Co-Signer on Mortgage after BK

[RickInMich]

Does anyone know if it's possible to have someone co-sign on a mortgage and, secondly, if that's possible shortly after bankruptcy and foreclosure?

My wife's parents would be willing to co-sign a mortgage for us. We're at the point right now where we've pretty much made up our mind to let our house go. We won't be formally discharged until after March 8, but we've had our 341. February would be the first month we stop paying on either our first or second mortgage.

After that discharge, would we even be able to be on a mortgage? Would it be better to just have them purchase the house and we'd attempt to buy it from them in a couple years?

[rrockinggramma]

It will take you 2 years after your discharge to qualify for FHA. In the past, getting a mortgage right after discharge was possible but the lending market has really dried up now and BK'ers are going to struggle finding a lender. FHA requires 2 years. So if the parents are willing, have them purchase and then sell it to you on land contract. Make all payments with check to verify ontime payments and then in 2 years refinance it with FHA.

[NotFun]

thats correct. Now with my FHA loans they are assumable, so if your parents purchase the home and then in two years you can assume the loan from them.

[RickInMich]

thats correct. Now with my FHA loans they are assumable, so if your parents purchase the home and then in two years you can assume the loan from them.

You mean if they get an FHA loan we could assume that FHA loan from them after a couple years? I mean, does it have to be specifically an FHA loan?

[rrockinggramma]

no, if they qualify for conventional, just make sure it is an assumable mortgage and in 2 years, with good history after your BK, you should be ok. But in conventional mortgage lending, they want 4 years of clean credit after a BK. FHA only requires 2. But they can get conventional and in 2 years, you can get FHA and pay them off (buy the house from them so to speak)

[NotFun]

yes and no. They can go either FHA or Conventional. But yes assuming the loan from them is the best way to go.

[RickInMich]

Thank you all for this advice!! I really think this is the route we are going to go. Well, if they go for the idea. We have told them nothing about our bankruptcy or anything. We'll just have to put aside our pride a bit.

Now our dilemma is do we want to have them attempt to buy our house after foreclosure, which I think they (we) could get a decent price on, or do we move somewhere else?

Oh, speaking of that. And I will search the forum, and I'm sure this answer is out there, but it may be pertient to someone reading this thread. When do you have to move out of a foreclosed home? Once the foreclosure goes through and the bank takes back the title, is that when you move? What I'm trying to figure out is if we do have her parents buy our house back, would we have to move out and then move back in? I'm trying to think if there's a way to not have to physically leave the premises.

They won't be able to buy the house at the auction since there's a second mortgage. My understanding is if they did attempt to buy at auction, they'd end up having to pay for the second mortgage. So at what point can they offer something to the bank (making sure there's no longer an obligation to the 2nd) and at what point do we have to move?

[iupui1299]

We were going to try that but the parents would have to live on the property in order for it to be approved....so that didn't work for us.

[NotFun]

We were going to try that but the parents would have to live on the property in order for it to be approved....so that didn't work for us.

well.... what the lender has you do is sign a wavier saying your parents would occupy the property.

I mean wouldn't they stay there at least 14 days a year...?

[RickInMich]

Okay, now this is something I hadn't heard before. Can anyone explain further. I guess I didn't realize you have to live ON the premises to get a mortgage. People buy cottages or vacation homes, and they don't have to live there. Shoot. This may pose a problem. Anyone know more about this?

[iupui1299]

We were going to buil a house about 6 months out of BK with CP Morgan. The only way we figured it could be done was with a co-signer. At first CP acted like sure that could be done but then they told us the co-signer would not make a difference unless they lived on the property. I am sure they wanted to sell us a house so I am assuming they are accurate but maybe someone else knows if this is indeed correct.

[CindyLou]

FHA requires the property purchased to be the PRIMARY residence. No exceptions. Plus you cannot already own a home or have owned a home in the last 3 years.

[erinmi]

Actually you can get an FHA loan if you already own a home or have owned a home in the last 3 years. We went the FHA route on the second time we bought a house.

People can buy property as a second/vacation home but they cannot use an FHA mortgage or certain types of other mortgages because they do require it to be a PRIMARY residence. When getting a mortgage for a second home, you also generally have to be able to put quite a bit of money down on the loan, usually 20%.

Oh and RickInMich, you also need to find out about property taxes because in Michigan if your parents aren't going to live there but you are, they will lose the homestead exemption and you have to pay the higher property taxes (generally almost double). My in-laws one time considered buying a house and letting us rent it until we could buy it from them (this was several years ago) but the property taxes made it a bad idea.

[RickInMich]

ernmi,

I talked to a realtor friend tonight, and you're right. I completely forgot about the homestead exemption. The taxes would be ridiculous. My friend did say, though, that they could quit claim the title to my wife, but still be the ones on the loan. That way we could claim the homestead exmption. But I'm not so sure about that.

Still trygin to decide what to do. February's payment is coming up.

[jal1129]

We bought our second, third and fourth houses all with FHA loans, (selling one and then buying the next). From what I remember FHA won't approve you for a new loan if you already have an existing FHA loan unless you will be selling the house (paying off the old loan).

Also from what I remember about conventional loans the lowest rates are for owner occupied houses, then it goes up slightly for second homes, with investment property having the highest rates.