My Credit Score is Bad But My Spouse's Credit Is Good

Reader Question: My credit score is not so good, due to some accounts I became delinquent on but later settled and paid off. My husband has excellent credit. We want to buy a home. How will my low credit score affect our home loan?

We answered a similar question about two weeks ago on the credit help blog. Actually, now that I look at it, the two questions are nearly identical. So this Q&A session should help you a lot:

Getting a Mortgage When Spouse Has Bad Credit

As the above response points out, it may be best for your husband to apply for the mortgage loan on his own. Not only will this increase your chances of getting approved, but it will also help you secure a better interest rate on the loan. And that means a smaller mortgage payment each month! If his credit score is truly excellent, he will probably qualify for the best interest rate the lender has to offer. This is the kind of position you want to be in when you apply for a mortgage.

We also did a Q&A about debt settlement and how it affects your credit score. It sounds like you're already well aware of how it can affects a score, but this one might still be worth reading.

Read the article here:
How Debt Settlement Affects Credit

Please note that this is not the only option you have available, nor am I saying it's the right one for you. That's a decision you'll have to make, obviously. These are just some things to consider. If I were in your shoes, I would have my spouse with excellent credit be the sole applicant for the mortgage loan, in order to get a lower interest rate on the loan. Then I would focus on improving my own score (if you're not already on that path).

Lastly, you might want to stop by the Bad Credit Central section of our main website. It's a work in progress, but it already has a lot of in-depth advice on how to repair a bad score.

Hope that helps you out some. Good luck with your home buying ventures. I hope it all works out for you.

-Brandon

How Do You Make an Offer On a House?

Reader Question: How do you decide what a fair offer on a house is? Do you take a certain percentage off the asking price and make your offer?

You should base your offer on current property values, not the asking price. So the first thing you need to do is find out what the home is truly worth in the current market. The asking price might be realistic, or it might be completely inflated. The only way to find out is to review recent comparable sales in the area.

For example, if you're looking at a two-story home with 2,400 square feet located in the Pleasant Valley subdivision, you should find out what other two-story homes of similar size in Pleasant Valley have sold for in recent weeks. This is what real estate agents refer to as "comps," which is short for comparable sales.

The more recent the sales data, and the more similar the comps are to the house you're considering, the more accurately you can determine a fair market value. This is one of the things a real estate agent would do for you -- they would help you evaluate the asking price. In fact, when most agents submit their client's offer on a house, they provide comps to support the offer as well. It's a way of saying, "We have done our research, and here's the data that supports our offer."

Of course, if you don't have an agent, you'll have to handle this for yourself. These days, there are a lot of websites online that offer this kind of data. Do a Google search for "find house values" and you'll see what I mean.

When it comes to your purchase offer, you must also consider upgrades and improvements. This is something of a gray area. Some upgrades (such as kitchens and baths) contribute more toward the resale value than other types of upgrades. In fact, I just posted a similar Q&A on this subject earlier today. It was a situation where the seller was asking more than the appraised value because of the upgrades made to the home. You can read it here.

In the previous Q&A, the reader actually paid to have an appraisal done on the house they were considering. In this process, a professional appraiser will examine the home and compare it to recent comparable sales in the area. That's another way to validate the seller's asking price.

Related Articles:

• How Do Home Appraisals Work?
• How to Evaluate the Seller's Asking Price

Big Difference Between Appraisal and Asking Price

A Reader's Concern:

I'm interested in buying a house with cash and it's being sold by the owner, not through an agent. I decided to pay and have an appraisal done as I didn't know what the value was. In addition, I had a termite and house inspection done too. The termite inspection came out clean but there were a few minor issues with plumbing and electrical.

I found out that the appraisal came back at $10k under what the asking price was. The owner had started out at a very high asking price and has already gone down $25k. This appraisal was done based on the market value of the houses selling in that area right now. The owner has done some improvements as it's an old home and thinks he should be entitled to a higher selling price because of it.

I really love the house but not sure about the big difference between appraisal and asking price. If I buy this house, it's like losing $10k right from the beginning that I'll probably never get back. My Mom has offered to cover the $5k deposit he is asking for. Could you give me any help or suggestions as to this being a smart move for me? He will not go down any lower and is pretty firm about it. In fact he's even tried to rent it when he couldn't sell it. Apparently that's not going well either, because I think he might be asking too much for the rent too. I appreciate any help you can give me.

Our Response:

In this current economic meltdown, with home prices rapidly on the decline, it is unwise to purchase a home for more than the appraised value. It's also unreasonable for a seller to expect more for their home than what it's worth. Since the owner has not been able to sell or even rent the home, it would be more reasonable in this market for the seller to lower the asking price.

My advice would be to hire a real estate professional, an agent or attorney, to advise you on how to proceed. If you do work things out with the seller and decide to proceed with the purchase of the home, this expert on real estate transactions can help guide you through the process and make sure that your best interests are looked after.

From a purely financial perspective, it's rarely a good idea to pay more for a home than what it's worth in the current market. You said it yourself -- it's like losing money right from the start.

Sometimes, in situations like this, the best thing you can do is make a reasonable offer and then walk away if the seller refuses. Even in a buyer's market (which is the case in most U.S. cities right now), some home sellers still inflate their asking price. Usually, this is because the homeowner is trying to price the home by what it's worth to them ... and not what it's truly worth in the current market. Sounds like that might be the case here.

What sellers need to realize is that it's tough to sell a home right now. Property values are dropping in most parts of the country, and on top of that many buyers are having trouble getting mortgage loans. There's also a lot of inventory on the market right now, largely as a result of foreclosures and other "distress-related" home sales. A surplus of homes for sale, combined with a shortage of qualified home buyers, creates a buyer's market. It sound like this person is behaving like they are in a seller's market, which is contrary to reality.

If the seller is truly asking much more than the current market value for their home, there's a very good chance it's going to stay on the market for a long, long time. Maybe then they'll be more inclined to set a realistic asking price for the property.

Just remember ... it's called an "asking price" for a reason. It's what the homeowner has asked for, but that doesn't mean it's what they will get.

Steps in the Mortgage Pre-Approval Process

Reader Question: I've never owned a home before but will have a chance to in the spring of 2009. My credit score is fair, I don't have any credit cards and I'm paying more in rent then if I owned a home. How do I know who to trust as far as getting a pre-approval mortgage, and what are the steps involved?

With the ever-changing economy, the confusion about mortgage requirements, and the banks that continue to fail, I can understand your concerns. When buying a home for the first time, it can be hard to put your trust in a lender when the process is so new to you.

