Published Friday, February 26, 2010 @ 4:19 pm

Everyone—from the halls of Congress to the many channels of media—is paying a ton of attention to those Americans who have lost their homes in the seemingly endless mortgage meltdown. Virtually ignored have been the millions who continue to pay their mortgage every month, even when they really can’t afford to. As a result, most homeowners are losing big on what used to be their biggest investment.

Which begs the question: Is the best solution to stop paying your mortgage?

For homeowners around the country who haven’t skipped their mortgage payments—but are seriously struggling—there are several reasons why homeownership is going less than swimmingly:

You’re Trying to Staying Afloat While You’re Underwater
Many of you are struggling to pay off a mortgage balance that is significantly higher than the value of your home. As a result, selling your home is simply not an option, since you would ultimately have to come up with the difference to settle with your lender.

You’re Drowning in the Deep End of Debt
Many homeowners just like you are spending down their savings, taking cash advances and/or relying on credit cards to buy bare necessities. Why? Because you’re using every actual dime that’s coming in to keep up with your mortgage payments. The result is millions of Americans who are not only underwater on the their mortgages, but who are also drowning in debt.

While staying current on your home commitment is admirable, and very much the American way, it’s also a quick and easy way to drain your savings, retirement, or nest egg, while also accumulating enormous debt, simply to avoid the dreaded “F-word.”

Consider Foreclosure
While it can be scary, this particular “F-word” can be your first, best step to a pair of “F” positives: financial freedom. If you are now hundreds of thousands of dollars underwater and go into foreclosure, your losses are essentially erased. In most cases, your lender can take the house, but not your future earnings with the only real financial consequence being trouble getting a loan for almost a decade (in an era when getting a loan isn’t easy even for those with stellar credit).

Unfortunately, most foreclosure alternatives are simply bad ideas. Let’s take, for example, the short sale. In a short sale, the lender is agreeing to accept less than what is owed to satisfy your loan. Assuming you find a buyer, you will then have run the offer by your lender. Even if they decide to go along with it, you could still be stuck with the deficiency if you’re not careful. That’s not to mention the tax implications of the forgiven debt. Why go through the hassle of a short sale, if it’s just as likely to hurt your credit, and may lead to even more debt.

Another foreclosure alternative, the loan modification, would be an option if lenders were granting permanent modifications. The problem is, most lenders are understaffed, behind on applications, and you’re likely to get lost in the shuffle. As of 9/1/09, over 362,000 loans have been granted a trial modification. Of those trial modifications, only 1,711 have been approved for permanent modifications.

And Then There’s Bankruptcy
If your credit score is going to suffer anyway, why not create a completely clean slate? As a hurting homeowner, knowing a qualified bankruptcy attorney can also help you face your financial fears, yielding the right kinds of support, information and insights—at a low cost— for a viable and secure future.  The bankruptcy experts at the Law Offices of John T. Orcutt offer a totally FREE debt consultation and now, more than ever, it’s time to take them up on their offer. Just call toll free to 1-800-899-1414, or during the off hours, you can make your own appointment right online at www.billsbills.com. Simply click on the yellow “FREE Consultation Now” button.

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Published Friday, February 5, 2010 @ 12:07 pm

Foreclosures have become a plague across the country, sickening the economies of small towns, the general contractor industry and even the commercial real estate industry. No facet of the real estate world has gone unaffected.

Whether your home was foreclosed upon or your mortgage lender granted you a short sale (negotiated permission to sell your home for less than what is owed), it was probably considered a tremendous relief to drop the proverbial financial anchor tied around your neck.

However, thousands of Americans once in the same boat are now finding that the tide is again rising around them, as banks and lenders are coming back months later for the remainder of what is owed on the home. The most common occurrence of mortgage companies coming back for the difference is happening after auctions when a home did not sell for enough money. But it’s also happening after bank-approved short sales.

A woman in Virgina, who legitimately short sold her home after a divorce and her commission income plummeted as a result of the recession, was shocked to receive a letter from an attorney stating she owed the bank another $65,000 months after the sale closed. Called a “deficiency judgment,” the extra amount owed eventually led to her having to file for bankruptcy.

It is a common belief, and in most cases the truth, that a short sale ends a commitment to owing any more money on a mortgage. However, banks are finding a way to come back for more through the use of deficiency judgments. Often, a former homeowner doesn’t get notified of the judgment until months later.

