Bought new home after BK. Previous mortgage included in bankruptcy. It can be done!

[paystayFla]

I would still like to know what bank you used

I went with a mortgage broker that understood and had worked with my situation before in FLA. In my opinion banks have the most closed minded mortgage folks. Initially we applied with Chase and they declined us out of mostly fear and no true reason. After closing on our new home Chase proceeded to buy our new mortgage. Go figure.

[thebigpunn]

I would still like to know what bank you used

[paystayFla]

I don't think you could get an underwriter to agree to it even if you said yes. If you currently have a home in foreclosure, you're not getting a new mortgage for awhile.

Thats one of the key point I made, make sure you do all this prior to foreclosure. foreclosure is a bigger scarlet letter than just the bk it seems.

[paystayFla]

PayandStayFLA, did your credit score go down when the bank changed your mortgage to IIB?

No it did not. In fact it went up to around 680 from under 600. The main reason was debt to credit ratio. The record was changed and back dated to 4 years ago when the bk was discharged also the balance went to zero. So it still looked like we had a bk but my debt to credit ration was under 3%. Today several months after purchasing my score is up to 700.

[sofarsogood2]

I don't think you could get an underwriter to agree to it even if you said yes. If you currently have a home in foreclosure, you're not getting a new mortgage for awhile.

[Logan]

This is a very interesting post. We are in a similar situation...yet different.

BK7 discharged in April of 2007...bk was the result of a second rental property that we owned that financially devastated us (multiple evictions, etc). We chose to pay and stay on the first home that we owned...also a multifamily property.

We attempted a mod in 2010 and were declined because we had never been late and therefore were not at risk of default. We defaulted the very next month...we were done...fed up. We saved the mortgage payments and used it to have a decent Christmas (for the first time in years) and then we moved out of state.

When my husband was offered a new job out of state...we began researching properties and our qualifications to buy. We began working with a fabulous mortgage broker...but in the end, we could NOT get a bank to take us on, despite the fact that we could demonstrate stellar financial history, etc. Their biggest hangup? The property in RI had not yet foreclosed and therefore was still an issue.

I spoke with multiple lenders...supervisors...and even FHA themselves. I had my mortgage broker contact FHA...he spoke with several underwriters...not a single one of them would touch us. Our credit scores were nearing 700. But they stated we would need to demonstrate either a mortgage payment history or a rental payment history and we could provide neither. It didn't matter that we had reestablished several credit lines...one credit card with a modest limit and a modest balance, a vehicle loan and a student loan.

We DID find several lenders that could provide mortgages but at exorbitant rates, closing fees, etc. We said no to all of that.

In the end...we were pointed towards USDA Direct and are going that route...0% down, no PMI, modest closing costs and we'll probably qualify for a 1% subsidized interest rate because we have four kiddos and one income.

It's not easy...and you sometimes have to be creative...but getting a mortgage can definitely be done. :-) Congrats on your new home!

When I was in the MTG business I would always take the angle of would I give this client a loan for a home? If someone came to me with a home in foreclosure the answer would most certainly be NO.

[hopejones]

PayandStayFLA, did your credit score go down when the bank changed your mortgage to IIB?

[Sweetpea3829]

This is a very interesting post. We are in a similar situation...yet different.

BK7 discharged in April of 2007...bk was the result of a second rental property that we owned that financially devastated us (multiple evictions, etc). We chose to pay and stay on the first home that we owned...also a multifamily property.

We attempted a mod in 2010 and were declined because we had never been late and therefore were not at risk of default. We defaulted the very next month...we were done...fed up. We saved the mortgage payments and used it to have a decent Christmas (for the first time in years) and then we moved out of state.

When my husband was offered a new job out of state...we began researching properties and our qualifications to buy. We began working with a fabulous mortgage broker...but in the end, we could NOT get a bank to take us on, despite the fact that we could demonstrate stellar financial history, etc. Their biggest hangup? The property in RI had not yet foreclosed and therefore was still an issue.