If you currently have an established relationship with a bank, I would start there. They will be able to give you a quick overview of their mortgage loan programs and rates. If you can provide them with a signed application, pay stubs, tax returns and statements (for things such as retirement accounts and investments), they will be able to pull your credit and consider you as a mortgage candidate. Based on this review, they should be able to quickly make a decision as to whether or not they can pre-approve you for a mortgage loan.

If you do not have a particular bank you regularly deal with, you may want to work with a known and trusted source such as Lending Tree. They will send your mortgage application to as many as four financial institutions, and in return you will receive competitive quotes for a mortgage loan program. Once you decide which will offer works best, you will be on your way to home ownership.

Related Article:

• Get Online Quotes From Trusted Lenders
• Getting a Mortgage Loan in 2009

Hope that helps. Good luck with your home buying process next year!

Owner Will Finance - What Does Owner Financing Mean?

Reader Question: Exactly what does it mean with an ad for a house says "owner will finance"?

This is commonly referred to as owner financing or seller financing. It means the homeowner / seller will allow you to make mortgage payments directly to them. So instead of getting a mortgage loan and paying the seller in one lump sum, you would make monthly payments directly to the seller. The deed does not get transferred from the owner to the buyer until the house has been paid for in full.

Owner financing generally appeals to home buyers who (A) cannot qualify for a mortgage loan with a good interest rate, (B) cannot afford a down payment, or (C) a combination of these factors. In other words, it's typically a last resort for buyers.

I've seen an increase in the number of seller-financing scenarios lately. It has a lot to do with the economy. Many home buyers are unable to get loans through a traditional mortgage lender right now, so a lot of sellers are offering owner financing to potential buyers. It will continue to be harder to get a mortgage loan in 2009, so this type of financing will likely continue to rise.

It's kind of like saying: "We know it's hard to get a mortgage loan right now, but we really need to sell the house. So we are willing to accept payments in lieu of a lump sum."

Another thing to keep in mind is that the seller will set the terms of your mortgage payment, since they are acting as the lender in this type of agreement. The size of the payment, the interest rate, the length of time you have to pay it off ... all of this is determined by the seller in an owner-financing situation.

If you decide to go this route, I recommend using a real estate agent who is familiar with the process. Or better yet, hire a real estate attorney to make sure the property transfer is done right.

From the buyer's perspective, there are various pros and cons associated with owner financing:

• Pros - You don't have to go through the traditional qualification process needed to get a loan. You might not have to put as much money down in advance. There is usually more flexibility in negotiating the terms of the financing.
• Cons - You will probably need legal assistance to make sure everything is legit. There's more room for error, oversight and plain old manipulation when you're dealing with a private individual (as opposed to a government-regulated lender).

This is just a basic overview of how owner financing works. A home buyer who is seriously considering this path should do additional research into the pros and cons associated with it. Hope that helps. Good luck.

Applying for Section 8 Housing - How to Apply

Reader Question: How do I apply for section 8 housing?

For the benefit of other readers, I'd like to start with a brief definition before getting into the application process. Section 8 housing is the common name for the Housing Choice Voucher Program, a form of federal aide provided by HUD. This program provides rent assistance to people with low income.

So the first thing I need to clarify (since this is a home buying website) is that you cannot buy a house with Section 8 housing program. You can rent a house or apartment under the voucher program, but you cannot buy. I just wanted to point that out because it's a common point of confusion for people, judging by the emails we get from readers.

When you apply for the Section 8 housing, your vouchers will either be project-based or tenant-based. In the first scenario, you would have to live in a certain pre-approved apartment complex. In the second scenario (tenant-based vouchers), you would not be limited and could choose any apartment that meets certain guidelines set forth by the Section 8 housing program.

How to Apply for Section 8

Applying for this program is pretty straightforward. To apply for Section 8 you would first need to the Public Housing Agency (PHA) in your area. The Department of Housing and Urban Development has a list of PHA's on their website. These people will be able to assist you with the application process for the voucher program.

From everything I've read, there's often a waiting list for Section 8 housing. So if you are serious about applying for the program, I recommend contacting your PHA through the link above and getting your name on this list as soon as possible.

$7,500 Tax Credit for First-Time Home Buyers

Editor's Note: I am posting this in response to many questions we have received about the tax credit for first-time home buyers in the U.S. So if you recently asked a question about the $7,500 tax credit and whether or not you qualify, please read through the information below.

Summary of First-Time Home Buyer Tax Credit

I think this program is going to confuse a lot of home buyers, at least initially. That's because of the terminology being used to describe. It is a tax credit at first, in the sense that you can claim it when filing your taxes. But in truth, it's more like a loan because you have to pay it back over time. Yes, you heard me right ... you have to pay the entire amount back over a 15-year period. The $7,500 amount is also misleading, because not everyone will qualify for that amount.

So if you haven't done so already, I urge you to read all of the details about the tax credit program. This blog post will give you a basic overview of how it works. Here are some of the frequently asked questions we have received about this new benefit for first-time buyers in the U.S.

What is this credit?
As part of the recently passed Housing and Economic Recovery Act, many first-time home buyers in the United States can qualify for a tax credit of as much as $7,500 when they purchase a home. Technically, it's a credit for 10% of the purchase price up to the $7,500 limit. It works a lot like a 15-year interest-free loan, meaning you have to pay it back in annual installments (beginning the second year after you get the tax credit).

How long does the program run?
As with all good things in life, there is a time limit on this tax credit. It is applied retroactively back to April 9, 2008 and will run until July 1, 2009. This means that home buyers who purchased earlier in 2008 (before the bill was even passed) could be eligible for the $7,500 tax credit ... if they are otherwise qualified under the eligibility guidelines.

Who is eligible for the tax credit?
Now we are getting to the real question many first-time home buyers have right now. Am I qualified for the $7,500 credit under this new program? Here's an overview of the guidelines for eligibility:

• You must be a first-time home buyer to participate in this program. Within the context of this bill, that means you haven't owned a home in the three years prior to buying one now.
• The property you are buying must be a single-family home to be used as your primary residence. In other words, it doesn't apply to investment properties.
• Your closing date must fall within the program's window, between April 9, 2008 and July 1, 2009.
• There are income limits as well. If your annual gross income is $75,000 or less (or below $150,000 for a joint tax return), you could qualify for the full credit amount. If you make more than that, you will receive less than the full tax credit when buying the home. If you make more than $95,000 a year (or $170,000 on a joint return), you will not qualify for the program.
  

