Buying a Home After Chapter 13 Bankruptcy — and What Rates Really Look Like

Auto-generated captions cleaned for readability. Commercial breaks, sponsor messages, and repeated housekeeping have been trimmed; licensing information appears at the bottom of this page. Loan program guidelines quoted here were current in February 2023 and have changed since.

Welcome — and the workshop that’s coming

Welcome to Mortgage Mom Radio. I’m Debbie Marcoux, the Mortgage Mom. I apologize — we sent the text out and then ran a couple of minutes behind, because the keyboard stopped working. We changed the batteries, that didn’t do it, and we had to go old school and plug one in. Everything’s wireless these days.

Each week I bring you what’s happening in the real estate and mortgage world: the Federal Reserve, interest rates, home prices, whether you should be buying, what your refinance options are, home equity lines. Today we’re talking about the 2023 Home Buyer Workshop. I’ve said week after week recently that this is a great time to buy — prices are good, you can get real incentives from sellers — and if I’m going to keep telling you that owning a home matters, I should also give you the workshop that helps you understand the process and what all the terms mean.

It’s Saturday, March the 11th, at noon Pacific, live on YouTube, and anybody can join. That’s about three weeks out, and I know it’s hard to remember three weeks later that this is what you wanted to do that day — so text the word WORKSHOP, just that one word, to 844-935-3634 (844-WE-LEND-4), and you’ll get a text when we go live.

Q&A: buying after a Chapter 13

CJ asks: “My BK 13 was discharged in January 2022. I was told I couldn’t buy or refinance for three years — is that true? I’m in California.”

The answer is the same across all fifty states: that is not true. If you had a Chapter 13 and you’ve been in it for at least twelve months with every payment made on time, and you can show us the payment history, you can purchase or refinance with court approval. You do have to call your attorney and they contact the court. I know that sounds tedious or difficult — it’s actually easy, and attorneys who handle bankruptcies do it all the time.

There are caveats. Your credit has to have been rebuilt since the bankruptcy — but not nearly as high as people think. The program I’m describing is an FHA loan; FHA guidelines allow financing after twelve months, and we typically want to see about a 580 credit score or better. There are banks doing FHA that will go below 580 and we have a couple of them on board. The problem under 580 is that rates get very pricey, because rates are based on risk: how much you’re putting down, how high your score is, what your credit history looks like. Even though FHA can go to 550, we like to say 580 or better, and a 600 gets you a much better rate than a 580.

So as long as those payments were made, your credit has been rebuilt, and your income and debt ratio work, we can help you well before three years. Conventional loans have a longer waiting period — at least two years with extenuating circumstances, three if there weren’t any. But a bankruptcy does not keep you out of financing.

I want to extend that invitation to everyone: Chapter 7, Chapter 11, Chapter 13 — if you thought homeownership was off the table for you right now, or you’ve been thinking about a refinance, call the office or book a consultation on the website. It’s free, we’re friendly, we’re not pushy, and I assure you there are many people who are eligible and simply don’t know it.

Q&A: what’s the rate today?

CJ also asks what the current interest rate is, and that is genuinely hard to answer from this chair. This is why you will never hear a commercial from me that says call now, 2.99% — because it doesn’t apply to everybody, and I don’t want to read a page of disclaimers at the end of it. Every person has a different credit score, a different down payment, a different property type. A condominium carries a higher rate than a single family; a two-to-four unit — a duplex, triplex, fourplex — is higher than a condo. Every loan program has a different base rate and different adjusters based on risk. And it matters whether it’s a purchase, a rate-and-term refinance, or a cash-out.

If you want an average of what I’m seeing today, I’d say about six and a half percent. Take a specific scenario — no points paid, a 740 credit score, a single-family residence, a loan balance within the conforming limit — and you’re somewhere in the six and a half range, maybe buying that rate down to 5.875%, 6% or 6.125%.

Why sellers are paying to buy your rate down

Here’s why this is a good year to do this. People who don’t have to sell are not selling. People who have to sell are selling — and if you have to sell, you negotiate more than you would otherwise. It’s a better deal for the buyer, and it lets the seller hold a slightly higher price, which keeps the neighborhood stable, while giving you incentives instead.

Those incentives can go toward closing costs or toward buying down the interest rate. The majority of the contracts coming across my desk right now have the buyer asking the seller for about two percent. Brand-new home builders are doing exactly the same thing. And buyers are taking that money and, instead of pocketing it, putting it into the rate — buying it down below where the program would otherwise start. A lower rate means a lower payment and it helps you qualify for a little more. With two percent applied that way, we’re seeing people land in the high fives and low sixes.

And when people say rates are so high right now — in reality these are very normal interest rates. I’ve been in this business since 1994 and writing home loans since 2002, and across all those years six percent is a very average rate. I think we’ll stabilize back around there. A couple of weeks ago I mentioned that most of the analysts — and I’m not a financial advisor, I’m giving you my read from years in the market — expect seven and a half to eight and a half percent by the end of this year, and then a turnaround with rates coming back down. When they come down, I think we settle in that six percent range. So right now you could be out looking and lock into the sixes before they go higher.

