Will I Lose My House When I Declare Personal Bankruptcy?

Bankruptcy may be an unsettling experience for people who find themselves deep into debt. The process is designed to help individuals keep up to the house as possible whilst repaying as much of the debts as possible. One key part of the bankruptcy process is what to do with the primary home. In some cases, you may file for bankruptcy and keep your home, especially if it matches the criteria for exempt status.


The quantity of equity you’ve got in your home will be a determining factor in whether you’re going to be able to maintain it. You’re permitted to maintain some property, called exempt property when you file for bankruptcy. That is property which you need provide a place to yourself. In the case of your home, it’s considered exempt from liquidation if the home does not have any non-exempt equity. It is possible to find this by taking your home’s fair market value and subtracting your own loans and liens on the house. The end result is called”unencumbered equity” Then determine the exemptions from the bankruptcy code of your home. Subtract that figure from the equity. If the figure is significantly less than the figure needed to pay off your home, then you can keep the home. When it’s more, it’s likely the bankruptcy trustee will sell the home to pay off your creditors. Each state has its own laws about what part of a home is exempt from seizure; these homestead exemption laws vary from state to state and may impact bankruptcy proceeding.

Chapter 7

Chapter 7 is also called liquidation bankruptcy. The bankruptcy trustee is obligated to sell off any assets to pay off creditors. That is why determining the non-exempt equity in your home is important. Is a consideration, where you stand in your own mortgage payments. If you are current in your payments, you are more likely to maintain your property. If you aren’t, you are more likely to shed it. Should you fall 90 days or more behind on your mortgage, the creditor can foreclose. In spite of all the automatic remain associated with filing for bankruptcy, if you are unable to heal the amount you owe on the mortgage, then you will lose the home.

Chapter 13

Chapter 13 is designed to help those who file bankruptcy to work out a payment plan with lenders for secured and unsecured debt over a three- to five-year interval. It is more likely that you’ll be able to keep your home in a Chapter 13, because the bankruptcy trustee will roll the quantity of money that you owe your creditor to the repayment settlement. During the payment plan, you must not just repay the cash mandated by your trustee, but also keep your mortgage payments current, in order to maintain your property. Should you spend time through the amount of the plan, you are out of bankruptcy and will keep your property. Should you fall behind in your deductions obligations or you home repayments , you are will likely lose the home, because your automatic stay will probably be vacated.

Second Mortgages

If you file for bankruptcy and have two mortgages, it’s possible to come out of the process with only 1 mortgage. In insolvency mortgages aren’t considered debt. The lienholder on the home always has priority. The next mortgage holder would just benefit out of a bankruptcy settlement if the initial lienholder was fulfilled. In the event the value of your home has fallen below the remainder of your first mortgage, your own deductions is permitted to remove the next mortgage entirely if you maintain the home.

Letting the House Move

In some cases, bankruptcy lawyers counsel clients to walk away from the home, even when they file for bankruptcy, according to the Moran Law Group. If you owe more than the home is worth, or if it might cost less to rent a comparable property, it may not be worth it to maintain the home. In bankruptcy, you are permitted to surrender the home and walk away from it, but you have to make that declaration during the bankruptcy process.

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Property Owner Rights Later Foreclosure

Foreclosure is the legal procedure which occurs when a borrower defaults on his mortgage obligations so the mortgage creditor sells the mortgaged property and uses the money to satisfy the mortgage loan. The mortgage process entails two separate property owners’ rights, such as the rights of the borrower who lost his home to foreclosure and the man who buys the property at the foreclosure sale.


After foreclosure, California law provides one very important legal right for your borrower who lost her property. That right is known as the right of salvation, and it means the borrower may redeem the mortgage at any time within a year following the foreclosure sale. To redeem the mortgage means to pay back the complete amount owed at the time of the foreclosure sale, such as principal, interest, late fees and costs incurred by the creditor at holding the foreclosure. In case the borrower accomplishes the mortgage within a year following the foreclosure sale then the borrower has the right to take the property back instantly, even if someone else purchased the property at the foreclosure sale.