These are not the only eligibility guidelines for the first-time home buyer program, nor do I have any desire to republish the entire bill here on this blog. If you want to find out if you are eligible for the tax credit I recommend starting with this IRS explanation of this program. After all, you'll be claiming the credit on your tax return, so who better to listen to than the "Tax Man" himself?

There's a new IRS form specifically for this program. So if you want to claim the credit when you file your taxes, you'll need the IRS Form 5405.

Buying a House Without Paying the Listing Agent

Reader Question: How do I buy a house without paying a real estate agent who has the house listed?

In most cases, the seller pays the listing agent's commission. This is the way it works in most states and for most real estate transactions. The seller pays his or her agent's fee out of the proceeds they make from the sale (if any). If the buyer has an agent as well, the listing agent will typically split his or her commission with the buyer's representative -- as a "thank you" for bringing in a buyer.

Of course, these rules are not written in stone, and there are other types of arrangements between sellers and their agents. This is just the most common scenario. Now, the seller may very well increase the asking price to account for the commission they have to pay out. But as far as the person who actually writes the check out of pocket to pay the listing agent ... it's almost always the seller.

Keep in mind, also, that you are probably in a buyer's market right now. This is the case for most cities. It's tough to sell a home right now due to the economy. A lot of would-be home buyers are unable to get mortgage loans. Heck, it's tough to sell anything right now. That's why everyone from Circuit City to General Motors is on the brink of collapse -- nobody is buying stuff.

For you, this means you have even more bargaining power than you would have in a stable economy. So there's very little chance a seller would ask you to pay half of the listing agent's commission. That would just be foolish in this economy. The scenario you will likely encounter is this: The seller will pay the listing agent, and that person will split the commission with your agent (if you have one). I would be very surprised if it happened any other way.

Hope that helps. Good luck with your home buying process.

Equity in Current Home to Buy Another

Reader Question: I want to purchase another home but I don't have equity in my current home. I am confused about the process. How does this work? Do I have to have equity in my home to purchase another?

I'm not sure whether you would like to buy a home in addition to the one you currently own, or you want to sell the home you live in but purchase a home before the sale takes place. In either scenario, you would need to have sufficient income to pay both mortgages and cash for the down payment on the new/additional home.

The only reason you would ever need equity in your current home to purchase an additional home would be for the down payment (in the event you do not have the cash). In that case, the lender would allow you to borrow against the available equity for your down payment and closing costs. This type of arrangement is referred to as a bridge loan, but they are not easy to secure in the current economy due to declining real estate values and lender restrictions.

Related information on our website:

Home equity loans -- This type of financing is popular among homeowners as a quick source of cash. But there are smart and foolish ways to use an equity loan or credit line, and this article explains the difference.

Buying a new home before selling old one -- Is it possible to buy a new home before selling the old home, and if so how do I go about it? This article provides some answers.

Buying a Home After Chapter 13 Bankruptcy

Reader Question: I filed a Chapter 13 bankruptcy in 2005 and my credit score is at 620 still. When will I be able to buy another home?

Only a mortgage lender can tell you that answer for sure. But I'll try to give you as much input as I can. By federal law, a bankruptcy filing can only stay on your credit report up to ten years. But in most cases, Chapter 13 bankruptcy comes off after seven years. This is relevant to your question because the information in your credit reports is what determines your credit scores.

Here's what Maxine Sweet, VP of public education at the Experian credit reporting company had to say about this:

Bankruptcy can be reported for up to 10 years from the filing date ... Experian reports Chapter 13 bankruptcy for seven years because it includes partial debt repayment. Chapter 7 bankruptcy remains for 10 years from the filing date because none of the debt is repaid.

Now, this doesn't mean you can't buy a house in the meantime. Those are just the "magic numbers" you need to keep in mind, when the Chapter 13 filing will come off your report.

Here's something else to keep in mind. The impact a bankruptcy has on your credit score lessens over time ... if all other factors remain the same. In other words, if you don't have any other issues affecting your credit score (such as overdue bills), then your credit score will likely start to rise. It sounds like yours has remained the same since the filing. If that's the case, you should try to determine what else might be hurting your score.

We have an article on how to read a credit report on another blog here at the Institute, and that's probably worth reading. You might also want to peruse this Q&A session from a couple weeks ago, on the same subject.

Buying a Home With Parents - Credit Scores and Income

Reader Question: My boyfriend and I along with his parents would like to buy a house together. The problem is he and I both have poor credit but decent incomes and his parents have good credit with low incomes. Would we likely qualify for a loan in today's market?

That's an interesting question. It's almost like a Zen riddle! It sounds like you offset each other's weaknesses. Since you have good income but bad credit, and his parents are the reverse, they might be able to co-sign on the loan to help you all get approved.

If you haven't done so already, I would read up on FHA home loans as well. That might be a good option for you. You would still apply for the mortgage through a private lender, but the FHA would insure the loan. This helps buyers with credit trouble and other issues get approved.

Probably the best thing to do at this point is set up an appointment to talk to a lender. They can look at your financial information (for all four of you) and pre-qualify you based on that. Pre-qualification is the process through which the lender will determine how much of a mortgage you might actually qualify for -- a ballpark range, at least. It's a good way to get the ball rolling.

To prepare for this process, you should start rounding up your financial documents. This includes your most recent W2 forms from the last couple of years, pay stubs, bank statements, retirement account info (if applicable for the parents), etc.

Hope that helps. And hey ... if you end up getting a mortgage loan and would like to share it with other readers, just send me an email when the time comes and I'll update this blog post. Information sharing is critical in this tough economy. Good luck!

-Brandon

Credit Score Needed for FHA Home Loan Program

Reader Question: What credit score do I need to get an FHA first-time home buyer loan?

First, let me clear something up. There is an FHA home loan program designed to make home buying more affordable, but it is not limited to first-time buyers. Anyone can apply for such a loan. With that being said, it can be a useful program for first-time buyers because it can help you get a mortgage loan when you might not otherwise qualify for one.

One of the biggest benefits of FHA loans is that you can often get approved with less money down. For tradition loans, most lenders these days require somewhere in the neighborhood of 20 percent down (especially in light of our current economic issues). But you can theoretically get approved for an FHA home loan with as little as 3^1/2 percent down.

I would love to give you a credit score limit that you need to get qualified for the FHA home loan program, but it's just not possible. Here's why. The FHA does not set the eligibility criteria for these loans, because they are not the one making the actual loan. You still have to apply through a private mortgage lender. So the minimum acceptable credit score will vary, based on which lender you approach.

