Question
I am interested in purchasing my first home. I would like to purchase it with my mother who has good credit but unfortunately my credit is not. I recently filed bankruptcy and it was discharged a year ago. Is this possible to do or will I have to wait?
Answer
Qualify To Buy A Home After Bankruptcy - 2 Options
Option 1
Buying a home after bankruptcy is challenging, but not impossible. Since the mortgage crisis in 2007 the options for getting a home mortgage following bankruptcy have gotten few and far between. In order for you to be on the mortgage, you will have to wait 2 years before you become eligible to qualify for a home. In order to qualify you will need to accomplish a few things like: re-establish credit, show that you are managing your credit property, document rent payments, and clean up your credit report. Also see 8 Tips for Credit Repair.
FHA Loans Following Bankruptcy
FHA loans are perfect for first time home buyers, especially for first time buyers in your situation who have had a recent bankruptcy. FHA is committed to making home ownership possible for people who have had a tough go of things. They understand that things happen and look at every loan application looking for how someone who has had past problems have been able to recover and move forward in a responsible way. If you can demonstrate this in your income, credit etc. then you have a good chance of getting an FHA mortgage to buy a home at two years from your bankruptcy.
Have Mom Buy The Home And Rent From Her
Option 2
Let's take the case that you do not want to wait, then you will have to see if your mom can qualify by herself. If she does qualify, then she could at some point in the future refinance and add you to the mortgage and title to the home. If she is going to live in the house it will be easier for her to qualify.
If you go this route, I would immediately start paying your mom rent when she gets her mortgage. Make sure that you pay her by a check and do a real lease. All of this information will be helpful in qualifying you in the future. The lease shows your housing expense commitment and your cancelled checks will show your payment history. Do not rely on a letter from her to say that you have been paying your rent on time. Of course she would say that you have been paying on time. Take the extra step and write her a check and have her deposit it every month without fail. By the time you are ready to get a mortgage with you on it, you will have some cancelled checks to prove your housing payment history.
Giving Gift Funds Or Receiving Gift Funds To Buy A Home
Since you were thinking of buying the home with her, does this mean that you have the down payment money? If so, you can give it to her in the form of a gift. One of the best loan programs for giving and using a gift is with an FHA home loan. If you plan to go this route, make sure that you follow the direction of your loan officer. There is a specific way to give your mom the money that you have as a gift for down payment.
If you decide to not go through the FHA for a mortgage and want to go with Fannie Mae or Freddie Mac then you will want to look at the MyCommunity Mortgage program with Fannie Mae or the Home Possible program with Freddie Mac. Both of these programs are similar to the FHA program and allow gifts. Again, follow the direction of your mortgage company for giving your mom the money for the gift.
If you don't know how long it will take to find a home, you could give her the money ahead of time and wait 60 days for the money to be in her account before you talk with a mortgage company. If the money is in her account for 60 days it is then considered her money, or seasoned funds, and you will not have to prove where the money came from.
If you give it to her and have to show bank statements that show a large deposit that you gave her, the money will not count as hers and it will make qualifying a little more difficult. It won't be a deal stopper, just that your loan officer and mom will have to jump through more hoops to get the loan done. A good loan officer will know how to handle a large deposit like that, but it will take a little bit of work to do it. So be smart up front, either wait and give her the money the right way as a gift during the loan process or way ahead of time so the money has time to season in her account so it's really her money.
Feel free to snoop around GetPreQualified.com for more information. Good luck and I would love to know how it all turns out.
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