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Kathleen Mac…, Home Buyer in Lincoln Park, MI

I would really like to buy a home but I filed a chapter 7 in June 2009 because my home had depriciated after the market crashed and I couldn't

Asked by Kathleen MacDonald, Lincoln Park, MI Fri Oct 8, 2010

sell it I have an excellent income ($100,000/yr) and have paid all my other bills on time. I know a bank told me I have to wait until june 2011 to finance again but I am moving to sacramento in Jan and would like to buy now rather than rent for 6 month first.

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There are many "cash" investors that can purchase a home of your choice for cash and put you in a lease to own situation where part of your monthly payments would be put into an account to be used as a down payment when you are ready to take out a conventional loan. You can get into a house you really want now and have an exact date and price for when you are ready to own. Most investors can set you up with a great deal for a win/win situation if they know what they are doing.
0 votes Thank Flag Link Thu May 10, 2012
Pose your question to a number of different lenders and see what they say. Without knowing any other details, you may or may not qualify for some type of loan. There is always the hard money market for short term lending and because of the interest rate you may not want to borrow from them long term, but it doesn't appear like you would have to. You could consider a lease with option to buy. In this slow market, there may be sellers a out there looking to do a lease option. Last but not least, there are seller finance deals out there where the seller will play the bank. If you use either of the last two, use an attorney to write bullet proof documents. One word of caution....have the attorney investigate a lease option or seller financed home for late payments and/or lis pendens, pending foreclosure etc. You definetely don't want to get involved with a home that the bank may snatch away.
0 votes Thank Flag Link Mon Oct 11, 2010
Worry about what you can control. I am a realtor in Sacramento and have a few organizations that offer free credit report consultation that may be able to better answer your question and point you in the right direction on controlling the controllable.

Right now I would avoid any new debt as much possible and save as much as possible. Your income will be huge. How long have you been with your current employer? Investors really look at your down payment, debt to income ratio and job stability.

There are a couple debt service places that may help with the chapter 7 on your credit report also.
0 votes Thank Flag Link Mon Oct 11, 2010
A chapter 7 bankruptcy may freeze the resolution on your home, but a foreclosure is a separate activity. If I assume correctly, you let your home go to foreclosure rather than short saling it? If that is the case, then the hit to your credit would be worse.

Only a lender can tell you when/whether you can qualify for buying a new home. You might also want to hire a credit repair company to help you improve your credit qualifications as quickly as possible. There are some efforts that may move the score up quicker if implemented. However, expect that a foreclosure will create some hard limitations that you will need to overcome.

If you need the name of a qualified lender, ask here and many will respond. Good luck!
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0 votes Thank Flag Link Sat Oct 9, 2010
Hi Kathleen,

It is an excellent time to buy, so I understand your concern. Unfortunately lending is the way it is right now, but it is a good idea to stay in contact with a lender so that they are able to get you on the right path to owning a home again soon.
Is it your job that is transfering you out here? Maybe look for rentals around the area where you'll be working. We are a full service brokerage and also have rentals available.
Sacramento has a lot to offer. We have a great downtown, the river, bike trails, lots of trees, a great nightlife, art, music and very close to many great destinations.
0 votes Thank Flag Link Sat Oct 9, 2010
Hi Kathleen, you can find an owner to take back a note, or find a nice rent-to-own situation.

got two relevant things for you to read -- this is a blog excerpt from Bill Zielinski...


The FHA is introducing new guidelines on loan to value ratios and the minimum credit score required for FHA borrowers. As detailed in a Mortgagee Letter from the Department of Housing and Urban Development (HUD), the following credit requirements will apply for FHA borrowers, effective October 4, 2010.

* To be eligible for maximum financing, borrowers will need a minimum credit score of 580 or higher.
* Borrowers with a credit score between 500 and 579 will be limited to a loan to value of 90%. A sub 580 FICO credit score borrower will henceforth need to make a 10% minimum down payment on a purchase transaction.
* All borrowers with a credit score below 500 will not be eligible for FHA-insured mortgage financing.