Because of the FHA's backing, lenders have traditionally been willing to offer loans to buyers will less-than-ideal qualifications (such as a low credit score). You would apply for an FHA loan through a regular lender, and -- theoretically -- you would be able to get approved with less of a down payment, a lower credit score, etc. I used the word "traditionally" above because times have changed. In our current economy, I'm not sure how much difference the FHA backing will make, in terms of getting approved through a private lender.

Find Out if You're Eligible for an FHA Loan

The only way to find out if you're eligible for the FHA home loan program (based on your credit score and other criteria) is to apply for it. There are couple ways to go about this -- and one is much easier than the other...

• The FHA has a list of approved lenders that you can access through this page. I don't know about you, but I personally would not want to contact a long list of lenders to see if I'm eligible for the FHA program.
• An easier way to apply would be through a website like LendingTree. In fact, we have an in-depth explanation of the FHA loan program on our main website, and it has links to the appropriate LendingTree application page. Go there now

I know I didn't answer your credit score question, because there's no way for me to answer it. But I hope you have a better understanding of how it all works now. Good luck.

Related Question:
Will FHA loans be available in 2009?

What is an H4H Loan? Hope for Homeowners Explained

Reader Question: What is a 4h4 loan?

I think you referring to the new H4H program. I put your question as you wrote it above so you would recognize your question. :-)

Hope for Homeowners (H4H) is a program launched by the Federal Housing Administration. I wrote up an explanation of this program about a month ago, on one of our other real estate blogs. So if you want an in-depth explanation of the program, check out this article:
FHA Refinance Program - Hope for Homeowners

Basically, the H4H program is designed to help "at-risk" homeowners refinance their high-interest ARM loans into more affordable fixed-rate mortgages. More specifically, all of the loans made under this program are 30-year fixed (according to the last news release I saw on this subject).

The FHA launched Hope for Homeowners in October of this year, and it's supposed to remain active until September 2011. There are quite a few criteria for this program though, so it's not available to just anyone. You can learn about the eligibility criteria (and even apply for the program) through the link I provided above.

There is a lot of criticism of H4H right now, because it's not helping nearly as many homeowners as the FHA predicted. They boasted that they'd be able to help 400,000 homeowners over the next three years, but so far it's off to a sluggish start. Why? Because many of the people who need help are unable to qualify for a refinance loan -- despite the FHA's backing. Property values have dropped in most of the areas with high foreclosure rates, so a government program does little good for them if the lenders turn them away. (You have to apply for this program through a private lender, like always.)

But I better wrap up this blog post before I go on a tangent about the ineptitude of the federal government! That sums up the Hope for Homeowners program in a small nutshell. You can learn more about this and related topics through the links below.

Related Articles:

• Learn More About H4H
  
• FHA Home Loan Program
• Hope for Homeowners Isn't Helping

I hope that clears up some things for you. Thanks for writing.

Fannie Mae is Not a Mortgage Lender

Reader Question: Is Fannie Mae the only mortgage lender available when the middle credit score is 580?

Let me start by saying Fannie Mae is not a mortgage lender. They do not make home loans to consumers, so they have no say over the qualification criteria set by private lenders. So you can completely remove them from your question. The real question is: "Can I get approved for a mortgage loan with a score of 580?"

With that being said, let's talk about what Fannie Mae actually does...

Fannie Mae (formally, the Federal National Mortgage Association) is part of the secondary mortgage market. They purchase the loans made by private lenders, and then "securitize" those loans and sell them off elsewhere through Wall Street. This provides a steady stream of cash into primary lending market, which encourages more lending. In their own words, Fannie Mae's mission is to "provide liquidity and stability to the U.S. housing and mortgage markets."

So you cannot apply for a loan through Fannie Mae, because consumers are not their primary customers. Their customers are the mortgage lenders themselves, from whom they buy loans.

And at the moment, Fannie Mae has its own problems to worry about. They hold trillions of dollars worth of debt, as a result of buying up mortgages in the secondary market, and much of that is bad debt (because of the subprime mortgage crisis). This is one of the reasons the U.S. government had to bail Fannie Mae and Freddie Mac out of financial ruin recently.

On top of this, Fannie cannot impose its will on the private lenders that you would go to for a loan. The individual lenders will set their own standards, and they can do whatever they want in terms of qualification criteria. Right now, they seem to be turning down any type of loan they view as a risk (such as a loan to a borrower with a low credit score). So I'm not sure a credit score of 580 would qualify you for any type of mortgage loan in this economy, regardless of Fannie Mae's influence.

You can always apply for a home loan and see what the lender(s) tell you. We even have a mortgage quotes page where you can get started with that process through LendingTree. But you would not be applying for a "Fannie Mae mortgage loan."

Related articles:

• Fannie and Freddie Are Part of the Problem
• FHA Loans and the Housing Recovery Act
• Buying a House With a Credit Score of 580

I hope that helps you out some. Good luck with whatever you decide to do.

Buying a Foreclosure - What Type of Loan Can I Get?

Reader Question: I am interested in buying a home that went into foreclosure. The question is, what type of loan can I get other than an FHA loan because I have great credit and a good job.

I don't why you would be limited to an FHA loan. If you do have great credit and solid income, you will be a good candidate for just about any type of mortgage loan. The FHA insures loans made through private lenders, but I can't see why you would need that kind of backing ... seems like you're a well-qualified candidate for a mortgage loan that is within your means.

You're hearing a lot about the FHA right now because of their efforts to help "at-risk" homeowners refinance into more affordable loans. I'm guessing that will remain their primary focus for the next year or two.

There are a couple of things to keep in mind when buying a foreclosure property, that aren't a factor when buying a home under normal circumstances. For one thing, keep in mind that you'll need to be approved by the lender who has foreclosed on the property. This can be a time-consuming and often confusing process where you don't get much information. Investors often complain about this part of the process. So if it's your first time buying a foreclosed home, be sure you read up about the process that's involved.

Also, if the home ends up being sold through a real estate auction, you would actually need to have all of the financing up front. In other words, you would need to have the cash to buy the home right after successfully bidding on it.

But as far as getting approved for a mortgage in general, your options will probably we wide open if you have great credit and sufficient income.

I hope that helps you out some. You can learn more about the process of buying foreclosed homes through the Foreclosure City section of our website.

How to Buy a Home in Bankruptcy

Reader Question: How can I buy a home that has been placed in a bankruptcy status?

