St. Louis Mortgage Help

Getting a Home Mortgage After Bankruptcy: What You Need to Know

If you’ve filed for bankruptcy, if you are making payments to your Chapter 13 bankruptcy, or your bankruptcy has been discharged, you may be wondering what it means for your ability to get a home mortgage. Fortunately, it’s still very possible to get a mortgage after bankruptcy with the right preparation and knowledge. Knowing what to expect and how to prepare can help you make sound decisions during the mortgage process. In this article, I will explain the steps you need to take in order to get a home mortgage after bankruptcy. We’ll discuss everything from improving your credit score to getting pre-approved and finding the right lender. With the right preparation and guidance, you can be well on your way to getting a home mortgage after bankruptcy, possibly during your bankruptcy! 

Understanding the Mortgage Process After Bankruptcy

When you file for bankruptcy, your ability to get a mortgage is greatly limited. Bankruptcy is specifically designed to allow a debtor to reorganize and get back on their feet financially. It’s intended to be a temporary fix, not a permanent solution. Like any legal process, bankruptcy’s main goal is to allow you to get your financial house in order and put your financial life back in order. Making the effort to get a mortgage after bankruptcy is a great way to get back on track. After bankruptcy, your credit is seen as “damaged” by mortgage lenders, mortgage guidelines, and Underwriters. Credit scores and credit history are used by lenders to determine your ability to be approved, your interest rate and mortgage products. An overly low credit score can lead to higher interest rates, higher monthly payments, and possibly not being able to be approved for a mortgage. Before you begin the mortgage process, you should look at and analyze your credit score and credit make up. Lenders are going to be looking to see if you have re-established credit, really, lenders will want to see that you have current trade lines with some history of repayment. Lenders will want to see how you are handling that credit after your bankruptcy, keeping your balances low, and ensuring no accounts are reporting late payments. 

 

How long do I have to wait after Bankruptcy to get approved for a mortgage

Every mortgage program has their own guidelines and rules for how long you have to wait before you can be pre-approved for a mortgage. Why do you have to wait? When I was a mortgage underwriter I was told that we don’t care that a borrower had to have a bankruptcy to improve their financial situation, we care about whether they learned from having to have that bankruptcy. Time allows for Underwriters to make that decision as to how you are and will handle your credit.  

How long you have to wait will depend on what bankruptcy you have used or you are currently in, Chapter 7 or Chapter 13 bankruptcy.  

For a Chapter 7 bankruptcy you will have to wait from 2 to 4 years from the DISCHARGE DATE depending on the mortgage program, FHA and VA mortgages requires a 2 year wait, the USDA mortgage programs requires a 3 year wait, and for the most part both Conventional mortgage programs require a 4 year wait. 

Of the two Conventional mortgage programs Freddie Mac is a bit more lenient. If your bankruptcy is reflected on your credit report and we get an automated underwriting approval then there is no waiting period.  

For a Chapter 13 Bankruptcy, it gets very interesting. You will need to wait 12 months from your FILING DATE for FHA, VA, and USDA as long as you have made your last 12 bankruptcy payments in full and on time. Making it possible to get a mortgage approval while you are still paying on your Chapter 13 bankruptcy. 

Also, we will need to get permission from the Court to allow you to get a new home and mortgage.

 With a Conventional mortgage, it is a 2 year wait from the discharge date or 4 years from the dismissal date.  

Getting Pre-Approved For a Mortgage after bankruptcy.

Once you have examined your credit scores, you want your scores to be in the 600 credit score range especially if you are considering FHA or VA. If you want to consider USDA or Conventional you will want your scores to be nearer to 640. The credit scores you will need will depend on the lender and their overlays to the guidelines and the mortgage program. Once you are sure you have re-established your credit and there are no late payments on this credit, and you have cleaned up any mistakes on your credit report, you are ready to get pre-approved for a mortgage. Pre-approvals can be beneficial for a number of reasons. It gives you an idea of your likely mortgage payment, which is helpful for budgeting. Being pre-approved will allow you to know how much of a sales price you should be considering. Being pre-approved will simply provide you with peace of mind. It also lets your real estate agent and the seller know that you’re likely able to get financing, which can help speed up the home buying process. Pre-approval gives you an advantage over other borrowers.  