And, believe it or not, some banks will wait until you have become more financially stable before pursuing the deficiency.

Making matters worse is that the practice of short-selling, which is the most common cause of a deficiency judgment, isn’t just a strategy used by those who took out a sub-prime loan or who are facing foreclosure. Homeowners with standard mortgages who simply watched their home value fall can use a short sale, even of just a few thousand dollars, to get out from under their mortgage.

A number of factors also contribute to whether or not your lender will pursue a deficiency. For example, the foreclosure rate of your home state can play a role, as can the presence of any additional liens you may have had on the home, like a home equity line of credit or second mortgage.

Still, because a deficiency judgment can follow you anywhere and lead to the garnishment of wages and serious credit report marks, it is essential for you to make certain that your short sale or foreclosure is indeed the end of your relationship with that lender.

But without a promise in writing, are you really going to trust the lender’s word that your debt has been extinguished? The only way to ensure a lender does not try to collect from you after a foreclosure or short-sale is to coordinate foreclosure through a bankruptcy. In bankruptcy, you can surrender your interest in the property, ending any possible future liability should the property sell for less than your mortgage.

And despite what your bank has told you, you don’t need to short sell your home. Obviously, your credit is already going to take a hit from conducting a short sale, even if you haven’t missed any payments. Going through the hassle of a short sale with no perceivable benefit for you or your family is just senseless. The only beneficiary of a short sale is the lender, who saves on the expensive legal costs of a foreclosure. Do you and your family a favor, talk to a bankruptcy attorney today and discuss your rights under federal bankruptcy law.

In North Carolina, contact the Law Offices of John T. Orcutt at 1-800-899-1414. With convenient offices in Raleigh, Durham, Fayetteville and Wilson, we’re close to you.

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Published Sunday, January 24, 2010 @ 10:25 am

So the impact of your bankruptcy is settling in. You have mixed emotions but underneath, feel confident that it was the right thing to do. The phone has stopped ringing, the mailbox delivers good news (for the most part) and best of all, you can sleep again.

Now that it’s time to get back on track, saving money should be a top priority. And one way to do that is by examining what it takes for you to keep a roof over your head every month, even if you managed to avoid foreclosure. Today, thanks to the real estate crisis which saw developers nationwide building new home homes and apartment communities on every plot of improvable land, it is a buyer’s market. Or in your case, it can be a renter’s market.

Apartments today are not what they were 20 years ago. Heck, they’re not what they were 10 years ago. Amenities like multiple pools, saunas, movie theaters, free Internet Access, fitness facilities, online rent payments and adjacency to high-end retail and entertainment districts make apartment living a very attractive and value-driven living option.

It’s important to put aside for a moment the aura of home ownership. There is without doubt pride in being able to maintain a home. The neighbors, yard space, security—all elements that many consider part of the American Dream.

However, the “dream” is not really home ownership. It’s about seeking a sense of accomplishment and the ability to create opportunity. But that’s not what happened.

Because home ownership was at one time a rare thing, a symbol of iconic Americana, it became the physical manifestation of our desire to experience those concepts. We somehow believed the signing of a mortgage was tantamount to everything our grandparents came here for.

However, the “dream” continued to manifest, morphing into a distorted, material facade of success–yet another symbol of where we like to position ourselves within society. And through the fog of that notion we watched the American Dream derail and plow violently through the psyche of the masses.

Now, as we learned in the crash’s aftermath, people are just happy to be under a dependable roof. And that’s a good thing; because maybe now we’ll realize that upon examination of our cost of living, we’ll realize just how much money we spend on what we were told was the culmination of the American Dream: owning a home.

The point here is that the housing crisis helped facilitate a historic financial demise. It was the marketing of home ownership in the face of viable, more than suitable alternatives in the the apartment market that led hundreds of thousands of Americans into foreclosure. Now all that’s left are faint apologies and the drive to get the Dream back on track.

Today, apartments are plentiful. Nice, well-kept three and four bedroom flats with multiple bathrooms, tile floors and clean carpets. In fact, according to new industry report, there have not been so many available apartments in three decades. The national average vacancy rate (the percentage of vacant apartments of total available) is 8 percent, which is the highest number the reporting agency has ever published as a country-wide statistic.

So do you know what that number means for renters? Savings.

A high vacancy rate means landlords are willing to negotiate to the fill their vacant units. In other words, renters have the upper hand. And for someone trying to save money and build a life after bankruptcy, renting should be a serious consideration, regardless of your current living situation.

