Post BK Home Buying Experience

[crazydebt]

congrats Cindy. happy house shopping. Just a quick question:

The 3 percent downpayment grant...The govt is giving that to you for free?

30 year fixed at 6 percent is pretty good. Did they say how much mortage (with everything included like insurance, etc...) is each month?

Who did you go through? Lending tree or was it through wells fargo? How long did it take.

Sorry for all the questions. I'm just trying to understand so that way when my time comes, i would know something rather than nothing.

Thanks again and congrats.

[chpxiii]

Go with the arm and take the savings and apply it to the higher rate 2nd. Takes discipline but you will bet better off in the long run.

ARMs are what are getting people in trouble lately.

I suggest staying FAR FAR FAR away from ARMs.

[CindyLou]

Well I got my approval today!

FHA 30 year fixed 6% Interest Rate - $300,000 (amount requested)
3% Downpayment Grant - No payback

They made the less than 2 year exception based on the following:
-Low utilization of credit vs. limits on credit cards
-No late payments or negative credit since BK
-401K Reserves
-Choosing to ask for less than prequalified dollar amount (300,000 vs. 350,000)

As far as closing cost, a portion of the property tax does have to be prepaid and will be paid by the seller in this case, as will be the hazard insurance, and all other closing cost. Also included in the closing cost will be the 1.5% fee for the FHA loan. Additionally they told me that I will be able to cash out the last remaining 1% of that 6%. It may not take the whole 6% but the real estate agent can figure it out to the closest possible.....but I'm sure 3% would not be enough especially if the taxes hit at the wrong time (and they are 1.25% per year due in two installments)

So...it looks like I really will be able to get into this house with NOTHING out of my pocket for real! Now I just have to find a house and a cooperative seller...and yes Nick, I agree, I need to find a private seller to accomplish my goals here.

Hope my info will help others contemplating doing the same thing. I will keep you posted.

Oh, and just FYI, if I would have chosen to go with a regular loan it would have started at around the high 6's for 100%.

[MTG_BANKER_OH]

Well I finally got out there and did some serious househunting! Wow...some great deals out here in Southern California compare to anytime in the recent past. We looked at 9 homes yesterday with the real estate agent and it just so happened the ones we picked to see were all unoccupied and all but one were either bank owned or short sales. All were very nice properties, well maintained and in move in condition. It was a little weird though knowing all these people had to move because they had gotten in serious financial trouble.

These homes were bought for mid 400's 2 years ago and are now listed for the high 200's.

Ok, back to the mortgage. Wells Fargo went ahead and started over on the app. because a couple of weeks had passed and wanted a fresh start so that when final approval is given we will still be within time frames for credit pulls, etc. This is what I found out yesterday:

Credit scores were in 675 range. 675 was my midscore and the one being used because I am the highest wage earner. Hubby's weren't much different though if you look at the middle score.

Once they looked at the hard facts (bank accts, debts, income, reserves, etc etc etc) They are going to be approving fo $350,000, not the 495,000 they had said prior...which FINE!

She is going to go for the FHA and said she just needed to get an override from her account exec, which she has done before with similar situations in which it is close to the 24 month period, there is no negative credit history since the BK, and there is a significant event (divorce, illness, etc) which can be documented as leading to the BK...which I can do.

She said the FHA is important because on a regular loan in CA you can only ask the seller to pay for more than 3% toward closing cost if you are putting more than 10% down (which I am not) or if you are doing an FHA or VA loan. So if she can get the FHA then I can ask the seller to pay up to 6% of closing cost which can be used toward even points or temporary buy down or whatever. The real estate agent said this is important because the sellers, even the banks are doing this a lot in this market right now.

The other thing that she came up with is a grant for the 3% downpayment which will not have to be paid back as long as we occupy the home and does not accrue interest.

She will find out on Monday re: the override. If she can't get the override then she said the rate will be a conforming loan in the mid 6's OR we can wait until Feb, which will make 24 months and go FHA.

So, I'll keep my fingers crossed and keep you guys updated. We won't be making any offers until we get full approval.

I would think you would get a better deal with the conforming loan. I find it hard to believe they will not approve you FHA but they will do conforming. FHA is easier and conforming loans need to go through an underwriting system, if the underwriting system is approving you then you should be ok. If you are looking at bank owned properties then you probably will not be able to go FHA, most banks will turn down FHA offers when they are selling a REO property.