New Owner

The new property owner who buys a foreclosure property has whatever rights the foreclosing lender had from the property. Property rights in California are ranked according to priority of time. Consequently, if the foreclosing creditor has a first mortgage on the home then the buyer at the foreclosure sale will purchase the property free and clear of any other exemptions. However if the borrower had a lien on his property at that time the foreclosing creditor forced the mortgage loan then the buyer at the foreclosure sale will probably purchase the property subject to that lien.

Trustee’s Deed

In California many mortgage loans actually use a deed of trust to lien the mortgaged property. Under the deed of trust the creditor can hire a third party, called a trustee, to execute foreclosure without going to court. This is known as power of sale foreclosure. The trustee must follow certain legal processes, such as sending out notice of a foreclosure sale and also holding a public auction at the foreclosure sale. The purchaser at the foreclosure sale may require title to the property by means of a trustee’s deed. The trustee’s deed includes a guarantee that the trustee carried out the appropriate procedures to properly and legally foreclose. The new buyer has the right to rely on these representations from the trustee’s deed, which means the new owner can’t lose title because the trustee made an error in the foreclosure procedure.

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How to Determine What Mortgage You Can Afford

Home ownership is associated with higher levels of happiness and satisfaction Degrees, according to a study by Robert D. Dietz, Department of Economics, Ohio State University, on The Social Consequences of Home ownership. Based foreclosure statistics 43% of American families pay more than they make each year and, on average, 1 out of every 200 houses will be foreclosed on. Buying within your means, and figuring out how much you can afford, will help you avoid foreclosure. A good technique is to calculate your debt-to-income ratio. This ratio compares your fixed expenses. It is also one of the methods if you qualify for a mortgage, lenders use to determine.

Contain your fixed monthly costs, such as the monthly payments of the loan you are considering, car loans, auto loans, minimum credit card payments, child support, alimony and student loans.

Add your income that is gross up. Include your basic salary, hints and some bonuses and commissions you receive. If you are self-employed, a seasonal worker or your wages depends on bonuses and commissions, calculate your annual gross income and divide by 12 to get an average monthly gross income

Divide your monthly fixed expenses by your monthly gross income and multiply by 100. This will give you your debt-to-income ratio. By way of example, in case you’ve got a monthly income of $3,000 and spend $1,000 in fixed costs, your debt-to-income ratio would be 33.3 percent (1000: 3000 * 100 = 33.33). Lenders usually need your debt-to-income ratio to be less than 38% of your monthly income.

Fix your finances so that your debt-to-income ratio is as low as you can. Although lenders might set limits on debt-to-income ratios, just you know what percentage of your income you want to cover non-fixed expenses, such as food, clothes, ballet classes and amusement.

Save enough money to support yourself for at least three weeks. This will give you time to discover a job if you are fired or your income is diminished. According to a research on 60,000 homeowners by the Homeownership Preservation Foundation, 32 percent of foreclosures occur after a job loss and 42 percent of all Americans don’t have enough savings to cover their expenses that are fixed for 3 weeks.

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Steps of a House for a Short Sale

A brief sale is a real estate sale where the creditor takes less than what is owed on the mortgage. A homeowner initiates a brief sale when his home is worth less than his mortgage and he can’t continue to create mortgage payments. An uncommon process previously, short sales have become commonplace since the onset of the recession in 2007.

Contact Your Bank

The first thing you should do as soon as you have decided to pursue a brief sale is contact with your creditor. Ask the representative if the company participates in the Home Affordable Foreclosure Alternatives program, or HAFA. The HAFA program streamlines the brief sale process by providing owners with pre-approved short-sale terms, using standard transaction timelines and obligations, releasing borrowers from prospective liability for mortgage debt and providing lenders, investors and borrowers with fiscal incentives. If your creditor doesn’t participate in HAFA, request the representative for information about its short sale process, especially about what paperwork is necessary, what qualifications you need to meet, how you are able to be freed from all mortgage liability through the sale process and how long the process will take.