Calculating Your Mortgage Payments

Now that you know what to expect and what documents to assemble, it’s time to figure out what your monthly mortgage payment will be. This is a critical part of the mortgage process and will have a big impact on your loan terms and amount. Your monthly payment is based on a number of factors, including the amount of your loan amount, loan interest rate, and loan term. To figure out your loan payment, you’ll need to consider all these factors and make a realistic estimate. The good news is there are a number of ways to estimate your payments. You can use a mortgage calculator, discuss it with a lender, or simply make an educated guess. It’s important to use a realistic method and not over-inflate your payment estimate. 

Know your budget and have a total house payment in mind that works within your budget. Know what that maximum house payment is that you will not go a dollar over, this will help you and your loan officer establish the maximum sales price that you can be approved for and still not be house poor.  

Understanding Mortgage Insurance Requirements

In some cases, lenders may require you to obtain mortgage insurance. This insurance protects the lender in case the borrower doesn’t repay the loan. It comes with a cost, which is included in your monthly payment amount. Although it may be required by your lender, you should still carefully consider this additional cost before choosing to obtain mortgage insurance. Mortgage insurance is designed to protect lenders in the event of a loan default. A loan without this insurance would result in a lower monthly payment amount. However, it’s important to note that the insurance is only payable if you’re late on your payments. 

Finding the Right Lender

Finding the right lender is crucial in the process of getting a mortgage after bankruptcy. There are a number of factors to consider when choosing your lender, including their mortgage knowledge and experience, ease of loan application process, can they do manual underwriting, and do they have any guideline overlays. Make sure to look around and ask a lot of questions. You may be able to find better options and interest rates as you look for the right mortgage lender. Once you’ve found a lender that you’re comfortable working with, make sure to clearly communicate your needs. Know what you’re looking for, including how much you’re willing to borrow, how much you’re able to put down, and what type of loan you’d like to use. If you’re unable to fully explain your needs, a lender may push you towards a loan that isn’t a good fit. A home buyer that does their HOME WORK will be appreciated by the mortgage loan officer they work with.  

Assembling the Right Documents

Before and after the mortgage pre-approval you will be asked for your filed bankruptcy documents, all pages. If your bankruptcy has been discharged you will be required to provide the Discharge Letter provided from the court.  

If you are in the midst of paying your Chapter 13 you will be asked to get a letter from the Trustee involved for permission for you to purchase a new home. Also, you will be asked to document that you have made the most recent 12 or more payments to the court on time.

 These documents and then the standard documents for a mortgage pre-approval application, that will include paycheck stubs, W2 or 1099 forms, bank statements, and possibly tax returns. Your loan officer will know what they want and need. 

Working With a Real Estate Agent

When you’ve finished the mortgage process and have your loan documents in order, it’s time to find a new home. This is a crucial step in the process and can have a big impact on your next new home. Hiring a real estate agent to be your buyer’s agent will allow you to shop around and compare homes. You can also use their expertise and contacts to help you find the perfect new home. Hiring a real estate agent can be beneficial for a number of reasons. They can help you navigate the home buying process, make comparisons between houses, and help you find the perfect home on your budget. They can also help you negotiate on prices, concessions, and get the best deal possible. 

Final Steps to Getting Your Home Mortgage After Bankruptcy

Congratulations! You’ve completed the mortgage pre-approval process and are ready to find your new home. As you finalize the purchase, make sure to include all these steps in your mortgage closing checklist. - Get a home inspection. The home inspection is helpful for identifying potential problems with the home, and save you from making costly decisions. - Get your home insurance policy in place. Make sure to have your homeowners insurance in place before closing on your new home. Get quotes as home owner’s insurance can vary a lot between insurers. Start with the insurer that has your car insurance as they will offer a multi-policy discount. Once you have found the best quote, put it into place. Get your mortgage documents to your mortgage lender as soon as possible. The more you are ready the faster you can close on your next new home.

Getting Your Home Mortgage After Bankruptcy, wrapping it up.

