Michael wrote to me through the GetOutOfDebt.org site and asked the following question. If you have a credit or debt question you’d like to ask just use the online form. I’m happy to help you totally for free.
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“Dear Steve,
I got a chpt 7 a few years back when I was going through a divorce. Ran into some money problems and got a chpt 13 repayment plan but my house was foreclosed on.
I am currently renting a home but would like to save money for a big down payment on a new home. I recently got a new job and I am making a little bit more money (about $10,000 more a year). Will I ever be able to get a loan for a home? I plan to save for 5-8 years. I am 32
Michael”
The Answer:
Dear Michael,
The short answer is yes you will.
The larger the down payment you have the less risk the lender has in making the loan. This opens you up to more lenders.
Right now as I write this the mortgage market is tight, but that’s the result of their reckless lending. Fog a mirror? Have a loan.
But lending is cyclical. Over time the lenders will loosen up again once the credit markets begin to free up and they can sell their packaged loans.
I certainly don’t think you need to wait eight years to buy a house, my bet is that within five years you will be in your new home.
While you are beginning the process of stashing your cash away for the down payment, I would suggest that you find a local mortgage broker to meet with to discuss your situation. The broker will be able to tell you when you should be able to buy a home with the current loan products available and if there might be some government backed loan programs that can help get you back into your own home sooner.
The FHA loan qualification guidelines are:
- Two Years of steady employment, preferably with same employer.
- Last two years Income should be the same or increasing.
- Credit report should typically have less than two thirty day lates in last two years with a minimum credit score of 580 or higher or no credit score at all.
- Bankruptcy’s must be at least two years old, with perfect credit since discharge.
- Foreclosure’s must be at least three years old, with perfect credit since.
- Your new mortgage payment should be approximately 30% of your gross (before taxes) income.
Your situation is entirely hopeful. Congratulations.