Does Your Homework

Regardless of whether lenders participate in HAFA, they do not automatically approve brief sales. To prevent encouraging borrowers who no longer have equity in their homes from drifting away from their loans, lenders require borrowers to establish they cannot continue to create mortgage payments. Reasons–known as hardships–can contain job loss, income decrease, health problems, divorce, substantial increase in obligations or any combination of events. Gather together relevant records to help you in documenting your case, including W-2 statements, pay stubs, tax returns and hospital bills. Review your lender’s bundle of necessary information, and supply everything it takes to review your program.

Pick an Experienced Short-Sale Agent

When you have gathered all the documentation, start interviewing real estate brokers. Select an agent who’s experienced in short sales, and, if possible, find a person who has previously worked with your creditor. Before setting a set price, have him run a comparative market analysis, or CMA. The CMA is required by the creditor to demonstrate that the sales price is at or close to the market value of the home. When you record the house, you will disclose it as a brief sale, which allows buyers know they’ll be dealing with a creditor as well as a seller. If your creditor participates in HAFA, have your agent include this at the listing information as well so buyers see that the process will be streamlined.

Follow up about the Contract

After a buyer submits an offer you consent, submit it to the creditor with the CMA and hardship documentation. If the creditor doesn’t participate in HAFA, make certain that there is a clause in the sales contract which needs the creditor to release you from any further duty on the mortgage. If this clause is not contained –except at HAFA earnings because the program requires this particular relief –your creditor may come after you for any difference between the sales price and the mortgage balance. Have your agent follow the creditor occasionally to be sure the contract has been reviewed in as timely a manner as you can, and have her update the purchaser’s agent regularly.

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The Way to Qualify for a Sale on a Home

If something happens and you can no longer create your mortgage payments, your first thought is the most likely going to centre around foreclosure avoidance choices. Selling the house is an alternative, if you don’t owe more about the house than that which it is currently worth. If that’s the case, you’ll need to do a brief sale, and step one is convincing your creditor to accept it. In 2010, lenders have a backlog of foreclosures and short sales. This will impact the time it takes for acceptance and also for closing your short sale. Therefore, begin the approval process as soon as you are aware that you will be selling the home.

Prove to the creditor that you can’t pay your mortgage. The lender will want to see proof that you’re facing long-term financial troubles, such as unemployment, medical problems or even the death of a spouse.

Prove the creditor that you’re bankrupt –you have insufficient assets to cover your debts. If the lender believes that you have assets that can be used to pay the mortgage payment, you will not be qualified for a brief sale. Gather an informal financial statement, such as a listing of all your existing debts and assets.

Obtain a current market evaluation proving that your home will not sell for that which you owe the creditor. A realtor will compile this to you, at no cost. A market evaluation ought to choose the agent two to three days, depending on how active he is.

Compose and send a hardship letter. This letter should contain the reason you can’t pay your mortgage. Also send documents, such as a financial statement, bank statements and pay stubs for the past 3 weeks; include any documents that prove you’re headed for bankruptcy or foreclosure with no brief sale. Call the contact number on your mortgage payment stubs, and ask to whom and where you should mail your letter and documents.

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How Do Wrap-Around Loans Work?

A wrap-around loan allows a person to buy a home without having to receive a mortgage by a lender like a bank or credit union. Rather, the seller of the home acts as the creditor. Wrap-around mortgages can help buyers with bad credit and sellers who can not get rid of their homes, but they carry risks for both sides.


In a typical home sale, the purchaser obtains a mortgage and uses that money to pay the seller. The seller takes the money, pays off anything he owes on his mortgage and pockets the remainder as profit. In a wrap-around deal, the seller’s mortgage remains in place, and he creates another mortgage to the buyer, at a higher rate of interest than the one in his mortgage. That instant mortgage”wraps around” the very first, thus the name. The purchaser takes possession of the home and makes monthly payments to the seller; the seller utilizes some of that money to pay his own monthly mortgage bill and pockets whatever is left over as profit.


