Investment Home after Ch 7

[utahdad]

Does anyone know the time required to purchase an investment property, with at least 20% down, after a Ch 7 BK discharge?

I know that FHA allows it after 3 years. But I want to buy and rehab investment homes.

[justbroke]

You are on the right track! It will entirely depend on whether you discharged mortgage debt, any prior foreclosures, and the seasoning required by both the lender and the underwriter/guarantor (such as FHA/FDA or the GSEs). The deposit will also depend on the lender and your credit score. Your credit score is going to be a big factor. Your debt load (DTI) is also going to be a major factor. I have just looked into second homes and, to my surprise, FHA is available with as little as 3.5% down. However, the guidelines are just that, guidelines. The actual lender can add any other requirements to the underwriting hurdle.

If you really want to get into this business of rehab (which I'm reading as buy, rehab, and flip), you will probably need more money. A smart lender should require 6 months in reserves and a pretty low DTI (below 40%). Until you build up enough funds to make straight purchases (cash), it could be difficult. I have also found that some of these lenders -- which would lend -- have "minimum" funding amounts and they are typically over $50-$60K. So finding that diamond, foreclosed, stripped unit for $20K, is probably not going to work since most of these lenders will not lend that amount of money (not enough money).

I too was thinking about this recently. Florida has a lot of inventory in some areas where the banks foreclosed and just sat on the properties. The banks are selling them in batches, so you could purchase several homes under one sales contract. If you can get them for $20-30K each, maybe that could work.

Because financing after bankruptcy and in this market is so fluid at this point, there is no one that can tell you for sure. It really depends on your overall credit picture (net worth, reserves, down payment, foreclosure record, time since BK, income, debt, ratios) and the specific lender. At least, that is what I have found. (I have not asked to go through underwriting, but I've been "shopping".)

Zillow mortgages actually has a nice tool which will match your "criteria" with several lenders in their network. I use it for rate shopping and to see what down payment and other things I would need to at least get "to" underwriting.

http://www.zillow.com/mortgage-rates/

FWIW, and using the Zillow tool, I could not find any lender that would lend $100,000 on an investment property with a 20% down payment, for any score below 700. (Even a 760+ score required 20% down on $100K... and that's just a soft qual.) (Also note that when you get to $200,000 on the purchase price, more lenders show up with lower score (620+).)

[utahdad]

Thanks. My D/I, and liquid assets are good. Credit mid score is about 690, I think... I can not use FHA as I will be buying as an investment.

I may go out to lending tree to see what could be offered... The Zillow idea was good.

[justbroke]

Thanks. My D/I, and liquid assets are good. Credit mid score is about 690, I think... I can not use FHA as I will be buying as an investment.

I may go out to lending tree to see what could be offered... The Zillow idea was good.

The Zillow tool is quite cool because it lists the lenders that would accept a "hypothetical" deal based on your input to the tool. The Zillow tool is not an application for a loan, where the Lending Tree is an actual credit application.