The Wall Street Journal reports today that Freddie Mac, Fannie Mae and their regulator provided for a “low down-payment mortgage program, which could open homeownership to thousands of cash-strapped borrowers.
Here are some highlights:
- Borrowers could be able to get a mortgage with a down payment of as little as 3%.
- loans will be available only to first-time buyers, buyers who haven’t owned a home for at least a few years and those with lower incomes.
- Some buyers will be required to undergo home-buyer counseling before closing on the house.
- 3% down-payment loans could be made to borrowers with credit scores as low as 620 if the potential buyer has had other factors that mitigate their risk.
The Journal reports that the Fannie program “will be limited to borrowers who haven’t owned a home in the past three years. Freddie’s program will generally be available to borrowers who don’t make more than their area’s median income.”
Can you buy a home after bankruptcy?
One of the most common questions I get from potential Chapter 7 clients is, “Will this keep me from buying a home?” My answer is that in the short run yes, but in the long run no.
Back in the days when the real estate market was hot, it was not uncommon to see a former client buy a house within a year of filing Chapter 7 bankruptcy. However, once the market melted down, the banks seemed to have tightened their belts so much that almost no one could buy a house. I’m glad to hear that things are now loosening up. Hopefully, this will lead to a economic recovery.
Most of the people who seem to worry the most about how filing bankruptcy will affect their credit rating are also the ones whose credit has already been hammered by repossessions and collection lawsuits.
In the long run, coming out from under large amounts of credit card and medical debt will put a person in a better position to save for a down-payment. Filing bankruptcy now might make it a lot easier to buy a house in the near future.