Know someone who would also benefit from filing bankruptcy? Keep in mind that the Law Offices of John T. Orcutt offer a totally FREE consultation out of 4 offices conveniently located in North Carolina: Raleigh, Durham, Fayetteville and Wilson. The number is toll free 1-800-899-1414, or suggest they visit the website at www.billsbills.com for information about just about everything there is to know about bankruptcy, how it works and what it means.

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Published Wednesday, December 9, 2009 @ 12:28 pm

Filing bankruptcy, among other things, is about getting a new start. Few things can match the sense of relief that follows even the first phone call to our office, let alone the day you know for sure that your bills are gone forever.

For some, starting over may mean leaving behind everything that contributed to your old spending habits, the material goods, the car, even the house, that led you deep into the financial abyss. If that sounds like you, maybe it’s worthwhile to consider a relocation, not just a downsize.

Know that moving is expensive. So yes, you’ll have to save money. That takes time, and yes, more money. But the most important question is, of course, where to move? Thankfully, the folks at Forbes.com have assembled us a list of places that get the Best Bang-For-The-Buck when relocating. Here is how they broke it down:

Forbes examined markets that at one time were considered second to the most popular regions during the boom times. For example, at one time, homes in Orlando and Las Vegas were flying off the lots. Developers went nuts and inventory was quite high. Now? Well, not so much. Home values are depressed and the foreclosure rates are at the top of the list.

Home prices are down 29 percent from 2006, making areas that never really experienced the boom that much more affordable. And, with a solid employment base, consisting of families who have roots in the area, as opposed to transient corporate workers who ship out every couple of years, places like Des Moines, IA and McAllen, TX are nice places for those looking to get a solid re-start.

Don’t want to move that far? Try Greenville, SC or Chattanooga, TN, which made the list at numbers 20 and 8, respectively. Because the boom avoided these areas for the most part, home values stayed relatively even, as did jobs.

If you must know (why else are you reading this post), Omaha, NE was at the top of the list. Forbes researched the 100 largest MSAs (Metropolitan Statistical Area), examining foreclosures as a percentages of home prices; apartment vacancy rates; unemployment figures; three-year job forecast; three-year home price forecast; housing affordability; median real estate taxes and commuting time.

Here is the Top 25 cities that offer you the Most Bang-For-The-Buck:

1. Omaha-Council Bluffs, NE
2. Little Rock-North Little Rock-Conway, AR
3. Jackson, MS
4. Des Moines-West Des Moines, IA
5. Augusta-Richmond County, GA-SC
6. Wichita, KS
7. McAllen-Edinburg-Mission, TX
8. Chattanooga, TN-GA
9. Colorado Springs, CO
10. Ogden-Clearfield, UT
11. Scranton–Wilkes-Barre, PA
12. Columbia, SC
13. Harrisburg-Carlisle, PA
14. Provo-Orem, UT
15. Syracuse, NY
16. Baton Rouge, LA
17. Buffalo-Niagara Falls, NY
18. Palm Bay-Melbourne-Titusville, FL
19. Tulsa, OK
20. Greenville-Mauldin-Easley, SC
21. Raleigh-Cary, NC
22. Pittsburgh, PA
23. Knoxville, TN
24. Louisville-Jefferson County, KY-IN
25. Youngstown-Warren-Boardman, OH-PA

You may note that a number of the cities are from regions away from the coast, as those regions tend to experience serious market growth in a fast-moving economy. You may notice too that there is not one California city in the Top 25. In fact, there is only one in the Top 50.

Cities in the mid-west, west and industrial regions of the east tend to hold a particular attraction to folks looking to find affordable homes and jobs. Many places in the west offer outstanding recreation and service industry jobs as well cities that cater to the younger, live-life-with-less crowd that is continuing to grow in the midst of a Wall Street-driven recession.

Whereever your final destination, remember that http://www.billsbills.com/bankruptcy-blog/ is always as close as your Web browser.

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Published Saturday, September 26, 2009 @ 6:17 pm

One of the greatest benefits of filing for bankruptcy protection is that it allows struggling homeowners a second chance to catch up on missed mortgage payments. For many people, the fear of losing a beloved family home is one of the most stressful parts of their struggle with debt. But is your house really worth saving?