This is actually a can of real estate worms we don't usually open, since our website caters mostly to first-time buyers. I would never recommend this strategy to a first-time buyer, because it can be fairly complex. People in this industry often joke that there are two "worlds" of real estate -- the normal world where the process is fairly straightforward, and the bankruptcy world where seemingly anything goes.

How you move forward would depend on the type of bankruptcy the homeowner filed (Chapter 7, Chapter 11, etc.) and many other variables. If most cases, the sale must be approved by the bankruptcy court, and I can tell you that they are usually in no hurry to get things done. The case may be tried as well, with attorneys on both sides weighing in for the debtor and creditors.

You can see why I don't recommend this process to first-time buyers, who make up our primary audience. Your best bet would be to hire a real estate attorney. They will know how to proceed and will be able to explain the benefits and pitfalls of buying a bankruptcy home.

You might also want to check out the PACER website, which is a fairly new development. It's the government's website that grants public access to court electronic records (hence the acronym PACER), and it has a database full of information on bankruptcy filings, real estate associated with those filings, etc.

If you're serious about this kind of transaction, I would suggest buying a book on the subject. Though most books on the subject of distressed real estate deal with foreclosures (a hot topic), you can find some that offer information on bankruptcy property as well.

Single Mom and Full-Time Student Buying a Home

Reader Question: I am a single mom and full-time student with no job. Can I buy a home?

If you have some other source of income, you might be able to swing it. For example, if a person was unemployed but had some kind of trust fund that paid money out each month, a lender might approve that person for a loan.

A lender's number-one concern (especially in this economy) is that the borrower has some financial means to make the monthly payments on the loan. If they determine the person is unable to do that, they won't offer a loan.

There are grants available for home buyers, but I don't know of any that will cover the entire cost of a home. Most home buying grants offer money for a down payment, or will only cover a portion of the cost. To cover the remaining amount, you would still need a mortgage loan. One of the first things a lender will do is review your current income -- whether that income comes from a job or some other source.

As for being a single mom, there is some helpful information for you here on our website. I once compiled a list of information for single moms buying a home. It's at least a year old, so some of the stuff on the list may be outdated. But it's a good place to continue your research.

The Department of Housing and Urban Development / HUD also has a "housing choice voucher" program (commonly referred to as Section 8 housing) for people with low income. You can learn more about that on the HUD website.

Hope that helps. Good luck.

First Time Home Buyer Programs

Reader Question: What qualifies you for first-time home buyer?

Well, if you are buying your very first home, then you meet the definition of first-time home buyer. I don't mean to be blunt, but that's the answer to the question you've asked.

But let me assume for a moment that you meant to ask about first-time buyer programs. In this case, we have more to consider.

This is a subject that confuses a lot of people, and it's easy to understand why. There are all kinds of programs designed to help first-time buyers purchase a home. But these programs range from private grants to federal tax credits, so it's nearly impossible to explain them all in one article. So let me zero in on a couple of things you might want to research:

Grants for First-Time Home Buyers

I've written about this subject a couple of times in the past. Here's one blog post that addresses grants, and here's another that offers helpful links to related information. I always suggest that people start with their city and state to find home-buying grants they might qualify for. There aren't many federal grants around anymore, but there are quite a few available through private sources and also through city and state programs. So try doing a Google search for the phrase first time home buyer followed by your city ... and then do the same search for your state.

Tax Credit for First-Time Buyers

As part of the federal government's efforts to stimulate the economy, there is a new tax credit available to first-time home buyers in the U.S. Basically, it's an incentive designed to encourage more home-buying activity, thereby stimulating our troubled economy in the process.

But there's a time limit on this benefit. As of this blog post (November 08), the eligibility cut-off date is July 1, 2009. It's a $7,500 federal tax credit for first-time buyers who buy between April 2008 and July 2009. The National Association of Home Builders (which is really hurting right now) has launched a website that offers more information on the tax credit.

Hope that helps. Good luck with your first-time home buying experience!

My Credit is Awful - Can I Get a Mortgage and Buy a Home?

Reader Question: My credit is awful. Can I get a mortgage loan to buy a home?

To be perfectly honest, it's unlikely. Somebody asked a similar question back in October, but used the word "horrible" instead of awful credit. It's the same scenario ... different adjectives. The previous Q&A hyperlinked above offers a bit of background into the credit and housing crisis we are experiencing right now, so it's worth a read.

Instead of explaining the reasons why you can't buy a home with an awful credit score, let me offer some tips on what you can do to raise your credit score as quickly as possible. We also posted a new video to the real estate videos section of the website that addresses this subject. Look for the video with the title "How to Raise Your Credit Score."

The first thing you should do is figure out why your credit is awful in the first place. There's no point in moving on to any other step in this process until you do that. So you must find the source of the "bleeding" before you can apply bandages. If you know fully well why your credit score is awful then you can move on to the next steps. But if you don't know the cause, get a copy of your credit report and read through it for possible causes.

Once you've determined the causes of your credit problems, you need to find a way to correct them. In addition to that, follow a three-pronged plan of attack for raising your score:

1. Correct any errors you find on your credit report.
2. Pay all of your bills on time to avoid having more negative info reported.
3. Reduce your credit card balances. You can keep the accounts open -- just pay down the balances to reduce your credit utilization ratio.

The next logical question you might ask is: "How long will it take me to improve my credit?" Well, this depends on two things -- just how awful your score really is, and how proactive you are about taking the steps outlined above. Here's another article that addresses the time frame question: How long does it take to improve a credit score significantly?

Hope that helps you out some. Good luck.

Bad Credit But Good Down Payment - Can I Get a Loan?

Reader Question: What if you have bad credit but have stayed out of debt for over a year, have a good job, and a substantial down payment. Is it possible to get financed for a home?

Let me start with my usual "disclaimer" to this type of question. The only way to find out for sure whether or not you can get qualified for a mortgage is to apply for one. You can do that through the LendingTree links on our mortgage quotes page.

With that out of the way, let me offer my thoughts on the subject. Congratulations are also in order. It sounds like you have got your finances well under control now. Kudos for that. However, if your credit score is still low, you have a major obstacle to mortgage qualification. Basically, you're doing well with two out of three factors a lender will look at:

• Credit score -- It sounds like you need some work in this area.
• Debt-to-income ratio -- If you have a good job and you are debt free (as you've said), then your DTI ratio should be in good shape.
• Income -- You said you have a good job, so I can assume that you're doing well in this department too.

Obviously, these are not the only things a lender will review when considering you for a loan. But they are some of biggest factors that will determine their final decision.

