Q & A: To Short Sale, or Not to Short Sale?

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I am looking to buy a home and came across a few listings in the paper for a short sale. What does that entail for me as the buyer? Is it the same home buying process? Does it take longer? Will I still need to be pre-approved?
 
Buying a short sale is a fairly common occurrence in this marketplace after the downturn a few years ago.  This is especially true in the areas that were hardest hit when market prices went down.  As a buyer, you need to be aware that there are added layers/steps to purchasing a short sale property in that the bank currently holding the mortgage on the house must approve the sale as they are taking a loss on their loan.  It is often a longer process depending on what, if any, work the sellers have done to make sure the bank is aware the short sale is taking place and what potential sales price they might expect.  In that regard, it is a different process than purchasing a non-short sale property.  As for the pre-approval, this is absolutely necessary as the bank wouldn't even consider an offer from you without a solid pre-approval.  That would be a must.
 
How does declaring bankruptcy affect my chances of being able to purchase a home? Will I still be able to get a loan? I declared personal bankruptcy 2 years ago and I now have a stable job and income but I am afraid the bank won't help me.
 
A bankruptcy definitely affects the ability to purchase a home.  You CAN get a mortgage after bankruptcy, but there are guidelines.  It can take anywhere from 2-4 years from the date of DISCHARGE before you can apply for a mortgage.  You need to have re-established credit and it really needs to be maintained well.  A lender will not want to see continued late payments after coming out of bankruptcy.  That said, once you are out of it for the required period of time, you should be able to get a mortgage and the rate will be measured the same way everyone else's rate is- by the credit score and the down payment.  You are not left out in the cold forever if you need to declare bankruptcy.
 
Is there a minimum credit score you need in order to be able to secure a loan? Are there different rates for different credit scores, or is everyone eligible for the same rates?
 
Yes, you need a credit score of at least 620-640 these days to get a mortgage.  That is true for 99% of the lenders out there.  While there MIGHT be some that would entertain a lower credit score, there needs to be some serious strength in the file in order for that to happen.  Also, your interest rate, for most loans, is based on both your credit score and the amount you plan to put as a down payment.  So the lower the credit score, the higher the interest rate could be.
 
I have a few years left on my mortgage and I also have a home equity loan. Is there a way to combine the two and just basically extend my current mortgage?
 
You certainly can. You can refinance your first mortgage and incorporate the balance on the home equity, turning it into one, stable loan. The thing you want to take a look at is the financial benefit to doing that. Yes, you can fix the payment, but if you only have a few years left on the mortgage, how long do you think it would take to pay off the home equity?  It could make   sense to roll everything into one and it could make you much more comfortable knowing the payments on your house are fixed and not going to change, but you want to do your homework to make sure you aren't going to spend much more money in extra interest payments over time.