A Question About A Fha Loan

[DANIEL1346]

I Filed a chapter 13 bankruptcy in april of 2007.. Will i be able to as long as i keep paying my chapter 13 payments on time be able to obtain a fha or other type of home loan come april of 2008.I know i will need to get trustee approval but wondering because of the credit crunch if its still possible

[lrprn]

(Daniel, I moved your question here to its own thread from the old thread you posted to - it's against our forum rules to post to threads older than a few months. You'll get more and better posts this way anyway )

I Filed a chapter 13 bankruptcy in april of 2007.. Will i be able to as long as i keep paying my chapter 13 payments on time be able to obtain a fha or other type of home loan come april of 2008.I know i will need to get trustee approval but wondering because of the credit crunch if its still possible

You aren't likely to find any financing at all during Ch 13, especially during the first few years. The sub-prime lending market has dried up. And even if it hadn't, you would have to file an amended plan the trustee would have to approve to pay a higher mortgage payment anyway.

Is your house payment going up significantly in April 2008 and that's why you are asking about another home loan so soon after filing?

[B12]

I am not a mortgage broker, but had been a RE broker for over 25 years in the NY area and have seen every imagineable type of loan and real estate transaction.

If there are any mortgage brokers out there in business for less than 5 years, please do not take this personally and it might not be you, but...

The mortgage business changed with the advent of computer underwriting. Underwriting used to be done manually, with an actual person reviewing the case and making logical decisions based on risk and experience. The mortgage broker fully understood the loan before it was presented to the underwriter. Today, a mortgage broker plugs numbers into a computer and gets a decision. Very few have a real understanding of the ins and outs of mortgages. I have come across this both professionally and personally. I have seen people taken off the street, put in front of a system with mortgage software, and start originating loans.

Many states do not even require people to be licensed.

If you decide to pursue a mortgage while in Chapter 13 or when discharged from BK, my advice is to get a mortgage broker with years of experience, and a company that does manual underwriting.

I have gotten clients mortgages while still in chap13, but there were extenuating circumstances that threw them into a 13. It is also very important NOT to incur any debt after any type of BK.

The "normal" waiting period to apply for a new mortgage is two years after discharge. I have seen it done in 12 months, but again, no new debt was incurred and the clients showed extreme diligence in paying bills. You also have to qualify for the new loan meaning having sufficient income and low debt. The income and income to debt ratios still apply.

I also want to clear up what seems to be a misconception of the FHA loan. It is not a special loan for BK people. It is a regular mortgage and can be obtained by anyone with any lender that provides the product. The only difference between the FHA and a conventional loan is that the FHA loan is insured with the government and there is a cap on the mortgage amount.

Let me back up a minute to clarify this.

Conventional loan is "insured" by either a large down payment or PMI, private mortgage insurance, which the borrower pays. If the borrower defaults on the loan, the lender can sell the house for the outstanding mortgage because there was a good size down payment or the PMI pays the difference to the lender.

VA loans for the military are GUARANTEED by the government. If the borrower defaults, the gov pays.

FHA loans are not guaranteed by the gov, but only INSURED by the gov, instead of a private insurance company. The borrower purchases the mortgage insurance in the form of a Mortgage Insurance Premium, MIP. If the borrower defaults, then the insurance kicks in for the lender.

The reason why FHA loans are good for a person discharged from BK is that the FHA is more lenient towards credit problems.
If you have shown a two year history of paying bills on time and have not incurred more debt, they tend to be more forgiving. You can even use your rent payments as proof. There still are qualifications for income and debt to income ratios, but your credit score does not have to be really high.

On a personal note, I would not rush out and get a mortgage right out of BK, especially with no money down. Try to save even 5% cash down so as not to start a downward spiral again.
And...although the sub prime market is drying up, I still see lots of negative am loans and teaser rates.

When you are ready to get into a house again, speak with a qualified mortgage lender and tell them your situation and your fears. You tell them what kind of loan you want! They do not tell you.

Sorry for the length, but I hope this helps to acquire a better understanding of the mortgage business.

[lrprn]

Very informative post, B12 - thanks for sharing!

[MTG_BANKER_OH]

I am not a mortgage broker, but had been a RE broker for over 25 years in the NY area and have seen every imagineable type of loan and real estate transaction.

If there are any mortgage brokers out there in business for less than 5 years, please do not take this personally and it might not be you, but...

The mortgage business changed with the advent of computer underwriting. Underwriting used to be done manually, with an actual person reviewing the case and making logical decisions based on risk and experience. The mortgage broker fully understood the loan before it was presented to the underwriter. Today, a mortgage broker plugs numbers into a computer and gets a decision. Very few have a real understanding of the ins and outs of mortgages. I have come across this both professionally and personally. I have seen people taken off the street, put in front of a system with mortgage software, and start originating loans.

Many states do not even require people to be licensed.

If you decide to pursue a mortgage while in Chapter 13 or when discharged from BK, my advice is to get a mortgage broker with years of experience, and a company that does manual underwriting.

I have gotten clients mortgages while still in chap13, but there were extenuating circumstances that threw them into a 13. It is also very important NOT to incur any debt after any type of BK.

The "normal" waiting period to apply for a new mortgage is two years after discharge. I have seen it done in 12 months, but again, no new debt was incurred and the clients showed extreme diligence in paying bills. You also have to qualify for the new loan meaning having sufficient income and low debt. The income and income to debt ratios still apply.

I also want to clear up what seems to be a misconception of the FHA loan. It is not a special loan for BK people. It is a regular mortgage and can be obtained by anyone with any lender that provides the product. The only difference between the FHA and a conventional loan is that the FHA loan is insured with the government and there is a cap on the mortgage amount.

It was a good post but with FHA you can buy a home or potentially refinance after 12 months of on time CH 13 payments, this is not saying that you can definitley get approved after 12 months but it can be done. A chapter 7 requires 2 years after the discharge, it can be done after one year but the chances fo this happening are few and far between. This is all subject to court approval, and I agree that you have to work with someone that knows the in's and out's of FHA and other loan programs, not just someone that can run your file through a underwriting system and say you are approved. THere are many changeg going on with FHA even in the past few days and i will try and post them in a new post.