Carrie looked up the number I was blanking on: the 2023 conforming loan limit moved to $726,000. It changes every single year and in my head I was still sitting on the 2020 limits. Thank you, Carrie, for making sure I gave everybody the right information.

What the workshop covers

Buying a home can be overwhelming and intimidating, and a lot of people go about it in the wrong order — they start looking, they see a house, they call a realtor, they fall in love, they want to write an offer, and they don’t have financing in place. On top of that they have no idea what anybody is talking about, because we speak in acronyms nobody would know unless they lived in this world. That’s not on you. It’s on us.

So the workshop runs the whole transaction. We start with the words — the terms used constantly through a transaction, so the rest of the sentence makes sense. Then the loan programs: FHA, VA, USDA, conventional, jumbo, non-QM, bank statement loans, DSCR loans — what each one is, what qualifying looks like, and why one might be better for you personally than the others.

Then getting pre-approved: what documentation we need, and what’s different if you’re self-employed. Then closing costs — what they are, what they run, who you’re actually paying when you write that check. Then appraisals and inspections, which trip people up constantly: you will pay for inspections, possibly several, which have nothing to do with your loan, and you’ll pay for an appraisal, which does. Your appraiser is not your inspector.

Then credit: where the score comes from, what actually improves it, where your credit card balances should sit to reach the highest score you can, and what to do about collections and charge-offs. Your credit has everything to do with the rate you’re offered, and you don’t want to pay a higher rate than you need to. Then debt ratios — I say DTI all the time; what does it mean, how do we improve it, and how do loan officers get creative to help you qualify for more.

Toward the end, the part that matters most: you’re pre-approved, now what? How do you select a real estate agent, and what do you look for when you’re interviewing one? Then escrow. You found the agent, they showed you properties, you wrote an offer, you’re in contract — now there are deposits to wire, inspections to order, an appraisal to order, a rate to lock. It moves very fast, and I want you ready for it.

Why I do it for free

Something I’ve heard since I started in 1994 — twenty-nine years now, and yes, I just aged myself — is that buying a home ranks among the most stressful things you’ll go through in life, behind a divorce or a death. It shouldn’t be. You should be shopping online for décor and thinking about where the sofa goes and whether the blender lives on the counter. You should not be flinching every time your phone rings, wondering if this is the call that kills your loan after you’ve already paid for inspections and an appraisal that nobody can refund, because the people who did that work have to get paid. You avoid that by being genuinely prepared before you start.

The workshop is free. I could put together something like this and charge thousands of dollars — people do. I used to run these in person, fifty, a hundred, a hundred and fifty people in a room, and I didn’t charge then either. I had attendees tell me they got more out of three hours with me than out of a seminar they’d paid thousands for and walked away from with nothing but an empty pocketbook. I always thought: that’s money that could have gone toward a down payment. So give yourself the free gift of three hours.

And this isn’t only for first-time buyers. If you haven’t bought in three or more years, it’s a genuine refresher — guidelines change on every program constantly, and the real estate contracts and forms change every year, sometimes more than once. It’s on YouTube, so you can listen while you shop or clean, with earbuds in and the phone in your pocket, and pull it out when there’s a slide worth seeing. One note for Arizona: you’re an hour ahead of us at that time of year, so noon Pacific is 1 p.m. for you.

A poll: would you come to a refinance workshop?

I’ve done many home buyer workshops. I have never done one on refinancing, and I think there are probably a lot of people who’d want it. How much equity do you have, how much cash out are you allowed to pull, what credit do you need, what about income and debt, what can you use the cash for, what property types can we refinance, should you do a HELOC on an investment property instead? What if you need to change title, or add someone to title? What if you want to buy your mom’s house and she’s willing to sell it to you — is that a refinance or a purchase? There’s a lot of good in it.

It takes me about a week to build a workshop, plus the weekend hours in the studio, so before I do that I want to know people would come. Text the word REFINANCE to 844-935-3634. It doesn’t opt you into anything — I’m using it purely as a poll.

Wrap-up

A housekeeping note, since I promised I’d never spam you: I did an extra show this Monday on a whim and didn’t send a text, so unless you’re subscribed on YouTube you had no way to know. One text a week is one text a week, and I’ll keep it that way.

I’ll also apologize to anyone who has left a question in the comments on an old video and never heard back. I don’t reliably get those notifications — I don’t always get them for the channels I subscribe to either — and after more than two years of live shows there’s no way for me to go back through every video hunting for comments. If that’s happened to you, email me through the contact form on the website, or ask me live.

Same number for everything: text MOM for one notification a week when the show goes live, text WORKSHOP for the March 11th link, text REFINANCE for the poll, or just call the office — 844-935-3634, 844-WE-LEND-4. The Mortgage Mom is out. Talk to you real soon.