Say a seller has a home valued at $400,000, and he owes $250,000 on his mortgage at 6 per cent interest. His payment is about $1,500 a month. He sets up a wraparound deal with a purchaser, who’ll put $20,000 down and finance the remainder at 7% interest. Each month, the purchaser sends the seller a check based on a $380,000 loan at 7% interest. That’s about $2,500 a month. So the seller pockets the 1,000 makes his own payment. In effect, the seller is earning the difference between 6% and 7% on the first $250,000 of their mortgage, and the full 7 percent on the next $130,000.


For buyers who cannot get qualified for a regular mortgagebecause of terrible credit, for instance –a wrap-around could be a route to homeownership. When interest rates have increased considerably since the seller took out the original mortgage, a wrap-around may enable the purchaser to”piggy-back” on that lower speed –paying 7%, for instance, once the market rate would actually be 8 percent. For prospective sellers stuck in a bad housing market, a wrap-around may be their very best opportunity to unload the home.

Buyer/Seller Hazards

A wrap-around mortgage relies largely on trust. The purchaser can faithfully send her obligations every month, but if the seller doesn’t use them to pay the original mortgagethen his lender will foreclose on the home, and the purchaser will likely have lost her money and her home. On the reverse side, if the purchaser quits paying, the seller may have to foreclose on her behalf before his own creditor forecloses on him.

Due-on-Sale Risk

Mortgages typically possess a provision known as”due on sale,” that gives the creditor the right to”call” the entire loan–which is, demand repayment in full–if the residence is sold. A wrap-around arrangement can come instantly in the event the seller’s creditor exercises this option.

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Explain the Subprime Mortgage Rate Crisis

With the exclusion of the burst of the dot-com bubble along with the temporary downturn after 9/11, America saw continued expansion of the market during the late 1990s and 2000s. A housing market drove customer spending and made the financial markets a great deal of money. Yet, when the sector began to falter, the market began to falter with it, and a domino effect began that led to a meltdown in the financial sector and national recession. Two individual factors caused the subprime mortgage crisis: a home market that expanded too rapidly to become sustainable and a basic change in the managing of mortgages.

Time Frame

Starting in the 1990s, the USA began experiencing a time of great financial prosperity. The nation had a balanced budget and many consumers were feeling good about the future. These positive feelings spurred consumer spending, forcing a growth in industrial output, which boosted employment and contributed to greater prosperity. The first part of the 2000s saw a reduction in interest rates and people buying houses in record numbers, driving up demand and prices. In many areas, such as California, Arizona and Florida, buyers greatly outnumber sellers and bid for houses over the asking price. Sellers began increasing asking prices in response and double-digit annual value increases became common. Many who did not market their houses borrowed from the equity produced by the inflated value of the houses.


The assumption in the 2000s was that housing prices would grow indefinitely, which makes buyers rush into purchasing and investors and sellers anxious to see gains. Lenders fueled this assumption by developing risky, innovative loan programs to fund this overblown market and enlarge the pool of buyers. A huge proportion of those loans were subprime loansloans especially geared toward buyers with high risk credit and greater debt.


Lenders operate on perceived risk. They judge whether to approve a person for a loan based on the default risk of the applicant. Lenders do not like loan defaults due to the fact that they result in foreclosure, which traditionally costs them money. When home prices rise at a quick pace, as they did at the 2000s, foreclosure is much less costly or as likely, because the homeowner can sell before foreclosure occurs or the lender can stand to eliminate money once in a while on a foreclosed home. This means the lender can afford to take some extra risk with the types of loans it provides.


Lenders began offering subprime loans that featured reduced credit criteria, reduced down payment requirements, let more debt versus income, and started more applications with little to no income verification in exchange for gains from charging higher interest rates. These products enlarged the pool of buyers, which warmed up the industry even more. Adjustable-rate mortgages provided low initial monthly payments for a couple of years that would adjust to a speed more in keeping with the market and let more people get into homes that would otherwise be out of the price range with minimal to no money down. Home buyers with such mortgages expected refinancing to fixed-rate loans before the modification interval and building equity from increasing prices.