If you find yourself living in an “upside down house,”  it may be worthwhile to consider simply letting the house go. “Upside down” refers to a property where you owe more money than the house is worth. Back when the housing  market was still booming, this situation was almost unthinkable, but now that the bubble has burst, short selling―selling a home for less than what is owed―is all too common. Unfortunately, a short sale leads to all kinds of nasty repercussions: Unless your mortgage lender agrees otherwise, you will still be responsible for the difference between the sale price and amount owed. Second, even if your lender agrees to forgive the debt, you’ll still be hit with the tax consequences.

If you’re a homeowner and considering bankruptcy, now is the time to take an objective look at the big financial picture and make some tough choices. Your equity situation is a great place to start this assessment. If you don’t have any equity in the home, holding on to that upside down house can’t even be justified on the basis that home ownership is a good investment. Just a few years ago a house was a sterling investment―but if you’re continuing to sink in negative equity, you don’t own a good investment, just a bunch of debt. And if you are living in an upside down house, how bad is your situation? In other words, how much more money do you owe the bank than the house is worth? If the difference is only a few thousand dollars, it may be OK to hold on to the house if you can really afford the payments. But if the difference is huge, you may want to consider the idea of surrendering the property in bankruptcy.

Second, take a look at your budget. Why did you get behind on your payments? Were you always struggling to make the payments, always one emergency away from getting behind? If getting rid of your credit card debt doesn’t free up enough money to comfortably make the mortgage payment, bankruptcy won’t help you save the home in the long term. If, on the other hand, you got behind because of a temporary drop in income that has since rebounded, bankruptcy can get you back on track with your mortgage and put your in a better financial position by dumping your unsecured debt.

The costs associated with home ownership go beyond the monthly mortgage payments. Can you afford property taxes? Your homeowner’s insurance? Does the house require a lot of maintenance? What are your utility payments like? These are all good questions to consider as you assess whether it makes sense to hold on to your home. Another thing to keep in mind is the structure of the loan. If you were one of the many unfortunate borrowers who signed on to an adjustable rate or interest only loan, your loan terms will never allow you to get ahead.

The good news is that the depressed housing market means that a lot of places that can’t sell are being offered for rent. Renting can be a good solution for someone seeking to rebuild their financial health, especially in the short term. If you are trying to keep your kids at the same school or are reluctant to leave the comforts of a familiar neighborhood, you may be able to find a good rental in the same area as your house.

Make sure to ask your bankruptcy attorney for advice on this issue. Letting a foreclosure proceed unchecked is not a good way of dealing with the situation. If the property sells for less than the outstanding loan balance, you will still owe the difference.. Surrendering the home in bankruptcy shields you by eliminating any personal liability after the foreclosure sale. If you are facing foreclosure now, contact a bankruptcy attorney immediately to ensure that you remain in control. Your attorney can help you assess your financial outlook rationally and help you make the right decision.

From: The Law Offices of John T. Orcutt. We always offer a free initial one on one consultation. Call today to set up your appointment. If you are in North Carolina, call 1-800-899-1414, or visit www.billsbills.com to fill out our free and confidential debt questionnaire.

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Published Thursday, September 3, 2009 @ 9:43 am

The economy is so grim right now it’s hard to see the silver lining, but the good news about markets is that they rarely stand still forever. Even now, economists are slowly and cautiously becoming more optimistic about the situation, and consumers are gradually gaining back confidence. The housing market, for example, posted a quarterly rise in prices for the first time in three years, which may indicate a stirring of recovery. Still, there are a lot of homes out there not worth half what they were recently, and new construction has ground to a halt for the time being. Is there a silver lining in this one for you?

Well, there may be if you are not a homeowner and not looking to become one immediately. With so many properties sitting empty while the market waits for buyers to return, people who are not homeowners can enjoy a renter’s market. Suddenly there are many options for housing–nicer places at must lower prices. In some areas of the country, it is actually cheaper to rent than to buy at the moment.

If you are considering or already preparing to file for bankruptcy protection, you may be worried about your ability to rent a home, since so many landlord applications now require a credit check and/or ask about past bankruptcies. Don’t let such questions dissuade you from pursuing a rental you really like. Because this is a renter’s market, landlords may soften some of these requirements. Most landlords will be more concerned with your payment history with past landlords than whatever happened with your credit cards. If you have a good history with someone, ask him if you can use his name for a reference and offer to provide it for the new landlord when you apply. Other times you may be able to bargain with the landlord by offering to pay a slightly larger security deposit or providing other assurances of payment. Remember that as much as you need a place to live, landlords need tenants to make money from their real estate investments―or in this market, just to minimize losses!

