Almost all mortgage loan programs have restrictions on how soon after a Bankruptcy and/or Foreclosure you can purchase a new home. The minimum is typically 2 years after a bankruptcy and 3 years after a foreclosure; with re-established credit. The problem arises as to when those dates begin.
I recently had a customer that was three years past their bankruptcy discharge date and had re-established suitable credit. Their previous mortgage was included in the bankruptcy and was not contested by the lender. Unfortunately, they did not sign over their previous house to the lender with a quit claim deed and the lender went through the foreclosure process on the property. Although not contested by my borrower, the foreclosure process took 16 months to complete, adding 16 months before the clock even began running on their foreclosure.
Neither your attorney nor the judge understand the ramifications that a court proceeding may have on your credit and your ability to borrow in the future. I see this all the time with both bankruptcies and especially divorces. For now, let’s concentrate on the bankruptcy process.
During the bankruptcy, you can choose to either include the house losing the equity in your property, or you can choose to “re-affirm” that debt and continue with your payments. In my borrowers situation, they chose to walk away, not able to continue with the payments. What they should have done was to sign a quit claim deed and have it recorded, giving their rights in the property to the lender.
If you choose to re-affirm the debt, then there is also paperwork that you must complete with your lender. Otherwise, even though you never miss a payment, they will continue to report your mortgage as included in the bankruptcy and not show your current “good” payment history.
Your lawyer, and the judge, are only responsible for dealing with the matter at hand and do not look to see how that will affect you in the future. Speak with someone that understands how such an action can affect you going forward. If you know someone going through a bankruptcy or divorce, have them call me.
© 2011 Richard Swan
This blog is for informational purposes and is the opinion of the writer. In financial matters always solicit professional advice and legal counsel if necessary.
Showing posts with label bankruptcy. Show all posts
Showing posts with label bankruptcy. Show all posts
Wednesday, October 19, 2011
Friday, September 2, 2011
Is Now A Good Time To Buy A Home? Yes Virginia, It's a Great Time To Buy
The question that I have heard most over the last year echoes in my mind, “Is now a good time to buy a home?” My unequivocal answer is yes, but let me explain why I believe now to be a great time to buy.
The first and foremost reason is low interest rates. Borrowers can maximize their buying potential today, unlike any other time in modern history. Rates today are in the 4.0%-4.375% range for a 30 year fixed rate mortgage. At 4%, as opposed to 6%, on a $200,000 loan you will save $88,000 in interest over the life of your loan. That does not even take into consideration using the monthly savings (about 20%) to pay additional towards your mortgage each month to pay off your home early.
If you look at the difference in buying power, you can look at over a $250,000 house today for the same payment that a $200,000 house will cost you monthly; when rates rise back to 6%.
Secondly, home prices are very attractive. Many studies seem to indicate that we have reached the floor in home values. Some studies point to average home sale prices being comparable to 2003 values; this reflects a 30% drop in home values since June of 2006. While home prices vary from state to state, buyers are still able to find great deals and many foreclosed properties are still on the market.
While foreclosed properties appear very attractive based on their price, buyers should avail themselves of qualified professionals to evaluate the property. Many foreclosures suffer from deferred maintenance and may have problems that are far worse than they appear. Speak with a licensed contractor and obtain estimates on repairs during your evaluation process. While the price may seem attractive, repairs often push the property above the average sales price of similar properties on the market.
First Time Buyers and those currently renting benefit most of all from the current conditions, because they don’t have a property to dispose of at present. Many current homeowners’ have shown reluctance to take advantage of historically low rates, because of fear of selling their current home. This is a conversation to have with a Licensed Realtor. They can do a CMA (Comparative Market Analysis) of your home to determine a reasonable list price.
All in all, now is a great time to look at increasing your buying power in the real estate market. Low interest rates, coupled with low home prices, maximize your buying potential, allowing you to consider the home of your dreams.
© 2011 Richard Swan
This blog is for informational purposes and is the opinion of the writer. In financial matters always solicit professional advice and legal counsel if necessary.
The first and foremost reason is low interest rates. Borrowers can maximize their buying potential today, unlike any other time in modern history. Rates today are in the 4.0%-4.375% range for a 30 year fixed rate mortgage. At 4%, as opposed to 6%, on a $200,000 loan you will save $88,000 in interest over the life of your loan. That does not even take into consideration using the monthly savings (about 20%) to pay additional towards your mortgage each month to pay off your home early.
If you look at the difference in buying power, you can look at over a $250,000 house today for the same payment that a $200,000 house will cost you monthly; when rates rise back to 6%.
