Talking to a banker today.

[OneDay]

Main question is how to build our credit to be able to buy a house sooner then later.
My fico is 664 and my wifes is 696 as of this October. We know it will most likely a long journey to clean up and buy a house. Our BK was DISCHARGED 2/4/08 and CLOSED 3/24/08. too soon?

Only current debt we have is my wifes student loan which has a balance of $11k montly payment of $181.

We have about 4%-5% to put down today if that would actually be possible.
Our gross income together is $74k, we are trying to buy a $150k home.

[HHM]

Easy answer, wait.

The ability to "rebuild" credit is over-hyped. There are really two things, that MORE than anything else, will rebuild your credit after BK
1. Time.
2. Clean up your credit report.

Getting credit for the sake of rebuilding is essentially pointless. If you do those 2 things, your credit will rebuild itself within 2 years of discharge.

[BassBoy]

.......Our BK was DISCHARGED 2/4/08 and CLOSED 3/24/08. too soon?

The general rule is to wait until you are 2 years post-discharge. I agree with HHM......let time and credit cleaning heal your credit.

[OneDay]

Nice blog HHM.
Used to live in Evans, CO Just East of Loveland...(near Greelely.... yep the stinky town).
Loved CO without a doubt, but wanted to move back near family... Cheap babysitting.... Although its not needed right now.

Thanks for the info, off to see the banker now.

[OneDay]

Just got home from the bank.
Honestly about the same information I already knew from research on the web, but my wife has to hear it from a banker. Even though the typical personal banker has minimal to zero experience, and in my opinion can only give generic answers.

A couple things she said to do:
She told us to apply for a secured card, buy a pack of gum each month and pay it off. To establish good payment history.... Would a CC even report such a minimal transaction?

Check into the NIFA (Nebraska Investment Finance Authority) about a home loan after 2 years.

One thing I do not agree with is she said to apply for the store cards when they offer 20% off for applying... Then paying them off if there is a balance and canceling them.

[StartingOver08]

Well, I don't know how much experience your "banker" has - but getting store cards and then canceling them is not going to increase your credit score.

The score does take into account the 'mix' of credit that you have; for example, installment loans, revolving accounts (cc's), and mortgages. The most important thing besides NO LATE PAYMENTS is the length of history and the utilization. You want to keep your utilization under 10% of the credit line and pay in full every month. Although I don't know about buying a pack of gum on your credit card!

As to applying for a mortgage after a BK, most of the lenders right now have tightened up the criteria to a min of 2 years and I am even seeing now where they prefer 4 years post BK.

You can check into seller financing (seller holds the mortgage rather than a third party lender) if you want to do something right away. Then you refinance in a couple of years

[007nco]

Thanks for the advice and comments.

The history and current position:
My our BK was discharged in Feb this year and now my report is nearly clean. (I had one $27 medical bill I missed, doh!) It's about to be gone, but the Experian site says that I have NO recent credit of any type. I have been cash and carry for sometime now I guess!. So, we want a home since we lost ours last year pre-filing. Good jobs now, but hers is less than 6 months. 2 paid off cars, no mortgage now. What I was leaning towards is to build back up some credit, to maybe try for a home loan after all the bank industry bailout gets sorted out etc, next year possibly. Keep building the savings to get about 15% down for a 150k home loan.

The question:
Get a couple cc's or late model car (could sell one of the paid off's to actually only borrow a few grand or ?) to show some payment history?

[StartingOver08]

If you get a car payment, depending upon the amount of the payment it can affect how much house you qualify for based on your total debt ratio. Right now you are in a good position because you have no debt other than the one small payment of $181.

IMHO, I would do two things. One, like you suggested, is put away the cash so you have a larger downpayment and reserve funds. Two, you might want to consider a cc to put gas on and pay off in full every month. Having no car payments when you purchase is a good thing for the underwriter. If you get a cc, keep the utilization under 10% and your scores should increase. The thing with a car payment, if you pay off within six months really no history will show.

[DisneyGirl]

You may want to look into this where you live but here we were told we'd need 3 open lines of credit. That could be 3 between us, not 3 a piece. Two of those needed to be at least two years old.

[OneDay]

After looking around houses, we have come to terms that it's best to buy a cheaper home this go around. $115k +/- $7k. That will get us a split level 3 bed 2 bath 2 car garage 12 year old home, not exactly what we want (we want a ranch with a basement) but cost per sq/ft and what is on the current market stinks.

I am rather dumbfounded at the current pricing in town with the market and recent mortgage issues, housing prices around here do not seem affected too negatively at all.

Hopefully we can manage to work something out with a mortgage, we would like to start a family and the small 2 bedroom apt is not cutting it.

[Stilltheone]

You may want to look into this where you live but here we were told we'd need 3 open lines of credit. That could be 3 between us, not 3 a piece. Two of those needed to be at least two years old.

WE were told 3 A PIECE....so that's what we have. We each have a Hooters, Capital One and an Orchard Bank. My husband also has a Target, with a $200 limit.

[Stilltheone]

After looking around houses, we have come to terms that it's best to buy a cheaper home this go around. $115k +/- $7k. That will get us a split level 3 bed 2 bath 2 car garage 12 year old home, not exactly what we want (we want a ranch with a basement) but cost per sq/ft and what is on the current market stinks.

I am rather dumbfounded at the current pricing in town with the market and recent mortgage issues, housing prices around here do not seem affected too negatively at all.

Hopefully we can manage to work something out with a mortgage, we would like to start a family and the small 2 bedroom apt is not cutting it.

I just have to say good for you. When we bought our home, almost 4 years ago, during the "subprime days", we made less than you ($65K) and our current mortgage is $260K.

Good luck to you!

[OneDay]

I spoke to a mortgage loan specialist at Tier One Bank today.

ME: "our bk was discharged Feb 2008, we are wanting to know what we need to do and how long before we can get in to a home"
TOB: "it will take 4 years before you would be able to get into a house"
ME: "is that your companies specific requirement or the industry standard?"
TOB: "no it is an industry standard, as of NOV this year it will become harder to purchase a home after a BK or Foreclosure due to new regulations"
ME: "what specific regulations?"
TOB: "you will need 20% down to buy within 4 years of a BK or Foreclosure"

I do not recall what regulations she specifically said but sometime near Nov 23 it was supposed to be active.
I can only hope it wont take 4 dang years...

[jaina]

I'm curious to know what new regulation this is... 4 years after bankruptcy? This is the first I've heard of this. Could you please find out more? Thanks.