Huh. Chapter 7, 19 months ago, now credit score 799? Banker has $$ in her eyes!

Miscellaneous and Personal Stuff I Must Share
1

I didn’t think I’d qualify for a mortgage. Had been thinking it would be nice to buy a condo. Went to the bank for other reasons that required a credit check yesterday, and here’s a nice credit score.

I had a chapter 7 discharge in February of 2008. I figured my credit would be in the shitter, but here I am with a banker begging me to go through prequal for a mortgage! I had to tell her 5 times that I’m not ready, and I have no down payment. She said, “Oh, don’t worry about a down payment.” I did a “???” with my eyebrows.

But now I find myself checking out the local listings. Condos so cheap they would save me at least $200 a month compared to my rent, including assessments. I feel like I’d be a chump not to take the first-time homebuyer’s $8,000 and run with it before the Nov. 30 cutoff.

I used to process mortgage applications back in the mid-90’s. I never dealt with condo’s, though, and don’t really understand the process of figuring out mortgage+assessments. It looks like I’ll have to go to a brick and mortar agency, really, to get a full picture of what I can afford, yes? Using those mortgage calculators on the websites isn’t really accurate as far as determining real monthly expense, right? I just processed the mortgages after all the front-end stuff was done, so I never really learned the process of, “I think I want to buy a home, now what?”

Am I missing something in figuring monthly expense besides actual mortgage + condo assessments/association fees?

2

Add in taxes, insurance and repairs.

3

It’s good top see the banking industry has learned from its mistakes, no down payment, bankruptcy…there’s someone that we should give a loan to :rolleyes:

Something is really weird (and wrong) with your credit report. I think the best possible score is 800, which you should not have. Have you pulled an actual credit report to see if the bankruptcy is appearing? The bankruptcy should be on your report for 7 years and should be dropping your score at least into the 600’s, even if you have had “perfect” credit since then. Even if the bank says they want to prequalify you based on your score, they should eventually catch this.

As far as your actual question: cost/estimates for house/condo need to include mortgage, association fees (these can be several hundreds of dollars), taxes, home owners insurance, possible increased utilities, and maintenance (maintenance always, always, always, is more then what a first time home owner expects).

I really suggest you think hard about buying a house/condo about the pros/cons of ownership. From the little you have posted, I can tell you that it is more than likely a bad idea.

4

Just want to add if you post a more detailed list of what your financial situation is like: salary, debt (if any), savings, and rudimentary budget and post the cost of the condos you are looking at I would be more then happy to give you a more in depth analysis of whether you should/can afford to buy.

5

Hey, Jorge, thanks for the vote of confidence in someone learning a bit life’s lesson and trying to turn around!

No, those were pretty much my first thoughts, too. I’m well aware of credit ratings, etc, from my loan processor days, and though that was 15 years ago I figured things haven’t changed that much.

She would have needed to pay an extra fee to print the report out, I think, at the bank, so my banker turned her screen so I could see the discharges were, indeed, there and accurately recorded, and it was in fact my credit report. The report is a compilation from all three main reporting agencies, so the score is called AccuScore or something like that. That one goes up to 950, so 799 isn’t completely unreasonable, I guess, for someone who opened a credit card account a month after discharge and has kept the balance low to nil with usage every month.

Even though this is an anonymous board, my mom ingrained the hesitance to talk income levels with people other than employers and bankers. What I am comfortable telling you is:

Rent: $850/mo
Electric: $40/mo
Other bills: $200/mo
Savings: Just $1,600, but starting to manage $100-$200/mo
No debt.

I really only just got the idea into my head because the banker was so excited and asked me so many times if I wanted to start the pre-qual process, that’s what started making me think this isn’t such a pipe dream. Trying to get it done this year seems a bit “jump-the-gun” to me, though, and thinking about the end of next year sounds more reasonable, except the condo market in Chicago is really soft and prices are really low right now, plus there’s the $8,000 to think about that might be available next year and might not.

I could probably get a $3,000 gift from my mom for down payment, and the condos I’m looking at are listed between $70,000 and $85,000.

6

Depending on the circumstances of the bankruptcy, a bank might have good reason to extend secured credit to a discharged bankrupt.

For example, folks who were financially responsible, but went bankrupt through no fault of their own (e.g. job layoff or illness), find themselves cleared of debt after a bankruptcy, leaving them more disposable income to make mortgage payments. The nature of a mortgage is that it is secured against a property, so that the bank will still get its money out if the folks run into financial trouble again despite the folks being in a better position to make their payments than they were prior to the bankruptcy. That’s why a lot of people who go bankrupt never lose their homes (or more correctly, the lose their homes to the bank which then sells the homes back to them with a new mortgage).

7

The recent economic collapse would beg to differ about banks getting their money back and people don’t lose their homes during bankruptcy because it is a protected asset in bankruptcy law, it has nothing to do with the bank reselling it back to them.

At any rate, I have nothing personally against you OP, and I don’t know the cause of your bankruptcy (I have a great deal of empathy for instance, for those that are bankrupt due to medical bills), but one of the consequences of taking the bankruptcy route is that you should be unable to take on a new large amount of debt until you have shown yourself worthy for multiple years. Bankruptcy causes everyone else to have to pay higher interest rates to recover the money the banks lost on you, and while I am glad that this option is available, there should be some pretty serious consequences for those that go this route (like for instance not being able to take out a loan to buy a condo 19 months later). I do want to say congratulations on what looks like you are starting to save, keep it up. One of the smartest ways you could do this is to not buy right now.

A 30 year mortgage would be about $450 or so a month for 30 year mortgage. You would need to add about $50 to that for pmi since you don’t have 20% down payment. Association fess can vary greatly but we will say another $100. A tax rate of 4% (not sure what actual tax rate is) would be another $250/month. Insurance would be another $50/month. You should probably save a minimum of $50/month for maintenance if not more . All of sudden you are not looking so great in terms of saving money buying, and most of the money you are currently able to save is going towards your condo.

The bigger problem in all this is you have virtually no savings. What happens if you lose your job? What happens if you hit a major repair bill just after purchasing? What if the market continues to tank and you become upside down by $20,000 (there is still a strong possibility real estate will continue to slide) and find yourself in a position where you need to sell?

You have been given a second chance, don’t put yourself back into debt so fast. Regardless of if you buy or not you really, really need to save up an emergency fund of $10k or so, it is one of the first steps to becoming financially responsible.

Hmmmm…It just hit me they may be wanting to qualify you for a FHA loan. At any rate, my advice still holds.

8

I can see, on a scale of 950, a 799 a year and a half after a bankruptcy. And this is just a WAG, but I know car dealerships will try to sell cars to people that haven’t been out of bankruptcy for long. The reasoning is that once you’ve had your discharge, you can’t file again for X amount of years. ( I want to say 7? 10?) At any rate, though I haven’t heard of the mortgage industry going that route, I wonder if it’s along the same lines?