You have gone through or you are currently in a bankruptcy? Are you looking to purchase a new home? Don't let bankruptcy stand in the way of realizing your dream of home ownership. With the right guidance, you should be able to get a mortgage after or during bankruptcy. I specialize in helping home buyers who are in Chapter 13 or have had a bankruptcy discharged get a mortgage sooner. I can help you can get the home of your dreams without having to wait years after bankruptcy. Take the first step today and contact me to find out how you can get a mortgage after or during bankruptcy. I will guide you every step of the way towards a new home and a brighter financial future. 

If you want to make an appointment to talk here is a link to my calendar where you can schedule a convenient time to talk, https://calendly.com/bobrutledge. If you would like to learn more follow this link to my website to learn a lot more, https://www.bobrutledge.com/mortgage-after-bankruptcy

Posted by Bob Rutledge on February 6th, 2023 4:37 PM

What is down payment assistance for home buyers?

Down payment assistance programs are programs that provide financial aid to home buyers who are struggling to save enough money for a down payment to purchase a home. These programs may be offered by state or local governments, non-profit organizations, or other groups. They can take the form of grants, low-interest loans, or a combination of both. Eligibility for these programs can vary, and may be based on factors such as income, location, or first-time home buyer status. In some cases, home buyers may be required to complete a homebuyer education course or meet other requirements in order to qualify. Some program also have income limit requirement to be eligible, it's important to check the specifics of the program you are looking into.

Why a home buyer may choose down payment help?

  1. Lack of savings: Saving for a down payment can be difficult, especially for first-time home buyers or those with low-to-moderate incomes. Down payment assistance can help bridge the gap and make it possible for a home buyer to purchase a home even if they don't have a large amount of savings.
  2. Lowering the costs of homeownership: By reducing the amount of money that a home buyer needs to save for a down payment, down payment assistance programs can lower the overall cost of homeownership. This can make it more affordable for a home buyer to purchase a home and can help to reduce the burden of mortgage payments.
  3. Increasing access to homeownership: Down payment assistance can help to increase access to homeownership for individuals who might not otherwise be able to purchase a home. This is particularly important for low-to-moderate income households, who are often the most in need of affordable housing.
  4. Building equity: By helping a home buyer to purchase a home with a smaller down payment, down payment assistance can help to build equity more quickly. This is important as it will give a better leverage to the home buyer in case of any financial hardship in future

Overall, down payment assistance can make homeownership more affordable and accessible for people who might not be able to purchase a home without assistance. It's important to check if there's any program available in your area and what is the requirements to be eligible for it.

It is also important to note that not every program will be suitable for everyone and it's important to consult with a professional and compare the different options before making a decision.

Who offers Down Payment Assistance in near me?

There are several ways to find and apply for down payment assistance programs:

  1. Contact a local housing authority or non-profit organization: Many state and local governments, as well as non-profit organizations, offer down payment assistance programs. Contacting a local housing authority or non-profit organization that specializes in homeownership assistance can provide you with information about programs available in your area.
  2. Check with your lender: Some lenders may offer down payment assistance programs or have information about programs available in your area. If you are going to want to consider down payment assistance these programs are tied along with your mortgage. It is your lender then who will need to be consulted.
  3. Look online: Many down payment assistance programs have information available on their websites. You can also search for programs by state or zip code on websites such as the U.S. Department of Housing and Urban Development (HUD) or the Federal Housing Administration (FHA).
  4. Consulting with a housing counselor: HUD-approved housing counselors can provide you with free or low-cost advice on buying a home, and can help you find down payment assistance programs that may be available to you.

When you find the program you are interested in, make sure you thoroughly read the eligibility requirements and understand the application process. You also want to check if the program is still active, funded and/or open to new applicant as some program have limited fund and open on specific time window. This is when an experienced and knowledgeable mortgage loan officer will pay dividends.

It's also important to keep in mind that some down payment assistance programs have income limits, and you may need to meet certain requirements such as completing a homebuyer education course, or having a certain credit score, it's important to check the specifics of the program you are looking into.

Down payment assistance can help buying a home more affordable

Down payment assistance can make buying a home more affordable by helping to reduce the amount of money that a home buyer needs to save for a down payment. By providing assistance with the down payment, these programs can help home buyers purchase a home that they may not have been able to afford otherwise.

