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Will I Ever Be Able to Buy a House After My Bankruptcy and Foreclosure? – Michael

Michael

“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.

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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.

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About Steve Rhode

Steve Rhode
Steve Rhode is the Get Out of Debt Guy and has been helping good people with bad debt problems since 1994. You can learn more about Steve, here.
  • Rosie

    Dear Steve,

    Our house went foreclosure in January. After that my husband lost his job. I had no choice but to file Chapter 7. Can we still get a house in a couple of years?

    Thank you,

    Rosie

    • http://GetOutOfDebt.org Steve Rhode

      Rosie,

      Yes, but you’ve got to prepare to buy a house. That means you need to get back in the credit game to start getting a new good credit history reported about you so your credit report does not end with bankruptcy. You’ll also need to look over your consolidated credit report to make sure all the accounts included in your bankruptcy are showing they were included and closed. Finally, you need to save as much money as you can towards a down payment. The more you put down, the less risky you are to the lender, the easier it will be to get the loan.

      If you follow this, you will get a home.

      Steve

  • http://tinyurl.com/ca5mez Jeff Jackson

    Michael,

    Take everything you have learned through this process very serious. Listen to Steve’s advice. Read other materials on improving your credit score. People fail after bankruptcy mostly because they do not make changes in their spending habits. You need to be very responsible with making your payments, and that includes paying yourself (saving). You may also want to talk to local “community” banks or credit unions regarding any financing. Community banks generally have a vested interest and are willing to help you. Their rates may be higher, but their loans are typically not sold. You will be dealing with the bank and not a broker.

    Good luck. You can make it work.

    Jeff

    Jeff Jacksons last blog post..Ohio Bankruptcy Attorneys – Jones & Jackson, LLP

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