Home ownership has some real advantages, and many people feel that it’s a waste of money to pay rent that will never translate to equity. However, home ownership comes with its own host of troubles, and renting can be a good solution, even if just in the short term. Home ownership is a big step, and you may want to allow yourself some breathing room (and an opportunity to rebuild your credit) before taking the plunge. If so, you might as well take advantage of a renter’s market!

If you already own a home, but are having trouble with the monthly payments, bankruptcy is a great option to get caught up on the missed payments. Unfortunately, some people wait until it’s too late to take advantage of these protections, and by the time they accept that bankruptcy is their best option, it may be too late for bankruptcy to help. That’s why it’s important to contact a bankruptcy attorney early in the process, before your finances are beyond repair. If you have conceded that it not financially feasible to keep your home, bankruptcy acts as a shelter from the after effects of a foreclosure, such as tax liability and deficiency judgments. Further, if foreclosure is imminent, a bankruptcy will stop the foreclosure from proceeding, even if you intend to surrender the property in the foreclosure. This strategy can buy your family some time to transition to a new living arrangement.

These are strange days for homeowners and those considering home ownership. If you have doubts about your future financial viability, it may be best to wait out the recession before plunging into the real estate market. If your income is already stretched to the max by debt payments, consider speaking with a bankruptcy attorney. A properly planned bankruptcy can put you in the best possible position to rebuild your damaged credit and pursue home ownership in the future.

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Published Sunday, August 9, 2009 @ 5:13 pm

The economic recovery packages rolled-out by the federal government are providing a lot of people in the midst of rebuilding their financial livelihood a chance to get back on track even faster. For those who are underway with getting back on their feet after a successful bankruptcy, today’s housing market, in conjunction with the First Time Buyer Tax Credit, is offering home ownership opportunities not seen in a long time.

Here’s a breakdown of how the homebuyer tax credit shakes out:

You are eligible for the tax credit if it has been three years since you owned a home. This is ideal for those who may have lost a home through foreclosure or decided to sell to reduce their monthly mortgage commitments before bankruptcy. You must close on the home before December 1 of this year. (However, there is very good chance the government will extend that deadline.)

The amount of the tax credit is based on 10 percent of the home’s purchase price to a maximum credit of $8,000. It is important to understand that there are limits on income, too. This means that you need to make less than $75,000 individually or $150,000 if filing jointly to be eligible.

In the tax credit’s current form, it does not have to be repaid. This makes it different than the tax incentive that was in place during 2008. The credit is claimed on your federal income tax return, specifically form 5405. Since we’re not accounting professionals, it would be best to consult a tax expert to understand the specifics relative to the paperwork. However, it seems that for once, the IRS has made that component of the process pretty simple.

Here is a quick tax lesson: A tax credit differs from a tax deduction. A credit is a dollar-by-dollar decrease in what you owe. A tax deduction is a figure taken away from the amount of income that is taxed.

You may have heard that the department of Housing and Urban Development (HUD) has announced that it will “monetize” the tax credit. This entails the ability to apply the maximum credit for which you are eligible to the home purchase right away instead of waiting until your tax return to claim the refund. This requires you to borrow with an FHA-insured mortgage, however. Don’t let that dissuade you though, as FHA-insured mortgages are very common.

If you choose to take advantage of the credit in this manner, nonprofit lenders and others that are FHA-approved will be allowed to offer up to the $8,000 limit as a short-term loan.

Another nice advantage of the first time homebuyer tax credit is that you can apply it to your 2008 tax returns. The law says that a home purchase in 2009 can be treated as if it was bought in 2008, meaning that your income from 2008 will be used to determine eligibility and that it accelerates when the credit can be claimed.

The tax credit seems to be creating a real boost for the economy as a whole, as home buying has bounced back in the last couple of months. The IRS stated that close to 1.1 million people have applied for the tax credit through amended returns and more should do so come April of 2010.

As mentioned earlier, your best source for the real nitty gritty on this tax credit is a certified tax professional. We believe it help a number of clients get a leg up on their life after bankruptcy.

From the Law Offices of John T. Orcutt. Call 1-800-899-1414 for a free debt consultation and get on the fast track to real financial recovery.