Down payment assistance can make buying a home more affordable in several ways:

  1. Lowering the down payment: One of the main ways down payment assistance makes buying a home more affordable is by lowering the amount of money a home buyer needs to come up with for a down payment. This can make it easier for home buyers to save enough money for a down payment and can also help them qualify for a larger loan.
  2. Closing costs: Some down payment assistance programs also provide assistance with closing costs. These are the fees and expenses associated with buying a home, such as appraisal fees, title insurance and attorney fees. By helping with these costs, the down payment assistance can further reduce the amount of money the home buyer needs to come up with at closing.
  3. Lowering monthly payments: Down payment assistance programs that offer low-interest loans can help reduce the home buyer's monthly mortgage payment. This can make it easier for home buyers to afford the monthly payments and make homeownership more sustainable.
  4. Special loan programs: Some down payment assistance program work with special loan programs, such as FHA or VA loan, that are backed by government and have more lenient requirements for first-time buyers, such as lower credit score or lower down payment. This could help more buyers to qualify for the loan, and make homeownership more affordable.
  5. Grant program: Some down payment assistance programs offer grant that doesn't need to be repaid, this can help to reduce the overall cost of purchasing a home, and make it more affordable.

In general, down payment assistance can help home buyers bridge the gap between what they can afford and the cost of buying a home. It can also make homeownership more sustainable by reducing monthly payments, closing costs and overall costs of purchasing a home. However, it's important to check if there's any program available in your area, and what are the requirements to be eligible for it before starting the process.

State of Missouri Down Payment Assistance - MHDC

The Missouri Housing Development Commission (MHDC) is a state agency that works to create affordable housing opportunities for Missouri residents. They offer a variety of programs to help first-time homebuyers, move up home buyers, and low- to moderate-income families purchase a home. Some of the programs offered by the MHDC include:

First Place: This program provides down payment and closing cost assistance for first-time homebuyers, and offers competitive interest rates and reduced mortgage insurance requirements. There is a Cash Assistance portion of this program that will provide up to 4% of your loan amount to be used for your down payment and/or closing costs. There is a non-cash assistance portion that will provide a lower than market interest rate when you provide your own down payment.


Next Step: This program was built for move up home buyers AND first time home buyers that have higher income levels than what the First Place guidelines allow. Next Step  provides down payment and closing cost assistance, and offers competitive interest rates and reduced mortgage insurance requirements. There is a Cash Assistance portion of this program that will provide up to 4% of your loan amount to be used for your down payment and/or closing costs. There is a non-cash assistance portion that will provide a lower than market interest rate when you provide your own down payment.


MCC: The Missouri Homeownership Preservation (MHP) Tax Credit program, also known as the Missouri Homeownership Opportunity (MCC) program, provides a tax credit to first-time homebuyers who purchase a home within the state of Missouri and meet certain income requirements.


Minimum required credit score for MHDC is 640 or higher.

There are income limits for each program depending on household size and area.

Limited to primary residences only, single family, 2 family, condos, and manufactured homes. 

Purchase price limits.

Cash assistance will be in the form of a second mortgage. The second mortgage will be forgiven if the borrower stays in the home/loan for ten years. The second mortgage will diminish after year five by 1/60 every month until year ten when it will be completely forgiven. No additional monthly payment required.


It's important to note that the MHDC program are not direct loans, but rather they are programs that work in partnership with participating and approved lenders. Not all lenders offer or provide the MHDC Down Payment Assistance programs.



Down payment assistance in the St. Louis area.

St. Louis City, St. Louis County, St. Charles County, and Jefferson County

The St. louis area is a hot bed for down payment assistance, along with having MHDC available to all home buyers in the area there is down payment assistance program operated through St. Louis County that is utilized by St. Louis City, St. Louis County, Jefferson County, and St. Charles county to provide down payment assistance for home buyers.

You will work hand in hand with your lender and one of several providers of the down payment assistance. The providers are, Beyond Housing, Better Family Life, The Housing Partnership, or NECAC. 