Lenders took even more risk in their loans since they changed how they did business. In the past, lenders were restricted in how far they could lend by just how much they had in deposits or may borrow. In the 2000s, most lenders acquired a continuous source of money to lend by bundling loans and selling them at a profit as mortgage-backed securities. These bundles comprised both high- and low-risk loans. The demand in the secondary market for these securities was high, with everyone from insurance companies to mutual and pension funds one of the purchasers. The sale of these loans required the foreclosure threat off the lender’s shoulders, freeing them to create even more loans and continue to fuel the market. A vicious cycle has been born.


The bubble burst when the first wave of foreclosures arrived in 2006 and 2007. Many homeowners did not or could not refinance their adjustable-rate mortgage could not afford the new high corrected payment. The resulting foreclosures began to flood the market and bring prices down. Lenders began to tighten lending criteria, which restricted the pool of buyers and, even when combined with falling home prices, further restricted the ability of homeowners to avoid foreclosure. Eventually, many homeowners were”upside down,” meaning that they owed more than what their houses were worth. A cycle began that eventually affected the whole nation and pressured many lenders out of business, starting with the heavily subprime lenders.

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Difference Between a Credit Line and a Home Equity Loan

An investigation on second mortgage loans results in a barrage of terms, two of which are fixed rate home equity loans and home equity lines of credit. When there are similarities between these and other household loans, they still have their own unique attributes. Both have their own place as valuable resources in the homeowner’s fiscal arsenal as ways to tap into a home’s equity.


Both home equity loans and home equity lines of credit, also called HELOCs, use the worth of a house for collateral to secure the loan. While you can repay either at any time, as soon as you sell or refinance the house you must repay the home equity loan or HELOC in full. Many wrongly refer to them as second mortgages, because they aren’t the principal loan on a house, but they aren’t part of the original purchase of the house so they are technically not a mortgage.

Home Equity Loans

Home equity loans are one-time loans made against the equity in a house that typically have a shorter loan term than mortgages, such as 10 to 15 decades rather than 30. They are compensated in a lump sum amount and can be used to pay off bills, make purchases, finance home improvement jobs or could be obtained as cash. Various lenders have different rules as to the highest percentage of a home’s worth they’ll loan for a particular purpose. A lender may allow you to borrow up to 90 percent of your home’s worth for paying off bills or decreasing debt, but might only allow you to borrow up to 85 percent if you’re taking the cash in cash.


Home equity loans are all available as fixed rate loans and adjustable rate loans. Fixed rate home equity loans feature an interest rate that remains the same during the life span of their loan. Adjustable rate loans have an initial rate of as much as two percent under a fixed rate home equity loan, but initial rate adjusts after a specified interval. Many homeowners enjoy a fixed rate home equity loan, especially when rates are reduced, because they can organize their funds not be surprised by greater payments due to their loan adjusting upwards.


Unilike house equity loans, HELOCs aren’t loans at all, but are open lines of credit which you can use at any given moment in a specified interval. When applying for a HELOC, your lender approves you for a maximum credit limit based on the value of your house. The creditor can correct the limit up or down, or cancel the credit line, dependent on changes from the house worth or variables like your payment and credit history. HELOCS function much as a credit card–your credit is revived as you pay it back.


HELOCs traditionally feature variable rates that change based on the prevailing prime rate. You might have a minimal payment because, for example credit cards, so many HELOCS only ask that you cover a very small percentage of everything you have borrowed from the payment. Your lender may ask that you take out a minimum amount during the life span of this HELOC.

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Where Can I Find Apartments for Rent?

Finding a flat in a significant metro region poses challenges for those seeking the perfect apartment. Searching for an apartment entails driving to lots of communities, walking through many distinct units and filling out applications. In metropolitan areas like San Francisco many options exist for finding a flat, some of which involve working with property representatives, and others that involve using online and print media resources to locate suitable apartments.