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Published Thursday, August 6, 2009 @ 1:21 pm

The month of July 2009 saw yet another increase in the number of consumer bankruptcies filed in the U.S., as low employment and high consumer debt continues to be a toxic combination throughout most of the country with only little signs that an antidote can be found. The number of filings, 126,434, was a 34.3 percent increase from the same month in 2009 and 8.7 percent increase from June, 2009.

Most experts agree that the rapidly decreasing number of jobs is in direct correlation with the consistent increases in bankruptcies every month. Also contributing to the increase is the so-far ineffective Home Affordable Modification Program. According to a recent report released by the Treasury Department, the modification program has only benefited 9% of eligible homeowners. When loan modification efforts fail, many homeowners turn to Chapter 13 bankruptcy, which can immediately stop a foreclosure and allows the homeowner the opportunity to catch up on missed payments over a 5 year plan.

In each of the last three months, more than 20 percent of those who have filed cited they did so to avoid foreclosure. The data was compiled by the Consumer Credit Counseling Service of Greater Atlanta. The organization, a nonprofit credit counseling service, collected data from individuals from April to June and determined that counseling was not going to be enough to assist them in preventing foreclosure.

Even with banks being pressured by federal government (and the national court of public opinion) to work with mortgage holders, the majority of home owners are frightened by the chance they could lose the roof over their heads. This alarming trend also demonstrates, once again, that the White House is not doing nearly enough to promote or educate America on its Making Home Affordable program, which provides financial incentives for banks and mortgage lenders to alleviate the rate at which they foreclose on homes.

The report is also further evidence that a Bankruptcy Cramdown Bill is more critical than ever. A proposed legislative action that has recently shown renewed signs of life, the bill would allow bankruptcy judges to alter, or cramdown, a homeowner’s mortgage in conjunction with their approved bankruptcy plan.

As we discussed on the blog previously, Senator Dick Durbin from Illinois is fighting to keep the bill breathing, going so far as to recently issue many in the lending industry a three-month ultimatum to do more in stemming the tide of foreclosures or see renewed vigor in Congress to revive cramdown legislature. Financial Services Committee Chairman Barney Frank from Massachusetts, a lightening rod for all things controversial in government, is also pushing hard to bring the bill back to life.

Oddly enough, the cramdown battle is being waged between powerful Senate Democrats and President Obama. Meanwhile, Americans’ home loans flap helplessly in the wind of the recession.

If you are behind on your mortgage, bankruptcy can help you stay in your home. In North Carolina, contact the Law Offices of John T. Orcutt for a free initial debt consultation. 1-800-899-1414.

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Published Sunday, July 26, 2009 @ 9:46 pm

It’s a couple of years after your debts were discharged in a Chapter 7 bankruptcy, you’re on track with your payments and expenses, and you’ve been working steadily to rebuild your credit. Now you’re ready to buy a new home: you’ve done all the homework, you’ve looked for good lenders and you’ve found your dream house. All you need now is to borrow what the house is worth, right? Well, not quite. If you have had some negative history on your credit report since your bankruptcy, you may need to come up with as much as 30% of the value as a down payment in order convince a lender to extend a loan to you. That’s why it’s important to work diligently on repairing and maintaining your credit after bankruptcy. And if you’ve got a clean record since bankruptcy? Even with great credit, most lenders will only allow you to borrow somewhere between 80% and 90% of the cost of your new house. This means that you will generally have to come up with up to 20% of the value of the new house as a down payment. Ouch.

Good news: you may be able to get a loan with a lower down payment if you purchase your home with an FHA or Veteran’s Assistant home loan. An FHA loan is a loan issued by a federally qualified lender which is insured by the Federal Housing Authority; thus, the Federal Housing Authority doesn’t actually provide the loans. The purpose of the FHA lending program is to help people who can’t afford a conventional home loan process, including the down payment, thus aiding low-income buyers and people who have struggled with financial problems to attain their dreams of home ownership. With an FHA loan, your down payment could be as low as 3% of the selling price of your new home, or even less. FHA loans are great for first time buyers and for people who haven’t owned a home for over three years. FHA loans are also excellent for people who have a bankruptcy on their record as recent as two years―FHA lenders are more likely to extend a loan to these aspiring home owners. An FHA loan will also allow you to roll closing costs into the loan, which will make buying your home even easier. The only sum you’ll need up-front will be the down payment. There are some drawbacks to the FHA program: a prominent one is that in order to qualify, the house’s value is subject to a cap.