I spoke with multiple lenders...supervisors...and even FHA themselves. I had my mortgage broker contact FHA...he spoke with several underwriters...not a single one of them would touch us. Our credit scores were nearing 700. But they stated we would need to demonstrate either a mortgage payment history or a rental payment history and we could provide neither. It didn't matter that we had reestablished several credit lines...one credit card with a modest limit and a modest balance, a vehicle loan and a student loan.

We DID find several lenders that could provide mortgages but at exorbitant rates, closing fees, etc. We said no to all of that.

In the end...we were pointed towards USDA Direct and are going that route...0% down, no PMI, modest closing costs and we'll probably qualify for a 1% subsidized interest rate because we have four kiddos and one income.

It's not easy...and you sometimes have to be creative...but getting a mortgage can definitely be done. :-) Congrats on your new home!

[hopejones]

I'm following this thread closely. Excellent points payandstayFla, thanks!

[paystayFla]

Thanks everyone for your replies and participation. I want to make a few additional points.

To buy or not to buy: That is a very personal decision, the one thing I can tell someone is, don't get house poor! and don't believe what anyone tells you you can afford. Do your own calculations. In our case our new mortgage is cheaper than it would have been to rent something half the size. It made sense for us.

Why bother selling the ride through home if it was discharged? You still own the house as long as its on your name. You don't have to pay the mortgage and the bank can foreclose but until it does you own it. Someone gets hurt on the property, you are liable, not the bank. HOA... you have to pay it, not the bank. City fines for disrepair, you not the bank. The second you don't live on the house anymore, get it sold! get you name off of it and prevent a public foreclosure record. I don't know how my re-buying would have worked with a public foreclosure record. It may have torpedoed things. Who knows.


FHA, two year after BK or three years after foreclosure? Up for interpretation. The regulations speak of each independently. There is no clear guidance on how to consider ride through. Hence why you need to work with a mortgage broker who know what to do. Also, I stress, buy prior to foreclosure on ride through. A foreclosure record may make things tougher.


Hope this help!

[dspii]

Check this out....I took it straight from the FHA Handbook. I tells about BK's, Forclosures and short sales. Now the guidlines can improve or get tougher with time, depends on elections I think, but right now this is where they are.

http://www.bkforum.com/showthread.php?68571-Chapter-7-and-Short-Sales

[psx402]

I was discharged on the 2nd of march of this year. Is it correct that the waiting period is 3 years from discharge date before i can apply for an FHA loan. the house was included in the CH7 and I'm currently doing a ride thru. renting is not an option with 5 girls at home, the rent would be higher then the mortage. However i am under water at the moment about 70 to 80 grand. I would like to stop paying the secound mortage about a year or so before i apply for FHA. this should be enough time to feel the market out. what advice could you give me in rebuilding credit to qualify for an FHA. Since 341 on dec 28th i have saved about 7 grand and hope to have a huge down payment on a home when it comes time. I reafrimed a car loan with about 13 months left to go. I was considering paying that off this month but i may need the credit reporting to help me out. please any advice would be nice. thank you.

[tobee43]

logan,

that is extremely sensable....my daughter agrees with you, i'm just "old" school and felt we needed....NEEDED to have our own...but i'm seeing the ****LIGHT****

and they are now saying home prices will dip another 20% at least before things start moving up the ladder again.

[Logan]

February was an all time low for home sales. Prices are not going up for 3 to 5 years. Freddie and Fannie may be going away--banks don't like to lend money for 30 years so without F&F the 30 year loan may disappear--What that will do to housing we shall see.
Also, Foreclosures still up--23% of homeowners underwater--Price of food and gas going up yet incomes remain flat. The price of housing historically rises below inflation and with flat incomes and inflation we all have less money to buy houses.

My point---there is no rush to buy a home!

Logan

[tobee43]

Does this mean there is hope for us? Our situation: Ch 7 discharged June 2010. 1st & 2nd mortage IIB. No NOD yet, house in escrow for short sale. Should be out of our name in a month or so from now.

We have been told all along it is 2 years FROM TRANSFER of previous home - even if included in BK.

We are eligible for VA.. never had one before had prime mortgages. Didn't know we were eligble for VA until a few weeks ago.

I hope this means we can buy again in 15 month's time....

i hope so for you as well... and if anything helps...it's being "creative"...LOL!! think outside the box!