I’m new to this site. So far info are helpful. My husband & I filed for BK and was discharged last April 2007. We hope to buy a SFR nxt year but don’t know what financing options we have. We have some credit right now. Stable income for 115,000 annually combined. What else should we do for the meantime to meet any criteria for a loan? Any info would be appreciated. Thanks.
One option is to talk with a local mortgage broker. A good one can offer you good advice on how to improve the credit. The good thing is that it seems that you are planning ahead and asking questions now. This will give you some time to improve your credit before you actually buy the property.
Another thought is that (in case you are not already doing it) you can start saving now. Lenders are asking for a larger down payment and I believe it is a good idea to put at least 20% down (this will save you the PMI).
How much can you save for a down pmt.? It really depends on the price of the SFR you want to buy. With you income, you might want to look at SFR in the $175k range. This way you can easily afford the home and build a nice savings cushion. In a few more yrs., you can trade up. In thend you’ll have money in the bank AND a nice house. Good luck.
Thanks for the information. We don’t have that much money saved up yet for downpayment. Is there any loan out there for us with 0-3% down? I hope there’s still SFR in orange county, california below 200s by the time we’re ready to buy.
Who would be the best person or what is the best way to find low priced homes?
For non-owner occupied (NOO), banks are going to want to see that you have more money in the deal than 0-3%. The lowest I’ve seen recently is 15% down with most larger “corporate” banks looking for 25-30% down. This will especially be true because of falling home prices. The money you have in the deal is the bank’s hedge that you won’t simply walk away when things get hard or your property value falls well below your mortgage balance. In addition, you’ll be looked at as a higher risk because of the recent BK.
I’ve found some Realtors seem to specialize in fixer-uppers and cheaper homes. You might be able to find someone like that. Also look in your local want-ads. There may be some people in there advertising FSBO for cheaper homes in hope they’ll avoid paying a Realtor’s commission for the sale.
With an income of $115k/yr., where’s all your money going? You should be able to save at LEAST $10K - 15K/yr. The BK was discharged 1.5 yrs ago. You should have at least $15K in savings. If you want to buy in 1 year, you should have at least $30K in savings at that time. Take $10K and put it in an emergency fund. Use the other $20K for a down pmt. You may be required to have a greater % down pmt. due to the BK. This may reduce the price of home you could afford. When all is said and done, you should have at least 20% of equity in your property and at least 10 - 15% of your annual gross income in an emergency fund. This is in addition to your savings. Your emergency should only be used in a true financial emergency. Its also a good idea to keep you TOTAL debt less than 30% of your NET monthly income. I know various calculators use gross income, but that can be decieving. Different people have different amounts of deductions from their gross income due to taxes, health ins. etc… Using your net income gives you a real picture of what you have to work with when it comes to debt affordability calculations.
thank you very much for the responses. we’ve saved up around 20k only since we had to help out family members in financial crisis. that’s why we’re not sure if 20k is enough for down since we want to buy house in orange county, ca and they’re kinda expensive still. we don’t know where to find property that is below market value to be able to afford since we had bk.
While $115K/yr. may be good in most parts of the country. I’ve heard that homes in Orange County, CA. and the cost of living is also very high. Since its all relative, I think you may have to wait longer until you save enough for a down pmt. Since it’s so difficult to know what financing options will be available 1 yr. from now, there are a few things you can do until then.
- Work on reducing expenses and increasing income as much as possible.
- Open a $2000 - $3000 CD at 3 different banks. Then apply for a secured personal loan for the the amt. of the CD’s at each of these banks. Use the CD’s as collateral. Deposit the money into a separate checking account and use the money to pay back the loans. If you can have it done via electronic bill - pay, all the better. What you’re doing is establishing “good recent credit”. If the banks ask why you’re doing this, just tell them the truth. You want to establish GOOD relationships with banks/ creditors. You can also save the copies of all your bills that you pay monthly along with the proof of pmt.
When it comes time to apply for a loan, you’ll have at least 2 yrs. of good credit history and hopefully you’ll have at least $60K in savings. This should enough to get a decent rate and down pmt. requirement. I got this idea from a local bank underwriter about 10 yrs. ago when my credit was bad. It works well. But you have to really stay on top of your credit. Try to make the pmts. automatic if you can but you have to be sure you’re paying the right amt. Good Luck.
thank you everyone for the information.
I’m a mortgage broker/owner with over 10 years in the business with over 90% of my clients needing “alternative” financing…financing with credit and/or downpayment challenges. I do have a lender the will consider a Bk within one year of discharge. Almost all now are 3-5 years out, I search for lenders with the most lenient guidelines and sign them up. What the lenders look for is this:
- Whatever caused the BK, was it a “legitimate hardship”, and has the hardship been corrected so as it is unlikely to occur again. Job loss, significant illness, death, etc…write me if question about this, as it’s important.
- Since the BK, has credit been establish, or has any previous credit been curent or new credit been established and current. I can use other trades depedning on the file.
If this is the case, I can get people up to 100% financing
If your interested let me know and I’d be happy to answer any questions and help in any way.