What mortgage rates can I expect to pay after filing Ch. 7?

[Jason(Kentucky)]

Let's say I file chapeter 7 and establish credit shortly thereafter by getting a small credit card and making regular, ontime payments. Is it realistic to expect rates close to what people with pristine credit receive after say a couple years? If not, how many points higher do you think a person in this situation would qualify for?
Thank you for your help!
Jason

[NOMO$$]

I am a mortgage broker and have dealt with BK situations for several years, but I couldn't help you because I am in Texas. Some lenders require 24 months of discharge before they will touch a file, but others will lend in as little as 1 day. They base their decision on Loan to Value, new credit history, alternative tradelines such as a cell phone or electric bill etc. and your income levels.

Once you have credit scores over 580 you have entered sub prime and will be able to attain a mortgage as long as the rest of your file is in good shape.

They will want the loan to have the lowest loan to value in order to give you a lower rate. Let's say you want to buy a house appraised at $100,000 and you are able to put $10,000 down. this house has a 90% loan to value. If this is something you are capable of doing, then you are in much better shape. Some lenders will not lend on properties to a prior BK higher than a 85% loan to value without getting them on the rates.

Make sure you shop around to at least 3 mortgage brokers and ask for good faith estimates for all of them so that you can compare. Do not discuss your other GFE's with them until you select one. If they know what type of interest rate others have quoted you, then they are likely to follow suit.

Good Luck

[Jason(Kentucky)]

Thanks NOMO$$, I am not planning on buying a house for a couple years anyway, just want to make the right decision on whether or not to file Ch 7. If I can only qualify for mortagage rates at like 13% after bankruptcy, then I may rethink my decision to file. I owe 24K of CC debt. It may be possible to settle with them for a lower amount instead of filing for Ch. 7, but this would be a long hard road with 22K of student loan debt to pay back at the same time.

When you said with a FICO of 580 I would qualify for sub-prime rates, what kind of rates are we talking about? If I was at 90% LTV and the market is say at 6% right now, could I get 6 too? Or would it be more like 7,8,9 and up??
Thank you for your help.

[HHM]

Rates vary from region to region.

But one thing you need to be aware of, settling your debt is a fairly big negative on your credit report, and often times can have a larger negative impact on your credit score than a BK (depending on how you settle the debt). Also, even though in TX you may START to qualify for subprime at 580, you don't get out of subprime until your score is above 660 in most areas.

As for subprime interest rates, on mortgage, they tend to range about 3-4 percent higher than market rates.

[Jason(Kentucky)]

Thanks HHM,
So why would someone want to settle with creditors as opposed to filing a Ch. 7 if this would result in a lower FICO score? It seems like settling would gain a higher score, just curious.

And how long would it take after filing Ch. 7 before reaching 660 FICO or market rates? (assuming you restablish credit and pay everything on time?)

I am not crazy about financing a house at 10%. Renting may be in my future for some time, looks like....

[HHM]

Thanks HHM,
So why would someone want to settle with creditors as opposed to filing a Ch. 7 if this would result in a lower FICO score? It seems like settling would gain a higher score, just curious.

And how long would it take after filing Ch. 7 before reaching 660 FICO or market rates? (assuming you restablish credit and pay everything on time?)

I am not crazy about financing a house at 10%. Renting may be in my future for some time, looks like....

It depends on how you settle the debts. Not in every circumstance will settling be equal to or worse than a BK on your credit report, but settling, without doubt is a negative for the simple fact that you are not paying back what you owe. How you settle accounts depends on what you have available to settle. Also, most Credit Card companies won't even listen to a settlement offer until you default, so that dings your payment history.
Some ppl don't have the resources to settle right away. How you accumulate settlement funds is by stopping all payments to your credit cards and setting that money aside to offer a lump sum. That process can take months and sometimes up to a year to get enough money to settle. During that time, your accounts will probably go to collection. The benefit of going to collection is you can settle for less. Most Collection agencies are authorized to settle at 35-40%, but the collection is noted on your credit report.

There are lots of factors that go into deciding whether to settle. Most of the time, settlement is used for those that cannot file a chapter 7 for whatever reason.

To understand credit scoring a little better, you should visit this site http://www.myfico.com/myFICO/CreditCentral.asp?fire=5

[Jason(Kentucky)]

It depends on how you settle the debts. Not in every circumstance will settling be equal to or worse than a BK on your credit report, but settling, without doubt is a negative for the simple fact that you are not paying back what you owe. How you settle accounts depends on what you have available to settle. Also, most Credit Card companies won't even listen to a settlement offer until you default, so that dings your payment history.
Some ppl don't have the resources to settle right away. How you accumulate settlement funds is by stopping all payments to your credit cards and setting that money aside to offer a lump sum. That process can take months and sometimes up to a year to get enough money to settle. During that time, your accounts will probably go to collection. The benefit of going to collection is you can settle for less. Most Collection agencies are authorized to settle at 35-40%, but the collection is noted on your credit report.

There are lots of factors that go into deciding whether to settle. Most of the time, settlement is used for those that cannot file a chapter 7 for whatever reason.

To understand credit scoring a little better, you should visit this site http://www.myfico.com/myFICO/CreditCentral.asp?fire=5

HHM,

I have been in default for over 2 years now. I'm pretty sure these CC companies would settle, what are the chances they would settle for less than 35-40%? Say 10%?? I heard they only pay between 1-3% to acquire a debt. Don't know how valid this is though. If I could settle for 10-20% I would probably go for it. Do you think settling is more advantageous than filing BK 7 in the long run (credit wise)??
Also, how do you know so much about these issues? You are very knowledgeable.

Thanks so much for you help again,
Jason

[HHM]

If you have delinquint accounts for 2+ years, do you know who has your account at this point? Odds are its with a debt purchaser. I have seen a few settlements around %15 (from debt settlement companies that supposedly include real settlement letters in their promotional material), but I haven't seen settlements less than that (that doesn't mean it hasn't happend). However, a more common settlement for seriously delinquint accounts is 25%. It just depends on who has the account. In your case, your credit must be pretty much shot anyway, most of the damage to your credit has already been done, so settlement might be more advantages if you have the means to do so. But there are risks (1) whoever has the account may not agree to your offer (2) and with such delinquint accounts, its can be very hard to get the account reported the right way on your credit report after you settle.

[Jason(Kentucky)]

If you have delinquint accounts for 2+ years, do you know who has your account at this point? Odds are its with a debt purchaser. I have seen a few settlements around %15 (from debt settlement companies that supposedly include real settlement letters in their promotional material), but I haven't seen settlements less than that (that doesn't mean it hasn't happend). However, a more common settlement for seriously delinquint accounts is 25%. It just depends on who has the account. In your case, your credit must be pretty much shot anyway, most of the damage to your credit has already been done, so settlement might be more advantages if you have the means to do so. But there are risks (1) whoever has the account may not agree to your offer (2) and with such delinquint accounts, its can be very hard to get the account reported the right way on your credit report after you settle.

HMM,
Thanks for the information. Sounds like Ch 7 might be the best answer. I receive a letter from time to time, not very often though. I know who the debts are held with, but they really don't even call anymore. I just need to get this mess cleaned up.

[Matt123]

Possible solution!

Depends on other things also, such as equity, if you are going to refinance. If your going to purchase then down-paymentwill also matter. Call me 941-447-5998.

Regards,

Matt