Bankruptcy isn't Always the Solution....in fact, it can be really bad advice!

By
Mortgage and Lending with Cherry Creek Mortgage Illinois Residential Mortgage License LMB #0005759 Cherry Creek Mortgage NMLS #: 3001 NMLS ID# 158606

I see it all the time.  The phone call begins.  The people want to buy a home. 

THERE ARE FOUR THINGS YOU NEED TO BUY A HOME!

  1. Income

  2. Assests

  3. Credit

  4. Appraisal

In 2010, the collapse always begins with issue number three....

Credit

CREDIT

CREDIT!!!!!

You got credit issues!  So what?  Join the rest of the world!  Welcome to 2011!  We're in the post luxoriousWhen things get tough, don't panic....call someone for help living economy!  Nothing's easy anymore.  For the record....Lending isn't easy anymore!  It just isn't.  It's hard for me to lend money.  It used to be a slam dunk.  You have a pulse, then you have a loan.  The only real issue was whether you were alive and whether or not you had a valid social security number.  Now we need to verify everything, from top to bottom, over and over and over again.....or so it seems. 

Again....you're credit isn't good, so what!  What are you going to do?  Walk away from it?  Unfortunately, it will follow you around like your shadow.  No matter how fast you run, it's following you!  It's just not something that can be ignored.  Ignoring it doesn't mean that next month or next year you can buy a home. 

Bankruptcy?  Sure, it's one way to work a tough situation.  For those that are in way over their head and have no viable way out, it's the most extreme way to wash your debts away.  The problem is that for most loan programs you're handcuffed anywhere from three to five years AFTER THE DATE OF DISCHARGE!  That's a long time to say that you're not going to buy a home. 

image provided by dreamstime.  http://www.dreamstime.com/stock-image-pool-business-difficult-rimagefree1252252-resi2857788 

The problem is that most people don't believe that their situation and their credit can be fixed well enough to be put in a situation to buy a home. 

Frequently, I tell people "if you'll follow my directions, over the course of this year, we'll get you in a position to buy a home by the end of the year."

THE REAL PROBLEM IS INSTANT GRATIFICATION!

Waaaaaaaa, waaaaaaaaaa, waaaaaaaaaInvariably 8 out of 10 people think that the struggle to get back up is too great despite my words of encouragement.  They fall off the wagon and are drinking the "gloom and doom Kool-Aid" and give up!  Whaaaa, whaaa, whaaaaaaa.  

For those who are coachable.  For those who can follow advice, they are elated when they're back on track to buy their new home.  It happens, all within a year.  It thrills me, but they're ecstatic.  Hard work & sweat with great results to show for!

INSTANT GRATIFICATION...

often times becomes long term pain.  Why?  Because the attorney's say "hey, pay me X $,000 dollars and we'll wipe away all your credit in short order.  The took the bait, hook, line and sinker!  It's really a shame.....Sure the debt is wiped out quickly, it's like walking into the bathroom after the 300 pound dude has been sitting there for about a half hour.  It lingers and lingers and lingers.  How long?  Try 3 to 5 years! When I was in law school, I hated studying, but I'd tell myself "short term for the long term."  Just work on it for a year for a long term gain!

Image provided by Dreamstime.  http://www.dreamstime.com/stock-photos-face-in-the-mirror-rimagefree305210-resi2857788 

My advice

.....look both ways before you cross the street.  You're probably closer to the top than you thought, but if you don't look before you cross, you could be spending a lot of time in the hospital wondering what just hit you!

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Ambassador
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John McCormack, CRS
Albuquerque Homes Realty - Albuquerque, NM
Honesty, Integrity, Results, Experienced. HIRE Me!

Frequently, I tell people "if you'll follow my directions, over the course of this year, we'll get you in a position to buy a home by the end of the year."

Larry this is exactly what I tell my buyers when I send them to a good Lender.  Listen to the Lender , follow what the Lender says then call me when your Lender says you're good to go on becoming a home owner!

Jan 24, 2012 02:08 PM #1
Rainmaker
565,766
Jordon Wheeler
The Jordon Wheeler Group - Fairburn, GA
J W Group Real Estate Sales and Service

Hey Larry, your alternative to bankruptcy (slow down, cut spending, pay off debt) goes against the maturity of our culture today.  Fast food, fast life, fast cars, fast approval, fast, faster, faster... We have to stop somewhere and make a decision to do it differently.  Thanks for the post and best of success to you this year!

Jan 24, 2012 02:11 PM #2
Rainmaker
1,158,838
Chuck Carstensen
RE/MAX Results - Elk River, MN
Minnesota Real Estate Expert

I keep seeing a lack of effort to get credit in line. More so from people who are close, they just dont seem to try.

Jan 24, 2012 02:14 PM #3
Rainmaker
1,143,971
David Shamansky
US Mortgages - David Shamansky - Highlands Ranch, CO
Creative, Aggressive & 560 FICO - OK, Colorado Mtg

Very true and the reality answer is each individual, their goals, dreams, desires and both short and long term plan (as well as income now and in the next few years) all plays a pivotal role in the advice and best way to give it.

There is definitely no "one size fits all" when it comes to this but there are good generalities that apply to many

Jan 24, 2012 03:35 PM #4
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Larry Bettag

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