If you have money in a 401(k), you are permitted by law to withdraw up to 80% of the account’s value to pay for a house that will be your primary residence. In order to avoid an unsavory surprise later, you should ask the 401(k) plan administrator to take taxes not paid out of the amount you are to receive.

If you don’t have the money for a down payment on hand or in an account such as a 401(k),  what then?  Fear not, there are other steps you can take to come up with the down payment. Each state has a housing authority, and these agencies frequently run programs to help people who are struggling to come up with the down payment for a new home. A housing authority may be able to provide you with a grant, a bridge loan, or other means to help you drum up that down payment. You will generally need to meet certain requirements, so you should check out the housing authority in your state to see what these are and what you can do to qualify. A directory of state housing authorities can be found at: http://www.ncsha.org/section.cfm/4/39/187.

Brought to you by the Law Offices of John T. Orcutt. Call 1-800-899-1414 for a free initial debt consultation.

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Published Sunday, July 5, 2009 @ 8:05 am

Buying a home after bankruptcy is a smart move. And yes, it is possible! If you don’t own a home already, buying a house is an excellent step toward rebuilding your financial life. A home can be a great investment because it is one of the few major assets you will own that will hopefully appreciate over time. Home ownership also demonstrates stability, which can reflect positively on your credit profile.

The good news is, as soon as a year after your debts are discharged in a Chapter 7 bankruptcy, you may be eligible for a good car loan, and just two years after completing a bankruptcy, you may become eligible for a home mortgage with a good interest rate. If you are still making payments in a Chapter 13 bankruptcy, buying a new home could be trickier, though it will not necessarily be out of the question. Generally, your trustee will have to grant permission for you to buy a new home if your are still in your plan. One situation where you may be allowed to buy a home before the end of your repayment plan is if you already own a home which you would like to sell. If you have equity in the home, you may be able to use some of the sale proceeds to pay back debts, and then use the rest to make a down payment on a new property. The payments for the new mortgage may or may not be included in your repayment plan.

The key to owning a home after bankruptcy is rebuilding your credit. Be proactive. Post-bankruptcy, you need to know your credit score and be familiar with your credit report. If there are discharged debts with balances still showing on your credit report post-bankruptcy, contact the credit bureaus to have the negative reporting removed. Fixing mistakes on your credit reports will improve your FICO scores.

Of course, another good way to improve your score is to make timely and steady payments on your debt. Take out a low line of credit, and make small purchases, paying off the balance on time at the end of each month. If you own a home or car, set up an auto pay with your bank so you will never be late on a payment again. Utilize your bank’s online notification systems to alert you to upcoming payment due dates. Don’t ever have an excuse for a late or missed payment.

After one or two years of proactively rebuilding your credit, you will be ready to evaluate your home-buying options. Carefully consider your budget, and what you can afford. Here, a good rule of thumb is that you should pay slightly below a third of your income for housing. A lender will usually pre-approve you for loans with payments equal to about 28% of your income, but 20% is a better, safer bet. That sum should include all of your housing related expenditures, including principal, interest, insurance and taxes. Don’t take chances by buying the most expensive house you can afford in terms of monthly payments, counting on the market to increase housing prices; like all markets, the housing market is subject to dips and even (as lately) plummets. Instead, buy a nice house that will fit your needs and try to pay it back as quickly as you can.

Your prudence and careful work post-bankruptcy will be well worth it: in a matter of months, you can go from bankruptcy to home ownership, setting up a solid base for long lasting financial success.

The Law Offices of John T. Orcutt have helped thousands of North Carolina families recover from financial uncertainty. If you are considering bankruptcy, call 1-800-899-1414 to set a free initial debt consultation. Visit the website billsbills.com and fill out our confidential debt questionnaire to help decide if bankruptcy is right for you. Take charge, file bankruptcy.

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Published Wednesday, May 27, 2009 @ 2:28 pm

Future home ownership is a major concern of so many people who have made the decision to file bankruptcy. A previous post on this blog discussed the ins and outs of your ability to buy a house after emerging from bankruptcy. The good news is that it is completely possible and that you can indeed be a very viable mortgage candidate.

