Buying A House After Bankruptcy

by Lisa from Middletown, New York, USA

Ask Kate about buying a house after bankruptcy and short sale: Hi Kate, Can I find someone to loan me money after I am discharged from a Chapter 7 bankruptcy and short sale on my present house? We fell on hard times but are trying to rebuild our lives now. We need a new place to live and new mortgage ASAP!


Lisa continues... We will have no debt other than 2 car loans and have $20,000 to use as a down payment. Our combined income is $155,000 a year and we can document income.

We are looking at a $310,000 house that is appraised at $413,000. It is a lakefront property in a desirable development. It was recently taken off the market after being listed for about a year and reduced three times by $25k each time.

There was two deals that fell through due to financing and the seller was aggravated so he took it off the market. The seller will still sell the property though.

With this motivated seller, our documented income with no other real debts, $20k down, and the fact that we are open to any interest rate, do you think we have a chance at getting approved of a mortgage?

Any offers or advice welcome. Please help! There has to be someone out there that will loan us money? Isn't there?

Kate Answers: Buying A House After Bankruptcy

***zz-portrait-left.shtml*** Dear Lisa,

Maybe I am all wet but buying a house immediately after bankruptcy and a short sale looks a whole lot like getting remarried the day after a divorce. The rebound syndrome.

I understand this house is a good deal. But the urgency you give off when you say 'There has to be someone out there that will loan us money?', 'we are open to any interest rate' and 'we need a mortgage ASAP' is worrisome.

Most likely, there will be someone who will be willing to mortgage the home. But will you get an affordable fixed rate mortgage at reasonable mortgage closing costs?

How Much Mortgage Payment Can You Afford

More importantly, can you afford the monthly house payments? Just because a private money lender or mortgage company is willing to loan you money does not make the mortgage affordable.

Take for instance Holly who asked me why any lender would loan her friend this much money. Read my answer about your mortgage affordability and why a lender might not give a hoot.

Mortgage Tip: Lenders qualify but homeowners must consider mortgage affordability.

The most important question to ask yourself is Can I afford a mortgage for this house. Plain and simple, mortgage affordability is not the same as willingness on the part of a bank to loan you money.

Lisa, I hope to hear back from you. Let me know if this page is helpful to you. Anyone can comment on Buying A House After Bankruptcy and Short Sale or ask Kate another question here.


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Best wishes,


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Buying a House after Bankruptcy
by: Gina

I had to file bankruptcy 2010 after I was laid off by my company after 26 years of service. My home (just freshly refinanced for my eldest daughter's college tuition) was foreclosed on, they NEVER returned a single call when I tried to asked for help, they just couldn't be bothered to deal with me.

It took me 12 months after the layoff to find another job, but I got a better position and almost doubled my salary. I lived with my youngest teenage daughter in a 34 foot camper on a piece of land with a septic tank, temporary electric pole, and a stream for water for 17 months that I bought for cash with my severance pay. It was a safe place, secluded, but still close to town.

We had the hardest winter that year, so I started searching for a house to rent or buy by owner, and after searching for almost six months, found one on Craigslist in Watkinsville, GA. It was a four sided brick split level, three bedrooms, three bathrooms, 2,400 sq ft.

I talked with the owners, and their situation was that they had built a new house on the river in 2009, and they had no luck selling their old home which was paid off, so they rented it out, but didn't like doing the work the home needed each time the lease expired due to tenant neglect. Their original price was $189,900, but prices had dropped so I offered $165,900 which they accepted. They asked for $5,000 down with them carrying the remaining balance at 6% for 15 years. It's a big monthly payment $1382 a month plus tax and insurance, but so far I have managed to keep going, and my payments have always been on time. I am four years into the home now, and I am planning on giving this house to my daughter when it's paid off, so that she will never experience the horror of foreclosure ever again (she suffered too when I lost our home). She chose NOT to go to college like her big sister, and is working as a associate producer for a cable channel reality show at age 20 getting paid $32 an hour. She loves it, and was at the right place at the right time, she has made a lot of connections in the business, so I think she will be ok for now.

Lending has changed since I first bought a home with a VA loan back in 1983. Back then you could assume someones VA or FHA mortgage with no downpayment, and or closing costs. Now lending has become predatory. The banks don't care about the lender, and pad their loans with mortgage insurance, and points, and other fees, not to mention the amount of interest a home owner will pay during the lifetime of the loan. It's almost shameful, but hey, that's just the way it is, like it or not.

Personally, I would rather give the seller who sold me their home a 6% interest for 15 years than deal with the banks at 3%, and who refuse to negotiate with me when times are bad and will then look down their noses at me as a bad credit risk for a decade afterwards. Who says there are NO debtors prisons with a 10 year sentence like that to look forward to.

I still have the piece of land with the camper on it out in the country, and I am planning on putting a mobile home on it soon, and making it a rental property to help my income in my retirement years, so I guess what started out as a sad story turned out to have a good ending.

Hi Gina, Kate here...

Yes, I am am SO happy to hear a happy ending. Thank you for sharing your story.

Best wishes, Kate

Can I Buy a House?
by: Anonymous

I filed Bankruptcy about a year ago. Can I buy a house right now?

From Kate: I often heard people say their attorney told them they could buy a house after bankruptcy. That is probably true.

However whether of not a mortgage company is willing to lend them money is another story.

Because there are numerous home loan programs and mortgage investors with differing criteria, there is not just one answer to your question.

I suggest determining what you can afford in monthly house payments first. Then secondly, sitting down with a reliable lender for mortgage pre approval or at least a plan to prepare for homeownership.

Good luck and please write back if you have another question. Kate

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