Secondly, home prices are very attractive. Many studies seem to indicate that we have reached the floor in home values. Some studies point to average home sale prices being comparable to 2003 values; this reflects a 30% drop in home values since June of 2006. While home prices vary from state to state, buyers are still able to find great deals and many foreclosed properties are still on the market.
While foreclosed properties appear very attractive based on their price, buyers should avail themselves of qualified professionals to evaluate the property. Many foreclosures suffer from deferred maintenance and may have problems that are far worse than they appear. Speak with a licensed contractor and obtain estimates on repairs during your evaluation process. While the price may seem attractive, repairs often push the property above the average sales price of similar properties on the market.
First Time Buyers and those currently renting benefit most of all from the current conditions, because they don’t have a property to dispose of at present. Many current homeowners’ have shown reluctance to take advantage of historically low rates, because of fear of selling their current home. This is a conversation to have with a Licensed Realtor. They can do a CMA (Comparative Market Analysis) of your home to determine a reasonable list price.
All in all, now is a great time to look at increasing your buying power in the real estate market. Low interest rates, coupled with low home prices, maximize your buying potential, allowing you to consider the home of your dreams.
© 2011 Richard Swan
This blog is for informational purposes and is the opinion of the writer. In financial matters always solicit professional advice and legal counsel if necessary.
Tuesday, February 1, 2011
Like Foreclosures, Short Sales May Prevent You From Buying a Home for Up To Seven Years
It seems like at least once a week, I get a call from someone either wanting to "Short Sale" their home, or someone about to buy one. Buying a Short Sale is fine, but make sure that when you make the offer, you have a letter from their current lender(s) that they will accept the price you have offered on the property.
Today's blog isn't about buying, but rather selling your home through a "Short Sale." What does that term actually mean. It means that the current lender is allowing you to sell the property and pay them less than what you actually owe on the current loan. Why would they do that? For the lender it can be a less costly option than going through the process of foreclosing on the property and then trying to list and sell the property themselves. It also allows them to decide right now what their loss will be. An offer in hand may be better than 4-6 months of lost payments, the expense of foreclosure, or listing the home and not getting an offer as high as what they are offered today.
What does it mean for the seller of the property. Current lending guidelines will not allow you to finance another home for at least 7 years after a foreclosure or short sale on a property. Many lenders offer home financing after a bankruptcy within 2-4 years, unless a home was involved in the process. If a home was lost due to a bankruptcy, then you could be looking at 7 years before you would qualify for another conventional or government insured home loan. This seven year prohibition from getting another loan is something that sellers are not being told when they try to sell their home through a "Short Sale."
What about the outstanding loan balance? When the lender accepts a payoff of the loan for less than what is actually owed, they can continue to show any loss as an outstanding balance that can be claimed for years to come. Why would they allow this? They allow the property to be sold to get out of the remaining balance on the loan and to eliminate the process of foreclosure. Taking a $10,000 loss now, may be less time consuming and less costly than holding onto the property and taking your chances. Banks manage losses on a daily basis and calculate the cost to sell the property versus the current loss on the loan. As a borrower, that doesn't mean that you are not still responsible for the outstanding balance. Read the documents closely and know the effect it will have on your credit in the future.
A short sale may be the right decision, but at least make it an "informed" decision.
This blog is for informational purposes and is the opinion of the writer. In financial matters always solicit professional advice and legal counsel if necessary.
Today's blog isn't about buying, but rather selling your home through a "Short Sale." What does that term actually mean. It means that the current lender is allowing you to sell the property and pay them less than what you actually owe on the current loan. Why would they do that? For the lender it can be a less costly option than going through the process of foreclosing on the property and then trying to list and sell the property themselves. It also allows them to decide right now what their loss will be. An offer in hand may be better than 4-6 months of lost payments, the expense of foreclosure, or listing the home and not getting an offer as high as what they are offered today.
What does it mean for the seller of the property. Current lending guidelines will not allow you to finance another home for at least 7 years after a foreclosure or short sale on a property. Many lenders offer home financing after a bankruptcy within 2-4 years, unless a home was involved in the process. If a home was lost due to a bankruptcy, then you could be looking at 7 years before you would qualify for another conventional or government insured home loan. This seven year prohibition from getting another loan is something that sellers are not being told when they try to sell their home through a "Short Sale."
What about the outstanding loan balance? When the lender accepts a payoff of the loan for less than what is actually owed, they can continue to show any loss as an outstanding balance that can be claimed for years to come. Why would they allow this? They allow the property to be sold to get out of the remaining balance on the loan and to eliminate the process of foreclosure. Taking a $10,000 loss now, may be less time consuming and less costly than holding onto the property and taking your chances. Banks manage losses on a daily basis and calculate the cost to sell the property versus the current loss on the loan. As a borrower, that doesn't mean that you are not still responsible for the outstanding balance. Read the documents closely and know the effect it will have on your credit in the future.
