How soon after buying a house is too soon to file? (when keeping the house)

[Poppie]

Good grief, you didn't "offend" me..things just didn't add up for me.

On one hand, you're saying that you're stretched to the limit each month and the next you're saying that you'd qualify in THIS STRICT LENDING MARKET for a mortgage.

Generally speaking, people that are stretched to the limit each month DO NOT meet the lending debt to income ratio requirements. If you DO meet the debt to income ratio requirements, you wouldn't be stretched to the limit each month. Which is it?

You're absolutely right, you don't have to be destitute, but generally your debt to income ratio is probably greater than 50% if you're filing bankruptcy. JMHO.

Sheesh. You do know there are expenses in life that are not considered DEBTS, right? DTI doesn't include things like medical expenses, groceries, gas, insurance, childcare, clothing, entertainment, utilities, etc. I can be stretched to the limit without being over the DTI requirements.

Is that simple enough for you?

[Stilltheone]

Good grief, you didn't "offend" me..things just didn't add up for me.

On one hand, you're saying that you're stretched to the limit each month and the next you're saying that you'd qualify in THIS STRICT LENDING MARKET for a mortgage.

Generally speaking, people that are stretched to the limit each month DO NOT meet the lending debt to income ratio requirements. If you DO meet the debt to income ratio requirements, you wouldn't be stretched to the limit each month. Which is it?

You're absolutely right, you don't have to be destitute, but generally your debt to income ratio is probably greater than 50% if you're filing bankruptcy. JMHO.

[Poppie]

Regardless, if your payment fits in the highest DTI ratio out there, why would you be filing for bankruptcy?

Not everyone who files bankruptcy is destitute, but even those who have not hit rock bottom yet may still need debt relief. I have about $65k in medical and credit card debt that I will never be able to pay off since I'm only able to pay minimums, nor will I ever be able to build any savings at all as I continue to pay the minimum payments on this debt.

I will have to have a housing payment no matter what - whether it's rent or a mortgage. It's not like I can give up a housing payment and put that money towards my debt. I don't live extravagantly at all. All of my money goes towards bills and the bare necessities. I clip coupons. I don't travel. I haven't bought clothes in about a year. I drive a 7 year old car. I very rarely eat out. Gas prices and grocery prices are getting higher and higher and so things are getting tighter and tighter. I see the writing on the wall. It's only a matter of time before it hits the fan for me - whether I'm renting or have a mortgage.

I'm sorry if it offends you that I realized a BK was probably in my future before things got bad. I'm not one to live in denial for very long. I realize that most people who file BK probably don't even consider it until they are so late on everything that they are being sued or are close to being sued. I had some financial difficulties when I was very young (not a BK though) and I was in denial about them then. It was a horrible way to live. So I'm very conscientious about it now.

I had not planned on buying a house right now, and may still not buy a house right now. I just happened to hear about this new development offering the down payment and closing costs and reduced prices and thought I'd look into it. When I calculated that the monthly cost of owning this home was roughly the same as I pay in rent, I thought I'd post here to see what people thought about buying a few months before filing. The house, btw, only costs about $100k. It's a very modest home.

[AngelinaCatHub]

Under the circumstance you mentioned Poppie, I will have to agree with Keepmine. As long as you can explain that, and it would probably be brought up on the 341. After that, I doubt it would be addressed again. I'm just a bit 'gunshy' as anything that could did go wrong with my equation. My Trustee has been wonderful and the UST has never asked a question......yet. I can't seem to communicate with my lawyer and she is a bit eccentric as well as intimidating. I don't even have a clue as to when or if I shall be discharged. Our 341 was Feb 7. 'Hub

[Stilltheone]

As I stated before, I'm not late on anything, so my credit is not shot. This mortgage/taxes/insurance payment fits in with the highest dti program out there. It's tight but it's approvable, according to the mortgage broker I spoke with.

And no, they don't include "all my bills". They include debts, but they don't include anything like utilities.

What debt to income ratio do you qualify with? Lenders are REALLY tightening their lending practices.

Regardless, if your payment fits in the highest DTI ratio out there, why would you be filing for bankruptcy?

[keepmine]

I really don't see fraud or abuse here.
You're on a month to month lease and, you have to live somewhere. If the monthly mortgage payment is near what your rent is currently and, you're reaffirming the mortgage after filing I think you're OK.
Frankly, if the home is affordable post bk and the mortgage rate is reasonable then, you've a good economic reason to buy.

[Poppie]

Don't misunderstand, it could be misconstrued as "positioning for bk". This could be tantamount to preferential maneuvering. You don't sound like you would wish to abuse the system, but rather you sound like a very professional business person. It also makes sense to me what you have in mind. I'm just cautioning as I got my hinder in a sling paying a debt to a relative. Now I got to pay it twice as to my Trustee. Not good. 'Hub

Gotcha. I am sorry you got shafted like that.

The only reason I'm even considering it is because the monthly payment is about the same as the rent that I am paying now and will have to pay after filing BK (if I don't buy). So it's really not going to cause an additional financial burden.

One other thing that I didn't think to mention, but maybe it has some relevance... I owned a house last year and sold it so that I could move to the city where my new job was. I decided to rent first so that I could get a feel for the area before buying.

I wonder if I bought and then waited a full year before filing if that would eliminate any suspicion of abuse? I mean, I had to move closer to my job, so that part of the equation makes sense. I'm renting on a month to month lease in anticipation of finding a more permanent home. Filing BK has been on my mind for a couple of months, but buying the house is not in any way meant to be a way to defraud anyone or work the system. I guess in my head I view my mortgage as very different from my credit card and medical debt. I know it's all still debt though and the trustee may not view it that way.