Having a substantial down payment also works in your favor. In fact, most lenders today are requiring 20% down. It seems the days of low-down-payment mortgage loans are gone, at least for now. So having a good chunk of change to put down is a big plus for you.

The question is, do your plus factors outweigh the minus factor of having a bad credit score? I can't answer this -- only a lender can. But I can tell you that it's really hard to get a home loan with a bad credit score in this economy. Of course, it depends on just how bad the score is.

Let me end on a positive note. It doesn't take that long to repair your credit situation. It sounds like you're well on the path already, by keeping your debt low and managing your finances. Keep that up, and you'll improve your score before you know it.

In my previous blog post, I posted a video about raising a credit score. You might want to give that a look as well. It's only about three minutes long, and it explains that three most important things to do when trying to boost a score.

Hope that helps. Good luck!

Buying a Foreclosure Home With Bad Credit

Reader Question: I want to buy a foreclosure home but I have poor credit. What can I do?

If you plan to buy a foreclosure home at a real estate auction, which is one of the most common ways to purchase these homes, you would have to pay cash for the home. It's just like any other type of auction in that way -- you're expected to pay for the item (in this case a house) immediately following a successful bid.

So in that scenario, your credit score wouldn't matter because you'd be paying cash for the foreclosure property.

Of course, if you don't have that kind of investment cash to put down on a foreclosed home, it's another story entirely. In this scenario, your credit score would be a factor because you would have to get a mortgage loan.

When homeowners default on their mortgages, the property will generally be sold in one of two ways. It might be sold before the foreclosure process through a real estate short sale. Or it might be sold after foreclosure through the auction scenario I mentioned above. If it is sold through a short sale, you could theoretically get a mortgage loan to buy it. But if it's sold after the foreclosure at an auction, you will need to have cash available to buy it after bidding.

So if you don't have the cash to buy a property at a real estate auction, and your credit problems make it hard to get a loan to buy it in the pre-foreclosure stage ... you might not be able to proceed with your plan. If that's the case, the best you can do is to focus on fixing your bad credit situation first.

We just published a new video on this subject earlier today. You can check it out below.

Buying a Pre-Foreclosure Home - Lender Wants to Approve Me

Reader Question: I am buying a pre-foreclosure home. Countrywide has the mortgage and I already have my financing set up. Now they want to "approve me" to see if I am worthy of their business. Does this seen right to you? I am not getting a loan through them nor do I want to.

Yes, it's very common for lenders to review a buyer, as they are doing with you. A lot of investors who buy foreclosure homes on a regular basis complain about this very thing (lenders dragging their feet). When you buy a home in the pre-foreclosure status, the process can be delayed by several things.

The process varies from one state to another, based on the foreclosure laws in a particular state. A homeowner has certain rights before the bank can foreclose on the home, and thus there is a time frame associated with the process. In most cases, the homeowner has two to three months to get caught up on their missed payment (through reinstatement or repayment).

It all starts when the lender files the initial paperwork for a foreclosure proceeding, and it can be several weeks later before they actually foreclose on the property. And again, this process varies by state.

If you have your financing lined up, then you have an advantage. But it still won't change the fact that there are certain time-consuming steps the lender has to take before selling the property.

I just found a good Q&A thread over at Trulia.com on this very subject. You might want to check it out. It's worth reading, because it's relevant to your situation.

Related Article: The Basics of Buying a Home in Foreclosure

Hope that helps clear things up a bit. Good luck.

Can I Buy a Home With No Money Down

Reader Question: Is it possible for a person to get a mortgage loan and buy a home making 34,000 a year, no money down and 10,000 for closing?

It's possible, but how likely it is will depend on (A) the size of the loan and (B) the qualification of the borrower. For example, if it's a relatively small loan and the borrower has good credit, then it may be possible. But as the loan amount gets larger, there will be less chance of qualifying under those conditions. Likewise, if the borrower has bad credit, the chances are even less.

So the size of the mortgage loan plays a big role, as does the strength of your credit score and financial history.

A couple things worth mentioning on this subject:

• In light of recent economic events, most mortgage lenders these days are requiring a down payment for home loans -- 20% down in most cases.
• It used to be possible to find a lender who would finance the entire home value without requiring a down payment. But it's going to be harder to find one of those lenders in the current economy. It's just too risky for them.

Keep in mind that some areas are worse off than others, in terms of buyers getting mortgage loans. For example, here in Austin, Texas, our local mortgage lenders are not suffering as bad as national lenders because they did not get involved in risky subprime lending as much. So while buyers in some areas are having trouble getting mortgage loans, buyers in other areas might have fewer obstacles.

So the only way to find out for sure if you can qualify for a mortgage is to request some quotes from mortgage lenders. You can do that from out mortgage quotes page.

Another article you might want to read:
How to Get a Mortgage In This Economy

I hope that helps you. Good luck.

Mortgage Modification Information - A Homeowner's Guide

Article Summary: Many financial institutions are unveiling mortgage loan modification programs to help at-risk homeowners avoid foreclosure on their homes. As new information becomes available, we will update this guide. Last update: 11/11/08

If you've been watching or reading the national news lately, you've probably heard a lot about mortgage modifications plans being used to prevent home foreclosures. Spurred by the economic crisis sweeping the United States, these loan modification plans are designed to help "at-risk" homeowners struggling with high-interest mortgage payments (i.e., the kind of homeowner who could face foreclosure in the near future).

But what, exactly, is a mortgage modification plan? Who will be eligible for assistance? When do these programs start? These are some of the questions we will answer in this guide to home loan modification programs.

Home Loan Modification is Making News (And History)

If you want to look back a few years to see how we reached this point of economic distress, you might want to read out explanation of the subprime mortgage crisis. The rest of this article will focus on current events, as opposed to the events leading up to them.

These home loan modifications are being offered by different lenders, and so the details of the programs will vary from one financial institution to the next. But in general, the process is supposed to work like this:

First, the lender creates a set of criteria to determine which of their customers / borrowers need (and qualify for) assistance under the mortgage modification program. Next, they will decide how they are going to modify the loans. In most cases, this includes moving their customers into loans with a lower fixed interest rate. This does two things at once. It makes the mortgage payment more affordable (because the rate is lower) and it protects the homeowner from future uncertainty (because the rate is also fixed). The goal, of course, is to keep the person in the home and avoid a foreclosure situation from developing.

Which Lenders Are Offering These Programs?

