Blessings From Home

Buying a home after bankruptcy

Two years ago this month my husband and I had to file bankruptcy. It was something that we hated to do, but at the time found it necessary. We had a business failure, numerous medical bills piling up, a mortgage, and a van we thought we had to buy, and the company my husband worked for 10 years for was about to shut down. So we decided to give it all up and start over. And that's what we did. We lost our home, our van, and a lot of bad debt. We sold a lot of our belongings and moved in with my parents with our three kids for about 6 months. We literally started all over.

Since then, we've managed to stay on top of our bills, always paying them on time, we've managed to buy a used van with cash. We had another car that was given to us when my grandma passed away. And we've managed to buy a brand new washer/dryer, dishwasher, and couch/loveseat with cash that we saved. We haven't accrued any more debt except for rent and utilities. We also have my student loans that we were not allowed to put in the bankruptcy that we pay for monthly.

We've been renting for a year and a half now and I think we're finally ready to start making the move towards buying a home. Our rent for this lovely house is quite high, and I'm sure we could get a mortgage payment for a lot less, and actually have our money going towards something we can one day call our own instead of paying for something that although is providing a roof over our head, will never be ours.

So I've been doing some research on the steps needed to take for buying a home after filing bankruptcy and here's what I've found so far.

~They suggest that you wait until 2 years after you have been discharged from your bankruptcy to apply for a mortgage. Now although we filed in October of 2005, we were not discharged until April of 2006. As it turns out, our lease for this house is up in April of 2008, exactly 2 years since our discharge. You can try for a mortgage sooner than that, but they say it is a little bit harder.

~They suggest paying all your bills, utilities, and rent on time. We've got that down.

~They suggest trying to save back some money. This is something we are working on. But in addition to saving back whatever we can, we have a couple of big checks coming up by the first of next year. One is a small annuity payment, that we usually use to help buy Christmas and pay bills, but we won't be spending near anything what we used to spend on Christmas, and should have most of it bought by the time the check comes in, and we will be making most of our gifts, and we will have our bills paid on time and won't need to catch up like we used to. The other is our tax return, which we also used to have to have to catch up on bills, but won't have to as we are set on paying our bills on time. I'm ready to be as frugal as I can in every area that I can from groceries to gifts to bills to make this dream happen for us.

~They also suggest building up your credit in any way you can. Now although buying a car, washer/dryer, couch/loveseat, and dishwasher with cash was nice, it did nothing for our credit. My student loan helps our credit very little. And we don't care to load up credit cards with debt and be back in the same boat we were in. So my plan on this is one of two things...a) get a prepaid credit card, or b)get a regular credit card and use only for gas and pay it off every month. Now, I'm leaning towards the first, as I don't like to have the temptation of a credit card looming over me, but from what I understand the prepaid credit cards don't do very much for your credit either. This is going to have to be something we need to continue to pray over.

~Praying is something that is always the best thing to do in any situation. We are praying for guidance through this. We don't want to rush into anything and find ourselves making the same mistakes. We would love to find a home in the country with around 5 acres so that we can raise our children in peace and teach them ( and learn right alongside them) all the ins and outs of running a homestead. We've always lived in town and although it has it's perks, there's no contest to living in the country for me. I know the responsibilites that comes along with a homestead and am prepared to make that sacrifice, as is my husband.

The next 6 months we will be making some changes in our lives. We're ready to simplify our lives as much as we can (right now through my mission clean and declutter). We're ready to get by on as little as we can so that we can have our dream ( even if it means cooking a lot from scratch, no eating out, and beans 2 or more times a week). We're ready to take the steps needed so that we can buy a home, the right way. From time to time, I'll update on our homestead dreams and how they're coming along. Thanks for stopping by.

Love,

Sara

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{ 02:38, Tuesday, October 9, 2007 } { Posted by Busia }

Congratulations on your successes! I want to make one suggestion- a bank loan is looked upon more favorably than a credit card. Take out a small bank loan, put that money in a savings account, and pay it back every month on time. You can use the money from the savings to have automatic payments made so you will never be late and get a mark against you. You'll have to over time add some extra to the savings to cover interest, or at least do that towards the end, but it will build your credit up and you won't be risking having that credit card. I know from experience it is ALL too easy to have a bad month and say oh, I'm just going to pay only the minimum this month. Before you know it, it's a habit and the card is maxxed out. (Not saying you'd do this, but it happened to me).

Good luck with your home buying plans! You seem to be on the right track!

Have you heard of Dave Ramsey??

{ 03:13, Tuesday, October 9, 2007 } { Posted by erika }

I've been listening to him on the radio. You should see if he's on a station near you, or you could go to the library and look for his national bestselling books: The Total Money Makeover and Financial Peace.

Also, I must disagree with the other comment from Busia. DO NOT get a loan! What you need to do is find a mortgage lender who does Manual Underwriting when you go to get a loan for your home. Dave Ramsey recommends Church Hill (I don't know if it's one word or two) Mortgage. As he says - don't get a loan from the bankers who worship at the altar of the FICO score! Also he says to only get a mortgage that has a term of 15 years or less, a fixed interest rate, and DON'T pay points. He is such a great motivator! Listening to his Friday shows are especially motivating!

Happy saving!

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{ 04:34, Tuesday, October 9, 2007 } { Posted by morningsunshine }

let me echo the dave ramsey comment. our local station started carrying him about 6 months ago, and I LOVE everything he has to say. there is an option of listening to him live via his website too, if that is an option for you.

Thank You

{ 06:15, Tuesday, October 9, 2007 } { Posted by Anonymous }

I find this honest post encouraging. We also were discharged a bankruptcy last April 2006. I never heard of Dave Ramey but I will look him up.
Blessings,
Angie

thanks too....

{ 05:39, Wednesday, October 10, 2007 } { Posted by Anonymous }

for the encouraging tips... some things are just hard to deal with and money is one of them. glad ya'll are making progress.

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{ 03:51, Thursday, October 11, 2007 } { Posted by christianmommaali }

Sara-

Thanks so much for everything you posted, and for posting it so that we may pray for you and your family. I know too what it is like having a home with a family thne having to go back with your parents. We almost had to declare bankruptcy as well, thankfully by God's good grace alone, we were able to get out of there JUST in the nick of time. One more payment and we'd have been in trouble. Ya know? So I will continue to pray for you so that in April or later you are able to purchase a homestead. We just did, not 5 acres, but 2 acres, and we LOVE it, thank God for small pleasures! My husband and I will pray for you! Blessings all around soon Im sure!!! Love ya!

Ali