One other thing that seems a little out of place is I would think 3% would be more then enough for closing costs, I do not know much about California but on a home around 300k 9k in CC is alot. I do not know if CA is a mortgage tax state then it could be normal.

Keep us updated.

[crazydebt]

very informative...please keep us posted. I am looking at buying a house in the near future....more like spring or even next winter. Thank you

[Logan]

Go with the arm and take the savings and apply it to the higher rate 2nd. Takes discipline but you will bet better off in the long run.

[chpxiii]

Cindy,

I was in California (long beach to be exact) last week. I have an aunt who is going for her broker license in February. She was telling me about how different cities are now offering grants to help people purchase homes. I assume this is what you are talking about. Let me know how that goes. I'm interested. I won't be buying a home in CA, although I would love to as I grew up there and wish I could go back "home." This is mainly out of courisity.

I can't believe how much houses cost. I know someone who purchased their home in Whittier for $82-$85k in 2000. It is now being appraised at $500k. WTF??? It is a nearly 600% to 700% INCREASE in cost. Insane. I'm really not surprised the housing bubble burst. It was too inflated, and got that way too fast.

[CindyLou]

Yep...its the DP assistance grant that she was speaking of.....

[SinkingFast]

Another thought for you,............ And this might even be that 3% grant for the down payment thingy the Realtor mentioned.

If you're a first time home buyer,........... Which also includes people who have not owned a home for 3 or more years,............. You qualify for some sort of special assistance.

I can't remember what the assistance was. Maybe a special loan program.

They didn't offer these things back when we bought our first house. But, I keyed on the 3 years part.

Since we have to wait 2 years post BK anyway,............ A few more months to get to the 3 year mark from selling our house won't hurt. Especially if we get some assistance!

Anyway,.............. Something to ask about.

[CindyLou]

Well I finally got out there and did some serious househunting! Wow...some great deals out here in Southern California compare to anytime in the recent past. We looked at 9 homes yesterday with the real estate agent and it just so happened the ones we picked to see were all unoccupied and all but one were either bank owned or short sales. All were very nice properties, well maintained and in move in condition. It was a little weird though knowing all these people had to move because they had gotten in serious financial trouble.

These homes were bought for mid 400's 2 years ago and are now listed for the high 200's.

Ok, back to the mortgage. Wells Fargo went ahead and started over on the app. because a couple of weeks had passed and wanted a fresh start so that when final approval is given we will still be within time frames for credit pulls, etc. This is what I found out yesterday:

Credit scores were in 675 range. 675 was my midscore and the one being used because I am the highest wage earner. Hubby's weren't much different though if you look at the middle score.

Once they looked at the hard facts (bank accts, debts, income, reserves, etc etc etc) They are going to be approving fo $350,000, not the 495,000 they had said prior...which FINE!

She is going to go for the FHA and said she just needed to get an override from her account exec, which she has done before with similar situations in which it is close to the 24 month period, there is no negative credit history since the BK, and there is a significant event (divorce, illness, etc) which can be documented as leading to the BK...which I can do.

She said the FHA is important because on a regular loan in CA you can only ask the seller to pay for more than 3% toward closing cost if you are putting more than 10% down (which I am not) or if you are doing an FHA or VA loan. So if she can get the FHA then I can ask the seller to pay up to 6% of closing cost which can be used toward even points or temporary buy down or whatever. The real estate agent said this is important because the sellers, even the banks are doing this a lot in this market right now.

The other thing that she came up with is a grant for the 3% downpayment which will not have to be paid back as long as we occupy the home and does not accrue interest.

She will find out on Monday re: the override. If she can't get the override then she said the rate will be a conforming loan in the mid 6's OR we can wait until Feb, which will make 24 months and go FHA.

So, I'll keep my fingers crossed and keep you guys updated. We won't be making any offers until we get full approval.

[Blue_Ray]

I hate oo be the bearer of bad news but I do not think this is going to get approved. They might be looking at your credit scores and replying back with automated information. I hope it works out for you but I do not know of anywhere you can get those types of rates with a recent BK. When they look further into it I think it will be turned down.