A short sale may be the right decision, but at least make it an "informed" decision.
This blog is for informational purposes and is the opinion of the writer. In financial matters always solicit professional advice and legal counsel if necessary.
Saturday, February 27, 2010
How Much Down Payment on a Home do You Need?
My friend did an 80/20 loan when she bought her house and didn’t have to put any money down, how can I get one of those? Two years ago in the mortgage lending world, there were many programs that allowed borrowers to max out the value of the property with low down payments. What lender’s found is that Real Estate, like any other investment, can be subject to fluctuations in value. If you loan someone 100% of the value of their property and that value drops, you could be left holding the bag.
Now, most lenders’ require some type of down payment, except for limited programs for Veteran’s and first time buyers. In most cases, you will need to have at least a modest (3.5%-5% down payment) in order to qualify to purchase a home. Credit scores have also become a more important part of the qualification process. If your credit score is below 680, you may need to put up to 20% down, unless the property will qualify for an FHA or First Time homebuyer’s program.
To find out all of your options, make sure that you are dealing with a mortgage banker. They will have access to more programs and be able to talk with you in detail about all of your options.
This blog is for informational purposes and is the opinion of the writer. In financial matters always solicit professional advice and legal counsel if necessary.
Now, most lenders’ require some type of down payment, except for limited programs for Veteran’s and first time buyers. In most cases, you will need to have at least a modest (3.5%-5% down payment) in order to qualify to purchase a home. Credit scores have also become a more important part of the qualification process. If your credit score is below 680, you may need to put up to 20% down, unless the property will qualify for an FHA or First Time homebuyer’s program.
To find out all of your options, make sure that you are dealing with a mortgage banker. They will have access to more programs and be able to talk with you in detail about all of your options.
This blog is for informational purposes and is the opinion of the writer. In financial matters always solicit professional advice and legal counsel if necessary.
Friday, January 29, 2010
Bankruptcy and Your Credit
After a bankruptcy, it is extremely important that you work to re-establish your credit. The faster that you work to repair your credit the quicker you will regain your life and the ability to live again.
How do I start? That's one of the first questions that customers ask. The first step is to make sure that your credit is reporting correctly. Many creditors do not update their reporting of your credit after you have filed bankruptcy. If the debt was included in your bankruptcy, then you need to make sure that information is reported accurately on your report. Many creditors continue to report late payments and collections as unpaid, years after the bankruptcy occurred.
How do I re-establish my credit if no one will lend me money? Start with a secured loan (installment) from your bank or credit union. Most institutions will make a loan to you, if it is secured by an account that they are holding. Put $500 or $1,000 into a savings account and ask for a loan against that money. Once you have the loan, make sure that your payments are on time and that the loan is paid back in full. Many accounts need time to report. Don't just repay the loan immediately; consider keeping it open for six months to a year.
You also need to re-establish revolving credit accounts to improve your credit. Use the same method of a secured account to receive a credit card. Use and repay the card over the next six months to one year.
Managing your credit is an ongoing process that takes diligence and perseverance. Most lenders require at least a two year period after a bankruptcy is finalized before you can be eligible to purchase a home.
For more information on credit issues go to:
www.experian.com
www.transunion.com
www.equifax.com
This blog is for informational purposes and is the opinion of the writer. In financial matters always solicit professional advice and legal counsel if necessary.
How do I start? That's one of the first questions that customers ask. The first step is to make sure that your credit is reporting correctly. Many creditors do not update their reporting of your credit after you have filed bankruptcy. If the debt was included in your bankruptcy, then you need to make sure that information is reported accurately on your report. Many creditors continue to report late payments and collections as unpaid, years after the bankruptcy occurred.
How do I re-establish my credit if no one will lend me money? Start with a secured loan (installment) from your bank or credit union. Most institutions will make a loan to you, if it is secured by an account that they are holding. Put $500 or $1,000 into a savings account and ask for a loan against that money. Once you have the loan, make sure that your payments are on time and that the loan is paid back in full. Many accounts need time to report. Don't just repay the loan immediately; consider keeping it open for six months to a year.
You also need to re-establish revolving credit accounts to improve your credit. Use the same method of a secured account to receive a credit card. Use and repay the card over the next six months to one year.
Managing your credit is an ongoing process that takes diligence and perseverance. Most lenders require at least a two year period after a bankruptcy is finalized before you can be eligible to purchase a home.
For more information on credit issues go to:
www.experian.com
www.transunion.com
www.equifax.com
This blog is for informational purposes and is the opinion of the writer. In financial matters always solicit professional advice and legal counsel if necessary.
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