I have a friend who got into some trouble paying his mortgage when his wife went on unpaid maternity leave. They got behind on their mortgage and ended up going into foreclosure on their house.
They were able to scrape up the money they needed to pay it off, but they are still pretty strapped and 1 month behind on their mortgage.
The question is, they want to sell their house to downsize to a less expensive home that is more affordable, but their credit is basically shot. If they sell their house and try to buy a less expensive one will they be able to get a mortgage with their history?
Please be respectful, this is a genuine question that needs knowledgeable answers. So only reply if you have good advise. Thank you.
2007-02-09 02:37:29 · 7 answers · asked by rpost52 2 in Business & Finance ➔ Credit
sorry, one more thing. they would be putting about 20% down on the next house, would this help the percentage rate?
2007-02-09 04:14:00 · update #1
Hello,
I do a lot or mortgage auditing for a auditing firm. There are several banks who make "subprime" loans. This means that your friends probably would be able to get a mortgage, but it would be about 4 to 5 points above the interest rate charged to those with good credit. If a bank would charge 6.00 right now...your friends would be looking at about a 10-12 percent interest rate.
The obvious downside is that this will cause them do downsize perhaps more than they expect. Their monthly payments will be much larger, even if they downsize, because so much of their payment will be going towards interest. The lenders charge this high interest rate to offset their risk for lending money to consumers with bad credit.
2007-02-09 02:44:14 · answer #1 · answered by Matt K 4 · 1⤊ 0⤋
You can get one, but you don't want to.With late mortgage payments on your history, most lenders consider you a risk. The more risky, the higher your interest rate and the higher your payments. If they get another loan now, it will have high interest rates, and a huge payment. Why would they trade less house for nearly the same payment. It would also cost them alot of thier equity to get.
Financially, thier best bet is to sell the house. Then they should rent somthing affordable for 2 years before getting back into a house. The housing market is not shooting up, so they will not be losing a bunch of equity. After 2 years, your mortgage lates no longer appear, and they will be able to get a great loan. They will also still have all the equity from the sale of thier home to put down as long as they don't blow it. In the long run, this will put them in the strongest position. they can still have a house in thier future, and they don't risk losing everything they have now.
2007-02-09 05:56:25 · answer #2 · answered by Ron B 3 · 0⤊ 0⤋
I would recommend working with their current lender. If they were able to avoid foreclosure, but are one month behind, they should consult their current lender.
There is a chance the lender will set up a special payment plan with them until they sell their home and possibly help them with the new mortgage as well.
It doesn't hurt to ask the current lender. If they can prove their worthiness, the lender may be the future business potential.
If they do try to go elsewhere, they will have a very tough time with a recent mortgage late potentially on their credit report.
Learn more at http://www.thetruthaboutmortgage.com
2007-02-12 06:16:25 · answer #3 · answered by Todd S 3 · 0⤊ 0⤋
Hi. I used to sell real estate. Your friends would probably be able to qualify for a house with a new mortgage on a less expensive house. However, they may have to pay more points, which will raise their house payment, until they can get their credit straightened out, which could be seven years. Then they will be able to apply for refinancing and get lower points, thus a lower payment at that time.
2007-02-09 02:43:49 · answer #4 · answered by Michelle 4 · 0⤊ 0⤋
20% down will absolutely help their APR be reasonable.
have them go to a mortgage broker or their bank now. They can get preapproved based on the fact that their house would be sold. They can tell them how much they plan to put down and the bank will check their credit scores.
It would be a good idea for them to do this now so that they know if downsizing their house is really going to downsize their payment or not.
2007-02-09 05:05:25 · answer #5 · answered by Anonymous · 0⤊ 0⤋
I hope they can get the house sold; there is a 9-month supply of houses on the market. Secondly, with 20% down, they should have little problem getting a loan if they go with a broker who has access to many lenders. I recommend reviewing the free evaluation form at
www.totaldebtsolutionsllc.com
and letting a loan officer from their network tell them "yes."
2007-02-09 09:02:40 · answer #6 · answered by CALIFORNIA GOLD 3 · 0⤊ 0⤋
personally i believe that there should be no problem in getting a loan. try the brokers who sits with estate agents. however they can be a bit pesty.
hope it works out for your friend.
life can be a b i t c h somtimes.
2007-02-10 10:06:34 · answer #7 · answered by bidia 3 · 0⤊ 0⤋