We are currently building a list of lenders that are currently offering some type of mortgage loan modification plan. It's a work in progress, because new programs are being announced at the time of this blog entry.

Learn more here:
http://www.homebuyinginstitute.com/mortgage-modification.php

What to Do Before Buying a House in the Current Economy

Reader Question: I've been hearing that it's harder to buy a house today, for whatever reason. I'm just getting started with the process, but I don't really know where to start. What are the most important things to do before buying a home in this current economy?

Depending on your financial situation, this could be a great time to buy a house. And because it's a buyer's market in most areas of the country, it's possible to get more house for your money in this current economy. It is also easier to negotiate any items requiring repair, seller-paid closing costs, and other negotiation points. However, due to the current economic crisis we are dealing, it may be a tough time to secure a mortgage.

So before buying a house in this economy it's a good idea to review your financial situation, including credit score, debt-to-income ratio and other factors.

Lenders in many areas of the country have tightened up their requirements due to the subprime mortgage fiasco. Many banks made bad loans and ended up with losses in the billions of dollars. What used to be considered a good, qualifying credit score may not be enough by current standards.

So I would say the first thing to do before buying a house is get copies of all three of your credit reports including the credit scores. This way, you will know what your credit looks like and if your score is high enough to even bother proceeding any further. In order to get the best interest rate on a home loan in this current economy you'll need a score of 720 or higher. You might still get approved for a loan below that number, but you won't get the best interest rates.

If your credit looks good and you have a decent score, the next thing you want to do before buying a house is start shopping for a lender. LendingTree is a good place to start, because you can get online mortgage quotes from up to four lenders at once. It's convenient, and it could save you a lot of time and energy. Visit our online quotes page to learn more.

Once you decide on a lender, set up a time to meet with a loan officer to go over the different types of loan programs and rates. It's always a good idea to come to the meeting armed with pay stubs and bank statements, including any retirement / stocks / bond accounts you have. This way, the loan officer will be able to come up with a clear picture of your debt-to-income ratio and your current assets.

It also helps to narrow down the general where you want to buy a home, and to determine approximately what the property tax rate is for that area. This will help the loan officer come up with a realistic loan amount and monthly payment that you qualify for. Now that you know how much you can borrow to purchase a home, it's time to start looking!

Obviously, these are not the only things to know and do before buying a house in the current economy. But they are some of the most important things you should do. Our website has hundreds of pages of advice on this subject, so be sure to spend some time surfing around here before you go.

How to Get a Mortgage In This Economy

Reader Question: I've heard that a lot of home buyers are having getting loans in this economy. Is this true? Is it hard to get a mortgage loan in this economy, and if so what can buyers do about it?

Let me start with the short and easy answer. Yes, it is a bit harder to get approved for a mortgage loan due to our current economic crisis. A lot of lenders have bad loans on their books right now, and they're not sure how or when they'll be able to recoup their losses (or prevent future losses, for that matter). So if you want to get a mortgage in this economy you will need to be a well qualified borrower, as defined below.

Now let me clarify some of these points. Lenders today are basically doing what they should have done all along. They are scrutinizing borrowers to make sure they are good candidates for a mortgage loan. They are reviewing the financial history of everyone who applies for a loan to see if there's a pattern of responsibility or negligence. This is a good thing, because it keeps both the lender and the borrower out of hot water down the road.

But we have only recently returned to these standards. For a while -- through the 1990s and into the early 2000s -- just about anyone could get a mortgage loan. Even if you had a bad credit score and tons of debt, you could find a subprime lender willing to offer you some "creative financing" to get you into a loan. As history has shown, this is a dangerous way to do business for all parties involved. Many of the problems we are having in this current economy are a direct result of the irresponsible lending that took place over the last 10 to 15 years.

So let's get back to your question: How can you get a mortgage loan in this economy given all the problems we are having?

Basically, you need to be a highly qualified candidate. The "best of the best," if you will. Homeownership has always been a reward ... something you had to strive for. But today, in this economy we are experiencing, you have to strive a little harder than you did a few years ago.

How to Get a Mortgage In Our Current Economy

Keep in mind that you might not have any trouble at all getting a mortgage in this economy, based on your current financial situation. It's true that some lenders are turning more people away these days, but a qualified borrower can still get financing in this economy. Of course, a lot of folks will have trouble getting approved for a mortgage in the current economic landscape. So for those people, I offer the following advice.

• Boost your credit score. As a result of the housing crisis and all of its symptoms, home buyers need a higher credit score in this economy if they want to (A) get approved for a mortgage loan and (B) get the best rate on that loan.
  
• Improve your debt-to-income ratio. Here again, the bar has been raised. If you want to get a home loan in the current economy you will need a more favorable debt-to-income ratio (DTI) than in the past. There are three ways to do this: Earn more, owe less, or a combination of the two.
  
• Pay down your debt. We just covered the importance of debt-to-income ratio when buying a home in this economy. You can increase your chances for getting a loan by paying down some of your high-interest debt (like those credit card balances).
  
• Save up for a down payment. And then some. In the past, you've probably heard about "zero down" mortgage loans, where you could get qualified based on your credit and income and then get financed for 100% of the home's sale price. Well, those days are behind us. At least for the time being. Most lenders in the current economy are requiring a 20% down payment across the board. If you can save more than that, by all means do so. You're going to need the extra cash at closing anyway.

I hope this answers your question, and I wish you all the best in your home buying experience. Good luck. If you think you're a qualified borrower, based on the criteria listed above, it might be a good time to move forward in the process. This would mean getting quotes from lenders, and you can do that from out online mortgage quotes page.

Buying a Home After a Bankruptcy Filing

Reader Question: Will I be able to buy a home after filing bankruptcy? I filed the bankruptcy in such a way that I made weekly payments to pay everything back. This has been discharged for years. I have a good job that I've been at for more than eight year. How do I get started?

This is pretty common question we get, so I'm always happy to answer it. In my view, you can never provide too much information or help to struggling consumers. So let's get right to it...

If you filed bankruptcy with a debt repayment plan, which you have indicated, I can assume that you filed a Chapter 13 bankruptcy. Other types of bankruptcies, such as Chapter 7, do not include repayment of debt. Regardless of which type of bankruptcy you filed, there are limits to how long it can stay on your credit report. These limits are outlined in the Fair Credit Reporting Act (FCRA).

