Bankruptcy in progress am I a lost cause?

11 Replies

@Krysten Simmons I think you’ll have to wait 3 years minimum. I believe it’s sometimes 7 years for some lenders (I could be wrong).

With a recent bankruptcy I’d say your odds for any bank or non-private lender would be close to nil

There are programs that allow short seasoning on BKs but you better have some money to put down and a somewhat decent credit score. Normally they want it to at least be discharged. 

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@Krysten Simmons chapter 7 generally 1-2 years. You’ll need a healthy down payment...

Chapter 13, 3 plus years... healthy down payment....

With that said, you might be able to find a owner contract (seller financing) or lease to own.

Good luck

Originally posted by @Krysten Simmons :

How often does a person in my situation get assisted with buying their first property through a lender?

Two years from discharge. FHA first time home buyer program 3.5% down and re-established credit.

So, for a $200,000 home you need $7,000 cash that has been in your bank account for at least 90 days. It's called seasoning. You need about $3,000 more for closing costs. At 4% interest you are looking at $200,000 house minus 3.5% down of $7,000 for a loan of $193,000 so about $921 a month for principal and interest, you add about $80 for Home Owner's insurance and $125 for property tax and $120 for mortgage insurance and get roughly a payment of $1,250 a month which can be about 1/3 of your gross monthly income. So you need to make about $5,000 a month to qualify for a $200,000 property. Keep in mind you will want to buy drapes, lawn care tools, washer/dryer maybe, etc, etc.

They will look at both your "front end" DTI (Debt to Income Ratio) and your back end DTI which includes car payments, credit card payments, student loan payments and other debt that won't be paid off in the next six months.

To improve your credit, as soon as you get your discharge, apply for at least two secured credit cards for at least $200 each. (Credit Unions, Capital One and there are others). Use the card and pay it off each month. Every six months ask to have the limit raised. Get a car loan from a company that actually reports to the credit bureaus. It doesn't do you any good to get a car loan if they don't report.

Don't be late on any payment.

Save money.

Have a friend or relative add you to their credit card.

Or, you can simply inherit a million $ and pay cash.

@Krysten Simmons

You are not a lost cause, at all.

You can absolutely buy houses with zero or bad credit and with minimal money down (closing costs). 

You can accomplish this, by getting the seller to carry the note. You have to make it worth their time to even consider a no money down option, but there are some that will. It's important to remember that not all sellers are cash motivated. 

* Get really good at negotiating, you will fail with this strategy more times than not, but it's okay.     You are looking to get started, not to become an empire in your first year. The better you get at     negotiating, the more likely you are to succeed with it. 

* Make sure you target those properties, that you can turn that note around, and make money on it. Whether you are going to rent it out, or create a note to sell it to an end buyer, you will want to know that either strategy will produce profits for you. So know the neighborhood!

* I would suggest you target properties with lower ARVs, rather than swing for the fences. It's not likely that an owner with a 250K house will even consider 0 Down, but someone with a 100K house, may just fall in love with the interest. 

* Learn the concepts of creating notes. You will need to sound knowledgable when talking to a potential seller, giving them confidence. Make sure you use documents that are drafted to comply with your state laws, regarding notes. The more you learn about these, the more you learn how to negotiate your deal. 

Again, this is not an easy thing to sell and you will get told no way more than you will ever get told yes. However, the more you talk to sellers, the better you will get at selling the idea. Don't be greedy when negotiating, you will have to give up more than you initially wanted, to get a deal done. This may mean more interest or a higher sales price, or both. If the numbers work, you do the deal, period. You are trying to get started and you are not going to hit a home run, every time. 

Best of Luck!

@Krysten Simmons what are you really asking? How often? What do you need to do VS what do you want to do?

Is this property for you personally as owner occupied? Do you want to fix and flip? Why don't you wholesale for a few years and build up your income? 

Obviously, there are extenuating circumstances when a consumer decides on BK and maybe beyond your control. Since you are in BK progress, make a plan to restore your financial situation with small short term attainable goals. Job? Income? I had BK a few years back and it did not stop my plans for wholesaling. I am not proud I had to go in that direction but it was needed. 

If you share more details, you will get others input. No not a lost cause. 

You can buy almost any property without the use of a bank.  A bankruptcy is a hiccup in your investing plans.  

@Krysten Simmons Time is your friend. Use the time you'll have to wait to learn, save money, and if you're disciplined and build a strong foundation you might find yourself ready during a better time of the market to invest, anyway.

After a bankruptcy I had some lenders tell me to apply for a credit card. I am glad I did not listen to them. I found a lender that used my last two years of rent checks, last two years of car insurance payments and my last two years of cell phone bills to show my history of paying on time. I didn't get my first credit card until after my home closed.  Good luck.