After Bankruptcy Before Buying a Home
by "Resolving Roadblocks"
Ask Kate what to do after bankruptcy and before buying a home: Hello Kate, When should I meet with a real estate agent or mortgage broker? I have a desire to buy a home but have a chapter 7 bankruptcy discharge less than a year ago. I know I am not able to possibly purchase for 2 years, which gives me enough time to save for a down payment.
"Resolving Roadblocks" continues...
I know I have a few roadblocks in the way, however I am working on resolving them. I have a job of 4 years making 41k and my husband make 30k. I have a credit card in good standing and recently purchased a car with a $500 car note, of course due to the bankruptcy. My credit score is about 579.
With all of this said, I was wondering should I be speaking with a real estate agent or mortgage broker so they are able to provide me with all the steps to make my chances of obtaining a FHA loan greater when the bk time frame has passed.
Or should I just make sure to pay all bills on time and save money and then talk to them after enough time to get a mortgage has passed since the bankruptcy? My fear is not knowing and making a financial move or career move that may hurt my chances.
Kate Answers: After Bankruptcy and Before Buying a Home
Dear "Resolving Roadblocks",
You are right! Buying a house after bankruptcy requires forethought.
So your questions are fitting.
Besides your plan to save a down payment and pay your bills, there is no time like now to move forward in preparation of buying your first home.
Of course right at the top of the list is getting a mortgage. But because home buying and financing go hand in hand, I recommend getting a real estate agent
and a mortgage lender
who work well together. This forms the foundation of your home buyer's dream team.
Step 1: Interview and Select a Real Estate Agent
It's too soon to shop for homes. But speaking with a real estate agent could help you know if you are being realistic about price tags.
Ask your friends and co-workers for a handful of Realtors who helped them buy their homes. Interview them over the phone and narrow it down to 3 who you'd want sit-down appointments with. From here, narrow it down further to the agent of your choice.
Be upfront and let the Realtor know you need to pick his or her brain, as it will probably be over a year before you can make an offer on a house. Prepare a list of questions. Discuss square footage, size of bedrooms, and number of bathrooms. Mention if living near schools is important to you.
This way you will have a targeted price range when you speak with lenders.
Step 2: Interview and Choose a Mortgage Professional
During your meeting with real estate agents, ask for referrals of mortgage originators. Realtors work daily with lenders and know which ones are reliable, treat borrowers fairly, and have a wide range of mortgage programs. Ask where they'd send their mother for a mortgage!
Take the estimates from your real estate agent to a couple of mortgage lender referrals. Ask if it seems realistic that you could qualify for a mortgage large enough to buy in that price range.
Discuss FHA mortgage loans
but ask for other financing options. If you have a credit report pulled after the bankruptcy, bring it along too.
Express your fears. If you think a new job is in the wings, talk that over too.
This is the perfect time to ask for an action plan that you can follow during the coming year, as well as a do and don't list. Not only will the discussion alleviate your worries, this is the best way to prepare for mortgage pre-approval
For a complete list of documents that a lender will want to see, go to Kate's Mortgage Information Planner
Step 3: Don't Forget Mortgage Pre-Approval
Don't forget to begin mortgage pre-approval 6 months before it is time for you to buy a house and get a mortgage!
Remember the Realtor and mortgage lender who helped you. Real estate agents and most mortgage originators are not paid hourly or on a salary. So they will appreciate when you return to them with your business.
Good luck and best wishes,
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