Home Buying in 55446>Question Details

Conehead, Home Buyer in 55446

should I take money trom trad. ira to use for large downpayment on house? (50%) Will bank loan the rest with foreclosure from 5 months ago.

Asked by Conehead, 55446 Tue Jul 26, 2011

Would be a smaller mortgage. Putting half down on price of 140k. If not, would they if I had a co-signer with really good credit?

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In most situations, FHA Guidelines require you wait 3-years from the date your foreclosed house was re-sold to an end user, not the actual date of foreclosure. On VA & USDA it rises to 4-years and conventional loans are generally 5-years. With that said, if there was a loss to the previous lender, and it was a federally insured loan, then you may have what is known as a CAIVRS claim (for the loss on the house, if there was a loss) and it must be paid in full prior to purchasing a new home. Additionally, with a foreclosure just 5-months ago, I would be surprised if your credit scores are sufficient to purchase a new home at this time anyway. Every financial advisor is different, but my personal opinion is that you do not withdraw funds from an IRA except for the minimum down payment.

Jack Gillis, M.B.A., J.D.
Jack Gillis Realty Advisors
Nathan Grace Real Estate, Broker
5619 Dyer Street | Suite 100
Dallas, TX 75206
Cell: 214.718.4910
Email: Jack@JackGillisRealty.com
1 vote Thank Flag Link Tue Jul 26, 2011
There is no right answer. BUT, my husband got a mortgage less than a year after his foreclosure through his CREDIT UNION. He got approval for conventional with 3% down, it took four months to get the approval. This is virtually unheard of in the mortgage industry, but credit unions have different rules than other lenders. If you belong to a credit union check there first, if not shop every credit union out there and shop a few mortgage brokers also. Changes are slim to none, but it does happen. I am not a lender and cannot give lender advice, but I wouldn't recommend closing your IRA unless you know there is someone who will pre-approve the loan.
0 votes Thank Flag Link Fri Aug 5, 2011
In response to your most recent addition, unfortunately that is the way of the lending market today. Lenders are not taking loans if poor credit exists regardless of equity position as they cannot be sold in the secondary market and most small banks will not hold loans and many do not even originate mortgage loans at all. If you have a LONG SOLID working relationship built with a small bank they might waive requirements or issue an unsecured loan based on previous credit history with them or a loan against other collateral, but if you don't already have a working relationship with a bank like that for many years those loans just do not exist. And even with a working relationship they are few and far between, particulary with poor credit. Even hard money lenders will require certain credit requirements. At one point there were lenders that would lend on situations with poor credit with a minimum of 35% equity position, but interest rates were in excess of 10% or need to be paid back generally within 6-12 months so do not make sense for a home purchase. And most of those lenders no longer exist either. As an agent who works with many clients affected by foreclosure, bankruptcy, etc. options are limited. I understand your frustration with the lack of common sense underwriting procedures and have researched many banks with similar proposals and unfortunately have come up empty handed.
Web Reference: http://www.tagrealty.net
0 votes Thank Flag Link Tue Jul 26, 2011
For conforming options such as Conventional, FHA, and VA, a large down payment will not negate the 3 (fha) or 5-7 (Conventional) minimum waiting period after a foreclosure.
0 votes Thank Flag Link Tue Jul 26, 2011
I am having a hard time believing that there is no bank that would lend out
about 70k on a home worth 140k-your willing to front 50 percent down. The bank has
no risk with something like this. Even if your credit is in shambles. Maybe smaller local community
banks would do this.
0 votes Thank Flag Link Tue Jul 26, 2011
Dear Cone,

I think we are mixing apples and oranges. If you had a foreclosure or short sale recenlty on a primary residence, and received a 1099, it could be waived if you had financial hardship because Minnesota is a non recourse state. In English that means that MN has laws that protect the consumer that most states do not have. However, if there was a 2nd loan, you are not protected from that becomng a judgement. That has more to do with IRS than credit. Talk with your tax preparer, or tax attorney to verify your specific situation.

To obtain a new loan you will have to wait for up to three years to qualify, providing that you rebuild your credit. I would be cautious is anyone tells you differently. Lending guidelines for FHA requires 3 years to rebuild credit, conventional is 3-7 years (documented extenuating circumstances).

If you really want to own at this juncture, a contract for deed would be an option. You would need 10-20% down, and it is at a slightly higher rate than a normal loan. A contract for deed is seller financing for a limited time period, usually 3-5 years. Again, use caution. There are some contracts being offered for as much as 12% interest. Last year I negotiated several contracts for 6% for 3-5 years, which is a decent time frame to reestablish yourself. You need to work with a professional who will explain what you need to know to get out and stay out of the woods while you are rebuilding credit. Rent to own only gives you a lease, you have no other legal rights to a property, contract for deed gives you ownership.
0 votes Thank Flag Link Tue Jul 26, 2011
You should get some professional advice from your tax accountant, a real estate attorney and several loan officers or banks before making a purchasing decision. Ask you tax accountant about any penalties for withdrawing from your IRA. If there is a 10% penalty and you are withdrawing $70,000 this would be $7,000 that you would have to pay in additional taxes. Consider this an extra cost for the house. Check with a real estate attorney to make sure you are not on the hook for any of the loss on the mortgage. You may be correct but we are not attorneys or accountants so all we can do is help you to raise the questions based on our experience. Lastly talk to a few lenders to see if you can get financing with the large down payment. You may be more likely, if at all, to get it from a bank that lends and hold the mortgage in their own portfolio. Another slim chance is a seller willing to hold a contract for deed with the large down payment. There are very few of these out there and your choice of homes will be severely limited. Another thing to consider in addition to the possible tax penalty is what kind of return you are getting on your money. Right now it might be much better than the return your will get on the house unless you get one that you can fix up to gain equity. Waiting the 3 years and then purchasing may be a good option. The big unknown is what will happen with interest rates. Housing values are not projected to go up dramatically but then none of us have a crystal ball. Best of luck.
Web Reference: http://www.eagleresults.com
0 votes Thank Flag Link Tue Jul 26, 2011
Traditional finance guidelines will not allow a mortgage with a foreclosure within 3-4 years regardless of down payment. I would recommend speaking with a mortgage banker directly who can assist with suggestions for your specific situation to rebuild credit so that you can obtain financing down the road. If you want to purchase sooner, you might consider seller financing. Options that offer such will be more limited, but a great way to purchase now vs. later. If you would like a list of seller financed homes feel free to let me know what areas you are looking and price range etc. I can send you available options. Thanks, Jennifer
Web Reference: http://www.tagrealty.net
0 votes Thank Flag Link Tue Jul 26, 2011
Don't make statements like what?? Actually I thought and was told by an accountant that they can't come after
you because of the state I am in. Even if it's an fha loan. And was told it's forgiven anyway through 2012 as long as it was primary residence. - A few minutes ago
0 votes Thank Flag Link Tue Jul 26, 2011
Don't make statements like what?? Actually I thought and was told by an accountant that they can't come after
you because of the state I am in. Even if it's an fha loan. And was told it's forgiven anyway through 2012 as long as it was primary residence.
0 votes Thank Flag Link Tue Jul 26, 2011
Take the money out of the IRA and the bank may go after it as new assets you have to cover any lose they had from the Foreclosure, and the foreclosure will be a spot for at least 5 to 7 years, slow down and start practicing safer and more disciplined financial practices. Repair your credit and don't make statements like this since it makes you look bad!
0 votes Thank Flag Link Tue Jul 26, 2011
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