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!