Thanks for your help. Like I said, I'll run everything by an attorney before I do anything. But I do appreciate the feedback.

[AngelinaCatHub]

I'm curious as to why it's fraudulent if I intend on keeping the house and paying it in full? I could see them accusing me of fraud if I ran up my credit cards on a bunch of luxury items and then filed BK.

Don't misunderstand, it could be misconstrued as "positioning for bk". This could be tantamount to preferential maneuvering. You don't sound like you would wish to abuse the system, but rather you sound like a very professional business person. It also makes sense to me what you have in mind. I'm just cautioning as I got my hinder in a sling paying a debt to a relative. Now I got to pay it twice as to my Trustee. Not good. 'Hub

[Poppie]

This mortgage/taxes/insurance payment fits in with the highest dti program out there.

This sentence is important. What percent of your takehome income will be devoted to a mortgage payment as well as, the insurance and property tax requirements?
If it's much above 35%, you got something you likely can't afford.

The mortgage/tax/insurance payment is right at 35% of take home pay, 21% of gross pay. And this is only taking into consideration my salary. I do make a little more some months with freelance work, but I don't count that since it's sporadic.

What I meant was that the mortgage plus my other debt payments put me in the highest dti program. If I had no other debts, the mortgage payment alone would be well within the recommended range.

[keepmine]

This mortgage/taxes/insurance payment fits in with the highest dti program out there.

This sentence is important. What percent of your takehome income will be devoted to a mortgage payment as well as, the insurance and property tax requirements?
If it's much above 35%, you got something you likely can't afford.

[Poppie]

Laurannm I enjoyed the article. However Poppie is planning his bk and purchasing a new house may be looked upon as fraud. Poppie, can you plainly show that this would be a good business decision to the Trustee? Could you buy this place on Contract for Deed? That is like rent to own in that you can walk away from it without any repercussion. That certainly would look right to any Trustee. With all the inclusive ancillary bills mentioned in the posts above, will it equal or be less than your rent? I think this is a judgment call but maybe a good 'gamble'. 'Hub

Thanks 'Hub. I don't know about the Contract for Deed, but I'll ask them. That's a good idea.

I'm curious as to why it's fraudulant if I intend on keeping the house and paying it in full? I could see them accusing me of fraud if I ran up my credit cards on a bunch of luxury items and then filed BK. That makes perfect sense. But this would be my home and I would want to keep it. And doing the math, the total costs of owning this home are pretty close to my rent (rent is high here). Utilities wouldn't be more since this home is new and energy efficient, whereas my apartment is old and not energy efficient. Square footage is roughly the same on both.

I'm really not trying to defraud anyone or get in over my head. But when faced with the option of filing BK and renting or filing BK and owning (with similar costs), it seems logical that I should own. I've owned before (just sold last year), so I know what's involved.

I will not do anything without speaking to an attorney. I just wanted to get some opinions on it from the people who are living through a BK first, especially if anyone had done this before.

Thank you all!

[AngelinaCatHub]

Laurannm I enjoyed the article. However Poppie is planning his bk and purchasing a new house may be looked upon as fraud. Poppie, can you plainly show that this would be a good business decision to the Trustee? Could you buy this place on Contract for Deed? That is like rent to own in that you can walk away from it without any repercussion. That certainly would look right to any Trustee. With all the inclusive ancillary bills mentioned in the posts above, will it equal or be less than your rent? I think this is a judgment call but maybe a good 'gamble'. 'Hub

[Poppie]

I think this is a bad idea. You would be incurring new debt while simultaneously planning for a future BK. No matter how good a deal it is, it is not worth the risk.

Thank you for your input. I'm not definitely doing anything at this point. Just wanted to get some opinions as to what might work.

Here is an interesting article that addresses your question. Touches on the issue of purchasing a car as well

http://www.************************/...cur-new-debts/

Thank you, that's helpful!

[Poppie]

I'm just wondering how you'd be approved for a mortgage in the first place.

Lenders have really cracked down due to the mortgage "crisis" and the subprime scare. Lenders are sticking with a conservative debt to income ratio and if you're already "stretched to the limit each month" I highly doubt you'd be approved for a mortgage anyway. They include all of your bills, plus taxes, insurance....your debt to income ratio would be through the roof.

As I stated before, I'm not late on anything, so my credit is not shot. This mortgage/taxes/insurance payment fits in with the highest dti program out there. It's tight but it's approvable, according to the mortgage broker I spoke with.

And no, they don't include "all my bills". They include debts, but they don't include anything like utilities.

[Poppie]

There are more expenses associated with owning/keeping a house(especially a new one);granted most everything should be working and under warranty but here are some expenses ,just to name a few...
Lawn/yard up-keep. Need to buy hoses, lawnmower, fertilizer etc., water/sewer bill will be higher as well. Plants/bushes are expensive too.
Gas/Electric utilities will most likely be more as well.
Need to buy window blinds/drapes/curtains.
Taxes on new developments are usually calculated well below the market price and will come up with new assessment down the road. This would affect the home insurance as well.
Perhaps there would be a purchase of clothes washer/dryer & even a new ref.
And there will always be a trip to your favorite harware store for all the little stuff that the house might need or not that would cost more money.

I've owned a house before, so I'm aware of these issues. No lawn maintenance here since it is taken care of by the HOA. I already have curtains. Tax rate is the same as the rest of the city. No new appliances needed since they are included or I already own them.