  • Must be a first-time homeowner, except in St. Charles County.
  • Must complete the Homebuyer Education Program and one-on-one counseling, resulting in a “Homeownership Ready” status. 
  • Must be at or below maximum gross household income limits, determine by household size.
  • Must have secured a fixed-rate mortgage on the purchased home.
  • Home must pass first-time homebuyer inspection.
  • Sales Price Limits apply
  • Assistance provided is a zero percent interest and 5-year forgivable loan with no monthly payment required.

Available Down Payment Assistance Per Household: (as of this writing)

  • St. Louis City Down Payment Assistance $3500
  • St. Louis County Down Payment Assistance $6000
  • City of Florissant Down Payment Assistance $5,000
  • St. Charles County Down Payment Assistance $10,000
  • City of O'Fallon Down Payment Assistance $10,000
  • Jefferson County Down Payment Assistance $5,000

Note: It is possible to stack this Down Payment Assistance Program on top of MHDC to provide a larger down payment for your new home. 

Down Payment Assistance in and around Kansas City, Springfield, Columbia, and other areas of Missouri

The other areas of Missouri do not have the wealth of down payment assistance programs as in the St. Louis Area. There will always be available the First Place and Next Step Down Payment Assistance offered through MHDC. There are some smattering of local down payment assistance programs available in Columbia, Blue Springs, Independence and in the Springfield area but many times these programs are lacking funds, come and go, or the MHDC program is the best available. 

In-House Down Payment Assistance Programs 

CHENOA Down Payment Assistance

Some lenders have their own in-house down payment assistance, many do not have down payment assistance program at all. One of the better in-house programs is offered through the CHENOA Down Payment Assistance program.

The Chenoa Fund Down Payment Assistance Program (DPA) is a second mortgage loan for eligible borrowers who meet income, purchase price and other program guidelines, as established by HUD and the Chenoa Fund. The DPA is intended to assist borrowers who lack the funds necessary to make a conventional down payment. The Chenoa Fund DPA is available to first-time homebuyers and repeat homebuyers who meet certain income and purchase price limits. The program is offered through participating lenders, and borrowers are required to complete a homebuyer education course as a condition of program eligibility.

The Chenoa Fund Down Payment Assistance Program has certain rules and guidelines that borrowers must meet in order to be eligible for the program. Some of these include:

  1. Purchase price limits: The purchase price of the home must fall within certain limits, as established by the program.

  2. Income Limits

  3. First Time Home Buyer or Repeat Home Buyer

  4. Primary Residence Only

  5. Minimum of 600 Credit Score for all borrowers

  6. Home Buyer Education may be required

  7. Single Family, Condo, Manufactured, or townhouse

It's important to note that these rules and guidelines may vary depending on the specific program and the participating lender, so it's a good idea to check with a participating lender for the most up-to-date information.


Bob Rutledge Mortgage Loan Officer and Down Payment Assistance Expert.

I have have been a mortgage loan office since 1995 and I specialize in helping home buyers with down payment assistance, purchasing a new home with little to no money out of pocket, and making that next home purchase more affordable.

I would welcome the opportunity of speaking with you to answer all your questions, feel free to email me at bob@bobrutledge.com or if you would like to set up an appointment follow this link LET'S TALK.

If you would like to take about 3 minutes of your time to fill out my Down Payment Assistance Pre-Qualification I will gladly respond within 1 to 2 business days with a complete analysis of what down payment assistance programs are available to you, what mortgage programs are best for what you want, and how to make it all work for you. Click on this link GET DPA and I will have answers to you very soon.












$5,000

Jefferson County

$5,000

City of Florissant

$6,000


St. Louis County

$10,000

St. Charles County*

$10,000

City of O’Fallon

$5,000

Jefferson County

$5,000

City of Florissant

$6,000


St. Louis County

$10,000

St. Charles County*

$10,000

City of O’Fallon


 




Posted by Bob Rutledge on January 17th, 2023 1:49 PM

Archives:

My Favorite Blogs:

Sites That Link to This Blog:


Bob Rutledge Mortgage

Loan Officer NMLS#: 297044

New American Funding 12321 Olive Blvd, ste 150
St. Louis, MO 63141