What are our chances??? Mortgage Brokers?

[ilovemycaitybug]

I'd love to see what all of you mortgage pros think about our situation...

My husband and I are currently awaiting discharge of Chapter 7 B/K but are looking ahead to purchasing a bigger home within the next year if possible. The sooner the better!

My FICO is 540 and husband's is 536 currently.

We make approximately $42,000 per year (before taxes) together and live in OK. We are around $5000 under the median for our county.

Our debts are as follows:
Auto Loan ($124 / month) - to be paid off June 2008
Auto Loan ($247 / month) - to be paid off October 2009
Student loan ($160 / month)
Current mortgage ($250 / month) - will be selling house
Our auto loans and mortgage are in good standing.

We would like to purchase a house in the $60,000 range, possibly up to $70,000.

Our house was appraised in 2003 at $35,000 before we installed an entire central heat/air system, vents included. So I imagine the house is worth slightly more than that now, maybe $37,000? We owe $29,000 so we have a tiny bit of equity.


What do you think? Is a mortgage in the next year doable? What do you suggest to help us make it a reality?

Thanks!!!

[BassBoy]

General Rule of Thumb is to wait 2 years after your discharge. On the other hand, I don't see why you couldn't purchase another home, but be prepared for the potential of paying a higher interest rate.

[ilovemycaitybug]

Thanks for the encouragement!

Thanks BB!

I actually have a meeting with a mortgage broker scheduled to discuss what we need to do to be in a position to purchase a home. I'm very excited that they would even take the time to meet with us at this point in the game. It definitely gives us hope. We've worked with this exact broker before to purchase our current house and when everyone thought we couldn't be approved (hubby had ZERO credit and I had worse credit than I do now). We are expecting high interest rates, but are not all that concerned about it as we would refinance when the b/k ages. What types of rates are typical? I'm actually expecting somewhere around 9% if we CAN be approved.

I appreciate any words of wisdom, encouragement, success stories, etc.!

[iupui1299]

I met with a mortgage broker yesterday and was told sub-prime rates are in the range of 10.5 - 13.0. In March we could have gotten rates in the mid 8's. I have a mid score of 650 as well. The sub-prime market just stinks right now. Too many foreclosures.


If you really want a house now can try and get a 1 year interest only loan and then refiance as soon as you hit that 2 year post BK mark. However, most people are not going to recommend that. The only pro I can see is that you could deduct quite a bit if interest in your tax return.

[ilovemycaitybug]

I met with a mortgage broker yesterday and was told sub-prime rates are in the range of 10.5 - 13.0. In March we could have gotten rates in the mid 8's. I have a mid score of 650 as well. The sub-prime market just stinks right now. Too many foreclosures.


If you really want a house now can try and get a 1 year interest only loan and then refiance as soon as you hit that 2 year post BK mark. However, most people are not going to recommend that. The only pro I can see is that you could deduct quite a bit if interest in your tax return.

Wow... those are really high rates! I don't know if we would want the 13%... may be worth waiting if that is what we'll be looking at. But the interest only loan is interesting... what is that all about? It would be an excellent solution for a SHORT term issue. Did your broker say if the market is going to get better soon?

Thanks so much for your response!!!

[iupui1299]

He said you never know....could get worse....could get better. He thought it would get better sometime next year. It was literally like 3 months ago that things would have been fine and we could of had an 8.5 % interest rate but our credit score was a 570. We joined a credit repair service and now it is a 650 but the rates are crap. (Go Figure) You can get a lower rate if you put some money down. We could get an 8.5% rate now if we could put down 5%.

The way I understand the interest only loan is that you basically pay nothing on your principal and only the interest. So your balance never goes down. You can deduct the interest on your taxes but this is a loan that if you have to get it then you only get it for a short time. If we did it we would only get one for one year and then refinance as soon as we hit the 2 year post BK mark. It's not a wise decision and I would only recommend it if you have to get a house right away. If you refinance your going to have those closing costs and when you finally do get a good rate your goign to start out with your original balance plus the added on closing costs of the refinance. Defeinetly better to wait but I know that can be easier said than done.

[emoney]

From what you have said you do not appear ready to buy a house. Some steps I would suggest are get your credit cleaned up and wait until your scores are least 650+ and have a downpayment of at least 20%.
By going this way you will own the house and it not owning you.
regards,
emoney

[BKOnce]

Because of the new law on defaulted sub-primes, brokers can not give good rates ever again...

[MTG_BANKER_OH]

I met with a mortgage broker yesterday and was told sub-prime rates are in the range of 10.5 - 13.0. In March we could have gotten rates in the mid 8's. I have a mid score of 650 as well. The sub-prime market just stinks right now. Too many foreclosures.


If you really want a house now can try and get a 1 year interest only loan and then refiance as soon as you hit that 2 year post BK mark. However, most people are not going to recommend that. The only pro I can see is that you could deduct quite a bit if interest in your tax return.

It is not even worth it to do interest only if you are paying 11-13%, the interest only only shaves about 1% of off your actual rate. So therefore if you have an interest only loan at 11% you would effectively be paying 10%. I would not buy a home zero down in this market and hope for a refinance in a year. Refinancing is expensive and should be avioded unless it will save you a good amount of money per month. And if you do not have any equity you will not be able to refinance.