Again I hope I am wrong, but lendingtree.com they just sell your information off to several people and then they will just tell you what you want to hear up front to get the deal.


Please keep us updated.

What is the going rate for someone that filed BK after waiting the 24 month period??

Like me, I plan to put at least 10% down once I reach the 24month period. I still own my home, but we're locating back North due to a job and plan to sell our home here. Which the APR rate is 5.375%, I know I won't get anything like that in the next 24 months

[CindyLou]

I know exactly what I can afford and will not budge from that amount NO MATTER WHAT! I will know exactly what I am signing in regards to type of loan, PMI, taxes, insurance, HOA fees, etc etc, and what my final payment will be before I do anything!

I just think its terrible that they encourage people to take such huge loans, but then we have to be accountable no to fall into that trap and take on more than we can afford! Its horrible propaganda to expect people to believe they can handle 30% of gross as a house payment these days. That standard needs to be revisited and people reducated. I still see that thrown out there SO MUCH in credit education websites and just general converstation and it is so unrealistic in our world today.

Maybe 20-30 years ago it may have applied when we weren't paying cable, internet, cell phone bills and all the extras we pay today. Things were much simpler without so many extras to pay.

Wells Fargo was not telling me this figure off of basic info. They actually took a full app. (this was not from lending tree) Anyway I'm sticking to my guns and within my budget.

Thanks so much for the input.

[B12]

By the way, why would wells fargo tell me I qualifed for up to $495,000 based on my app???? I could NEVER afford that kind of payment!!!!!


--------------------------------------------
Nick already answered this in his above post.(lending tree, although it pertains to all lenders)

Look, take the bull by the horns. YOU TELL the mortgage company what you are comfortable paying including PITI, principle, interest, taxes and insurance. Tell them to back a mortgage amount into what you are comfortable paying.

These SALESpeople AKA mortgage brokers and the uneducated consumer is what got us into this mess.

How many times have you heard now people saying.........I didn't know what I was signing?

[CindyLou]

I would also like to add, I was just reading a previous post regarding reserves. I would also I have approx. 3 months mortgage in the bank ($6600)in reserve after the closing of my loan in addition I also I have my 401K that has 25K that I do not plan to touch.

Nick, I will update as we go. We are going to Louisiana for the long weekend for my grandmother's 80th birthday, so our serious househunting adventure will not begin until we return. I will update this thread next week.

Keep the advice and opinions coming.....from both sides. I need a lot to think about.

By the way, why would wells fargo tell me I qualifed for up to $495,000 based on my app???? I could NEVER afford that kind of payment!!!!! That boggles my mind! They must be calculating that based on 30% of gross, right? I know my debt to income ratio is low, but I still have regular bills. How can people afford that? But why don't they consider what you have to pay in taxes when they look at your income? I have calculated my 30% from my net income which puts me at the $285,000 range. We have actually come across some new homes in the $250,000 range, so we are going to explore a little lower ...that would be great.

[MTG_BANKER_OH]

thanks so much for all of the info! I talked ti the lender. He does have my credit report, knows about the BK and all is well. He says that rules are different and a loan one day ouut of BK in Cali is no problem even close to confoeming rates. I'm also working with a girl at Wells Fargo that says she can get me a little better deal on the rate but still buying one point. I thin the one point might be the thing with the BK.

My predicament is that my income bracket is such that taxes are kicking my butt. if I don't get in a house I am losing aprox. 8000 dollars per year to the IRS! because its getting harder to itemize as my income goes up. My tax advisor said no house no itemizing after 07 which means a tax loss of 10000 or more for 08.
Another thing is we have no central air or heat in our apt which is very hard on my husbands health. We are currently in rent control paying 1700 so to move when our lease is up in feb to a market rent apt would put us in the 2700 range.
Doing that would not allow us to save anything
Our living situation is not great. yes, our apt is in a DREAMY Location by the beach but we could never start a family here. I guess we have to weigh the positives and negatives of the situation and I appreciate everyones advices. Keep it coming because we havenlt decided yet.
But as far as the loan, its funny becuase my best friend owns his own loan brokerage in louisiana and he said no way too, but thing must be different here with loans because I confirmed with Wells Fargo (hard pull and app) and they are saying no problem. Sorry for my typing format I'm on mt handheld today

Please let us know, I am very curious how it will work out.