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Buying after bankruptcy or foreclosure (guest blog)

Buying after bankruptcy or foreclosure (guest blog)

The foreclosure crisis began in 2007 and was in full effect by October 2008. The foreclosures were due to job loss, credit mismanagement and predatory lending. Those that had a foreclosure three years ago can now buy through FHA financing with 3.5% down. This presents an interesting situation.

Rates are very low, which allows for a lower payment compared to what the same borrower would have been offered just three years ago in the same price range. Housing prices have plummeted, which also allows for that borrower to be ultra-conservative this time around. Many of my current clients are buying homes in which the payment is equal to or less than their rent.

The predatory loans are now a distant memory, and guidelines are such that hopefully we have curtailed the credit mismanagement foreclosures. The obstacles that many borrowers with a prior foreclosure/bankruptcy will come up against are lenders who don’t have the knowledge or the determination to help them. Although I would suggest contacting a good lender to assess your situation, there are a couple of pitfalls to watch out for. Lenders will determine the three year requirement by searching for the final deed of foreclosure. The credit report is not a trustworthy source to determine the timeline. A borrower who included their property in the bankruptcy will also subject to the final deed in determining the three-year requirement. The bankruptcy discharge is not the determining factor! A borrower who filed bankruptcy and kept their home will qualify after two years with re-established credit.

Note from Julie: This is a guest blog from a terrific lender that I work with often – Jon Izenbart from Evolve Bank. Hope it is helpful! If you have more questions you can reach him at 616-745-0645.