly. This is why the actual mortgage payment should be closer to 20%.

Perfect example. My mortgage is currently 23.3% of my gross income. However, with my taxes and insurance alone, my total cost is 33.3%!!! Yes... a 10% difference. This does not include maintenance such as the need to repaint the exterior (re-trim) about every 5 years, busted sewer main, etc.

(My area has very very high taxes.)

[getback]

Not speaking for HHM, but look at other expenses for a household. Do the math, but 20% of your gross income could be 25% of your actual take-home pay (net pay). Then you need to account for maintenance, emergency repairs, taxes, insurance. This could get you to 31% of our gross income really quickly. This is why the actual mortgage payment should be closer to 20%.

Perfect example. My mortgage is currently 23.3% of my gross income. However, with my taxes and insurance alone, my total cost is 33.3%!!! Yes... a 10% difference. This does not include maintenance such as the need to repaint the exterior (re-trim) about every 5 years, busted sewer main, etc.

(My area has very very high taxes.)

My area have very high taxes too... About 1.5% of assess home value...

this is good info...