In general, a bankruptcy can stay on your credit for up to 10 years. If it's a Chapter 13 filing, it might be removed from your credit report after 7 years. Maxine Sweet, who is the vice president of public education for Experian (one of the credit reporting agencies) had this to say about their policies:

Bankruptcy can be reported for up to 10 years from the filing date ... Experian reports Chapter 13 bankruptcy for seven years because it includes partial debt repayment. Chapter 7 bankruptcy remains for 10 years from the filing date because none of the debt is repaid.

Based on your question, I'm not exactly sure how many years it has been since you filed. But just keep these time limits in mind. More importantly, don't just assume that the bankruptcy will be removed from your credit file when the time limit is reached ... verify it yourself by getting copies of all three credit reports (from Experian, TransUnion and Equifax) and make sure it gets removed. If the bankruptcy stays on there longer than it should, you can dispute it through the reporting company's website. The aforementioned FCRA laws require them to make such corrections.

Now with all of this being said, it's important to make another point about bankruptcies, credit scores, and mortgage loans. The way a bankruptcy affects your credit score will lessen over time. It has a big impact at first, but as the years pass it has less of an impact. This is even more true if you have been financially responsible in the meantime.

So now you have two homework items, if you haven't done them already:

Get copies of all three credit reports to see if the bankruptcy information is on there. It will be listed under the "Public Information" section of your report. Here's a helpful article on how to read your credit information. Remember, the legal limit for bankruptcy to remain on your reports is 10 years, but it could very well be removed after 7 years. Only one way to find out if it's on there!

Next, request your credit score so you can see where you stand. There's a bunch of information on this blog about the kind of score you need to get a home loan in this economy. But you obviously need to know what your score is before you can use that information.

You can get your credit reports once a year for free, through AnnualCreditReport.com. You'll probably have to pay a nominal fee for your credit scores -- I've seen the cost range from $19 to $29. If you'd like to get everything all at once (with other products such as credit monitoring), you can get package deals through some websites. We recommend Credit.com for this purpose, and you can access their package deals from the Credit Tools section of our website.

I hope that helps you some. If you have any follow-up questions, just type them into the Q&A box at the top of the blog. Good luck!

Entering U.S. With no Credit History - Can I Get a Mortgage Loan?

Reader Question: I am entering the U.S. for the first time and therefore I don't have a credit history at all. I wish to purchase a condo in Orange County for about $150,000 and I am prepared to pay 20% as down payment or equity. What are the chances of getting a mortgage loan?

Normally this would be a fairly easy question to answer, but you are coming into the U.S. at a time when our economy is "touch and go." The economic conditions this month are far different from last month, and who knows what next month will be like.

I have some friends from England who got a mortgage loan soon after entering the U.S., so they were in a similar situation as you (no credit history within the U.S.). I know they had to put 20% down on their home, and it may have been even more than that. It was at least 20% for sure. Both the husband and wife had to show proof of income as well, and also their legal immigration status (visas).

They were able to get approved for a mortgage in the same ballpark as the $150,000 range you are talking about. In fact, their loan was a little more than that amount. With that being said, they went through the process about three years ago ... before the economic crisis ... before the subprime mortgage collapse ... etc. So things may very well be different today.

Having 20% down will certainly help you. With everything going on in the U.S. economy right now, the days of "no interest" mortgage loans are gone. Most lenders today are requiring 20% on mortgage loans, verification of income, and higher credit scores.

The only way to find out for sure is to request a free mortgage quote from lenders. For people who are in questionable qualifying scenarios (such as having no credit history), I usually recommend getting offers through a website like LendingTree. Their service will give you offers from up to four lenders at once, which increase the chance of getting a favorable offer. There's a link in the upper-right section of this blog (under the "Home Buying Tools" label) that will connect you with the LendingTree quotes page.

Hope that helps you out some. Good luck.

Republicans Use Voter Suppression Tricks - Voters Beware

I had a feeling things were going to get dirty in the hours leading up to this election. Or should I say dirtier? In a despicable attempt to reduce the number of democrats who turn out to the polls, some folks on the Republican side of the fence are using some dirty tricks for voter suppression.

In some cases, they are sending out bogus flyers to tell people there are "overflow" elections to accommodate large crowds. These flyers claim that Republicans will vote on Tuesday and Democrats on Wednesday. In truth, there are no elections being held on Wednesday. It is a despicable attempt at voter suppression aimed at reducing the number of Democrats who turn out to vote on Tuesday. If they fall for this trick and go to their polling station on Wednesday, they will find it to be closed ... and they will have been tricked out of their vote!

There are other voter suppression tricks being used by the Republican party, and you can read all about them in this MSNBC article.

Do not let anyone scare or confuse you away from voting. This election is far too important for you to lose your vote due to voter suppression tactics. You can find your polling station and voting times at Vote411.org or through your county or state website.

CNN has also set up a voter hotline to help with polling questions and problems: "If you have a problem registering or voting or see a problem, call the CNN Voter Hotline at 877-GOCNN-08."

Voter suppression is a disgusting practice, but it's nothing new. In recent years, it has been most frequently used by the Republican party. They are experts at voter suppression and, unfortunately, their tactics sometimes have an effect. You can protect yourself by using trusted information sources (such as those I've provided above), along with a healthy mixture of common sense and skepticism.

Can I Buy Another Home During a Foreclosure Process?

Reader Question: Can I buy another home while current home is in foreclosure?

Somebody asked a similar question a couple of weeks ago, so you might want to start there:
Current home is in foreclosure and I want to buy another

Can you purchase another home while yours is currently being foreclosed upon? Sure you can ... if you can afford to pay cash for the home. But if you need to get a mortgage loan for your next home purchase, I would say your chances are slim to none (for right now, at least). I don't mean to sound harsh. I just feel that painting a rosy shade on it would be a disservice to you, and also dishonest.

You will be able to get another mortgage someday. But it won't happen while your current home is in a foreclosure process. To understand why, you have to step out of your own shoes and into the shoes of a mortgage lender. Many of them are in survival mode right now, because they have a lot of nonperforming loans on the books (from foreclosures) and no way to recoup their losses or prevent further ones.

Additionally, the record-breaking numbers of foreclosures we have seen recently were the primary cause for our economic crisis. So when you approach a mortgage lender for a loan in your current situation, you are saying this:

"My current home is in foreclosure because I could not make the payments. And I know that's something you're terrified of right now, given the shaky ground your bank is standing on. But how about giving me a new loan anyway?"

If you haven't done so already, I would talk to your current lender about workout options to avoid foreclosure on your home. A lot of lenders are offering repayment programs and the like to help homeowners get back on track. I don't know how far into the process you are, so it may be too late for such a program. But it's worth some further research.