Real Estate Agents

Besides selling houses, realtors may also locate rentals by using the Multiple Listing Service (MLS) database; flat communities also use real estate agents to list their possessions. Private parties that have rental units in their homes often find it is easier to list the device with the agent instead of trying to find a tenant themselves. The owners pay a commission to the agent once the prospect she referred to the house signs a lease.


The Internet is a great resource for finding rentals of all kinds from the Bay region. A great deal of websites are specifically devoted to finding apartments, and the majority of them are easy to navigate. Apartment directory websites supply a fair quantity of information. Apartment communities may list their vacancies on line on directory websites, or supply links right to their own sites for more comprehensive information. Apartment community websites always include photos, floor plans, rental numbers, deposit information, pet policies, amenities and lease lengths. The individual community websites also supply maps and phone numbers, making it effortless for those looking for a rental unit to get hold of them.


The weekly residence and property sections of newspapers often carry advertisements for flat communities. The want ad sections of those papers may additionally contain listings for apartments or houses for rent. Individuals who have houses for rent can promote them from the want ads comparatively inexpensively, and they are a fantastic resource for those looking for places to live.


Because real estate is local, many people and rental communities set up signs near or in their home to market an available lease. The route from home to work can turn up a few possessions, and looking for homes in specific neighborhoods can involve driving around in free time to find out whether there are any houses for rent.

Rental Magazines

Rental magazines are free books generally found in supermarkets, external popular restaurants or other retail shops, and may include a lot of information about apartment communities by area. The magazines provide lots of information about the communities and supply phone numbers and websites so prospective renters can find out more about the neighborhood. Sometimes the apartment communities promote specials or coupons for those that use the magazines to obtain the apartment community, offering them a discount or a bonus for visiting and renting with them.

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Can FHA Be Qualified for by an Investor?

Real estate investors utilize different investment strategies to make money. Some repair and flip homes; others buy rental properties and hold onto them for monthly cash flow. Based on what real estate investment strategy you employ as an investor, you might benefit greatly from getting an FHA loan. Investors do fulfill the qualifications to obtain at least one kind of FHA loan, though some do not.

FHA Loans

FHA loans are backed by the Federal Housing Administration, a government company. Though the FHA doesn’t directly contribute the money, it guarantees FHA mortgages created from FHA-approved lenders. A lot of people think that FHA loans are just for first-time house buyers, but you may actually take out an FHA loan on your property. You cannot have more than just one FHA loan at a time, however.

Investment Benefits

Among the main benefits of working with an FHA loan within an investor is the capability to put down hardly any money for a deposit. To get an FHA loan, a borrower or investor is simply required to have a deposit of 3.5 percent, as of July 2010. FHA loans generally have lower rates of interest than conventional loans because they are insured by the national government.

Accessible Properties

An investor who purchases commercial properties cannot meet the requirements for an FHA loan. FHA loans are only available on residential properties of one to four components. FHA loans can also be used to buy condominium units or manufactured homes on permanent foundations. Realtor.com says that FHA loans can only be employed on owner-occupied homes. An investor cannot qualify to obtain an FHA loan on a property that he never plans to reside in. He is, however, use an FHA loan to buy a four-unit home, reside in one of those components and let the others out.

Debt-to-Income Ratio

To obtain an FHA loan, an investor must have the correct debt-to-income ratio. Bankrate.com says that the Federal Housing Administration requires borrowers to have a debt-to-income ratio of 31 to 43 percent. This usually means that you cannot owe more than 43 percent of your monthly income in debt, such as additional mortgages. Investors that have too much debt or inadequate income would not qualify.

FHA 203(k) Loans

FHA 203(k) loans have been intended for a specific kind of real estate investor. According to the Department of Housing and Urban Development, FHA 203(k) loans may be used to buy and fix properties in distress, such as homes which have been foreclosed on. Although the creditor, the debtor and the house must be pre-approved from the Federal Housing Administration, these kinds of loans may be helpful for investors that fix and flip properties that they reside in.

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