HUD’s newly introduced minimum credit score and loan to value requirements will apply to all single family loan programs, except for Reverse Mortgages (Home Equity Conversion Mortgages) and Hope for Homeowners.

The new credit requirements are not expected to dramatically change the number of FHA mortgage approvals. Most lenders had already imposed a minimum credit score requirement of 640 or higher for FHA borrowers. In limited cases, borrowers with scores between 620 and 639 could still obtain mortgage approval.

Many potential FHA borrowers with scores below 640 who cannot obtain mortgage approval may be left wondering why this is the case if the FHA has established a minimum score of only 580. The explanation for this is that the FHA does not make mortgage loans but rather insures FHA loans made by lenders. Despite the FHA insurance, banks do not have an iron clad protection from loss.

... rest of that blog at…

And I wrote a 10 part blog called "Top 10 Credit Myths" which is good..
0 votes Thank Flag Link Sat Oct 9, 2010
Another thing to consider, because it looks like you are coming from out of state, is you really should take some time to check out all of the different areas of Sacramento, to see where you might like to buy a home. If you just come out here and within 2 or 3 weeks pick a home to buy, you might miss out on a different area you might have liked better.

Renting for 6 months to a year gives you time to explore the different areas, see what is close to your work, close to the recreation you like to do, shopping etc.
0 votes Thank Flag Link Sat Oct 9, 2010
Jim is absolute correct. If you are willing to pay a very high interest rate and have sufficient down payment you can pull it off, but I did not think that would be of interest to you considering that you are not that far away from qualifying for something much more attractive. While interest rates may very well be higher next year in June than what they are now, they will probably still be significantly lower than what you'd have to pay for a hard money loan.
0 votes Thank Flag Link Fri Oct 8, 2010
Ute Ferdig -…, Real Estate Pro in ,
You remember "sub-prime" Well, not all subprime lenders collapsed. It is possible to get a loan six months out of bankruptcy with a "sub-prime" loan. Not Freddie Mac, Fannie Mae, FHA or VA.

Sub-prime is also known as "B" "C" or "Hard Money" depending on just how far below an "A" rating you are.

Generally the rates for "subprime" are way way way higher than conventional. The fees are higher and the down payment must be hefty....

So, with such a good income, you could probably buy, (provided that you have at least 20% down and will be owner occupant. Oh, and be willing to pay an exorbitant interest rate. The high rate is commensurate with the perceived risk.

Renting is probably the lower cost option for now... It is a good idea to build up your down payment even if you later qualify for conventional...The larger a down payment you can put, the less you pay in private mortgage insurance.
0 votes Thank Flag Link Fri Oct 8, 2010
Jim Walker, Real Estate Pro in Roseville, CA
Kathleen, I totally understand the desire to own, and to buy in this market of great prices and killer deals! You will have to wait until two years after the discharge of your BK. Do all you can to rebuild your credit, get a new credit card--secured or not--from a bank. Pay on time, every time, never let the balance get to be more than 50% of what your limit is, etc. Talk to a credit counselor if you need help with that. And, the real point of my note here--rest assured that by next June, prices will likely be close to what they are now!!! I don't think any professional on this board is going to predict a sudden upward surge in value, and so you will still be the victor when it comes time to buy at immense value, in just a few short months!
Good luck!
Web Reference:
0 votes Thank Flag Link Fri Oct 8, 2010
Hello Kathleen. At this time, the current lender underwriting guidelines prevent you from qualifying for a loan sooner than what you have already been told by the bank. Unless the underwriting guidelines relax again, you'll have to wait. In the meantime, just do what you have to do to keep improving your credit score. June of 2011 will be here before you know it.

Good luck to you.
0 votes Thank Flag Link Fri Oct 8, 2010
Ute Ferdig -…, Real Estate Pro in ,
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