However, there are some drawbacks to home ownership in general, many of which are related to costs. For starters, buying a home is not going to be the same rapid-return investment it was five years ago. As you know, the recent real estate boom sent home prices flying because financing was so readily available. That bubble has burst. Folks who have been watching real estate prices understand that in many parts of the country, home values have dropped significantly and in fact, hundreds of thousands of people owe more on their home than it is worth. Thus, don’t consider home ownership just for the investment potential. Unfortunately, in the last several years, a lot of people did just that.

There is a healthy number of hard costs associated with buying a home, especially now that the 100% financing days have faded into the sunset. As a result, you’re going to need a down payment. And that means thousands of dollars. Mortgage rates are very attractive right now but they demand at least a 20 percent down payment. For a $150,000 home, that equals $30,000. Knowing what you now know about preparing for financial emergencies and the power of having cash on hand, that amount of money could also buy a great deal of emotional comfort should medical bills or other surprise expenses occur.

Many lenders have significantly increased their costs relative to approving and processing a home loan. Fannie and Freddie Mac, for example, have pushed fees that in many cases will equal three percent of the mortgage. Again, for a $150,000 home, you’re looking at $4,500 simply for the ability to obtain the mortgage. Still, it should be noted that those fees are the lowest in North Carolina. They are the highest in New York.

Don’t forget about the costs of your inspections prior to closing. While many inspectors have become quite competitive in the face of the down market, many of them have also gone out of business. Thus, don’t just assume that inspections have become cheaper. When you add together a general home inspection, radon testing and pest reports, you could be looking at another $1,000.

In the last several years, apartment homes have become exceptional alternatives to home ownership. Real estate developers have created an almost new sector to the apartment market in the concept of “apartment homes.” Many apartment communities today come with outstanding amenities, furnishings and add-ons that are equivalent to many higher-end homes. Granite counter tops, multiple full bathrooms, three-bedroom options, club houses with elaborate pools and fitness centers and even movie theaters are just some of the features available to renters today. Renting also provides flexibility in lease options, very low maintenance costs and commuting convenience, since so many communities are built around mass transit stops, employment centers and highway access.

Even though home ownership is a viable possibility after bankruptcy, and a worthy goal to shoot for, it may not always be your best option. As with all major financial decisions, weigh the costs and benefits carefully and do what’s best for your family and your finances. And of course, keep reading our Blog!

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Published Tuesday, April 21, 2009 @ 7:15 am

Bankruptcy gives you a fresh start; a relief from the stress and uncertainty about your future. Your hope is that things will soon be back to normal. But that hope is often based on the answers to so many questions. For many, one of those questions may be about your ability to buy a home. You may have heard the myth that a bankruptcy is a black mark on your credit, and that you will never be able to buy a home. Don’t believe it for a second! You can buy a home after bankruptcy. With some time and planning, it will be much easier than you think.

First and foremost, you need take what you have learned through the bankruptcy process and apply it to your everyday management of money. Start small with credit cards (secured cards may be your only option at first) or other lines of credit and use them sparingly and pay on time. The point is to establish a healthy payment history, which is the most critical component of your credit score. Remember that when first rebuilding your credit, interest rates will be a bit higher. Nevertheless, it is important to obtain some credit to demonstrate you can maintain your finances and that the risk to grant you credit, like a mortgage or car loan, has diminished.

A mortgage lender is going to want to see at least two years of responsible credit handling as well as a steady job. A reliable source of income will mean a great deal to a bank when deciding whether or not to grant you a mortgage. Be aware that to a bank, sporadic employment, part-time jobs or freelance work will not be an adequate demonstration of steady employment.

Down payments are also important, especially in today’s lending market, but those requirements can vary. You will certainly stand out as a “good” risk if you have cash available as a down payment. Bankers will recognize this as responsible money handling and it will further demonstrate that you have maintained employment. Additionally, a down payment will help keep your monthly mortgage payment at a manageable level. The larger the positive difference between your monthly income and your mortgage, the better chance you have of being qualified.

Today’s volatile financial environment is for many people the most serious recession they’ve experienced. However, in terms of real estate, bad markets often translate into opportunity. Home prices nationwide have fallen substantially and and are unlikely to reach pre-recession levels for quite some time. This means that homes will be more affordable in the next five years. Additionally, the federal government is creating a number of first-time home buyer incentive programs to encourage home ownerhip.

Given the nation’s collective effort to help everyone get back on their feet, a person emerging from bankruptcy will be in a great position to own a home in very little time. With the advice of an experienced bankruptcy attorney and some sound financial planning, you can be rid of your debt and be on the path to owning a home.

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