Question: I have been pre-approved for a home loan with an 8 percent down payment if the seller will carry back part of the sales price with a second mortgage. The lender quoted a 8.9 percent interest rate, but I would rather not go over 6 percent interest. My credit isn't that bad.
I filed for Chapter 13 bankruptcy, but it was dismissed because I didn't follow through. I am writing to the credit bureaus to clear this off my reports. Also, I did have a home foreclosure, but it was under duress and fraud. I am filing a lawsuit because the home sellers' disclosure statement to me was a lie. I couldn't get refinancing to save my home.
I also had bad luck in a pet-grooming business. The Small Business Administration wouldn't make me a loan because I hadn't been in business for two years.
Should I go ahead with that ?? percent subprime mortgage? What should I do?
Answer: Although I often say anyone with a decent income can afford to buy a home, your situation might be an exception. Face facts. You have bad credit and are an extremely high credit risk. That's why the subprime lender you consulted wants a high 9 percent interest. Even 8 percent interest is to high to pay especially in today's bad financial times when you put up your residence as loan security.
Six or 7 percent would be reasonable for a few years until you clean up your credit. However, the new chairman raised and will, over a period of time, raise the interest rates again and if you wait much longer these rates may go up.
My suggestion is to forget the past. Admit you made some mistakes. If you had followed through on a repayment plan, filing chapter 13 bankruptcy could have helped you avoid foreclosure.
If your pet-grooming business is doing well, keep building it. If not, sell or close it and get a salaried job to establish your finances. Postpone a home purchase for at least a year until you straighten your finances. Look to the future and good luck.
Have a real estate question? Write, call, fax or e-mail:
Bob Jeffries, Realtor,
Century 21 Birchwood Realty, Inc.
4040 Del Prado Blvd., Cape Coral, FL