New home/what to do with First home?

[2muchinDebt]

Just throwing around ideas and would like opinions.

We filed CH7 and were discharged May 2010. We got a modification on the house (in the nick of time), but we did not reaffirm so it's included in the CH7. We DO have a HELOC on it though that was not included in the CH7. So at some point if and when it there's equity in it they'll come after us for it. Anyway, we've thought about (in a year at the 2 yr post discharge mark) buying a smaller home. The thought was to rent this one out as long as possible. If it goes unrented we could let it go as it's covered in the CH7. But would we be tanking our credit again? Id on't know if I explained that very well. Basically we want to approved for another home and eventually let this one go. Don't want to rent for 2 years in between.

[AngelinaCatHub]

Well your question is a bit convoluted but as I understand it you are "paying through" and living in the house. You did not list your HELOC? Why not? So if you 'walk away' from the house you are still stuck with HELOC? Also, why would you just not stay if you wish to purchase a house just like the one you have? I'm not understanding your logic in doing this. Is it to lower your payments? You already did that with your mod. As far as credit score, you C7 already took care of that. Your house has already been listed IIB so walking away would not matter. In two years, I doubt you will get a mortgage but in two years you could ask for another mod. They don't want another empty house. Best I can do with the info given. 'Hub

[2muchinDebt]

Sorry I am not the best in getting my point across when I write it down. We modified before CH7 and the payment did not change. We went from a fixed rate to an IO for a few years when DH's income got drastically reduced and then when he got new job would refi to a fixed rate again. But then the economy tanked as did the equity. I couldn't find a job for 2 yrs either. So our mod. was same payment for a very low interest rate for 26 yrs. (no balloon payments) It was like a continuation of the original loan but a lower interest rate. 4 months after discharge I finally got offered a job.

HELOC cannot be included in a CH7. It can in a 13. If we walk away from the house before it gets equity back we are not responsible for the HELOC. At least I believe so. We want to buy a house (when the wait period is over) and eventually let this one go. Or we can stay in this one, but would like to downsize at some point.

[NoMoreCards]

HELOC cannot be included in a CH7. It can in a 13. If we walk away from the house before it gets equity back we are not responsible for the HELOC. At least I believe so. We want to buy a house (when the wait period is over) and eventually let this one go. Or we can stay in this one, but would like to downsize at some point.

When filing BK, ALL debt must be included in the filing, including a unsecured (by house value) HELOC. If you failed to include the HELOC, you should have. I don't know the legalities, but it may still be able to be included simply by it being pre-BK debt. You should discuss this with a attorney. In any case, once you walk from this house it will be a foreclosure although it should not show on your credit report. There is another system the mortgage companies use, and they will see it there. If this house goes into foreclosure, you will not be able to obtain another mortgage until 3 years after your current house is out of your name. However there are other options.

One recent post was from someone who banked 6 months worth of mortgage payments on their current home, and rented it out. That way they could show the bank that they were not just "walking" form their home. Once they got their new mortgage, of course....well, if the home wasnt able to be rented...it would go back to the bank. Look and you will find the thread in the "Mortgage after BK" section.

Another option, which is what I am currently doing. I found a distressed house for 35K cash (borrowed part of it from family), and will be walking from my underwater home. The new house needs work, but without a house payment that is easily paid for. The funds that would normally pay my house payment, will pay for the new roof the house needs in about 2 weeks. :-)

The difference with the CK 7 and 13 regarding the HELOC is that in a 13, the HELOC can be proven to be unsecured (by a low house value) and therefore discharged like a credit card would be. In a CH 7, the HELOC keeps a lien on the house and if it isn't paid, they CAN foreclose. It is a risk, because legally they can force foreclosure, however the first must be satisfied and if there is nothing left...then the second gets nothing. So it is a risk of "will they or won't they".

All the best.

[locolady]

Sorry I am not the best in getting my point across when I write it down. We modified before CH7 and the payment did not change. We went from a fixed rate to an IO for a few years when DH's income got drastically reduced and then when he got new job would refi to a fixed rate again. But then the economy tanked as did the equity. I couldn't find a job for 2 yrs either. So our mod. was same payment for a very low interest rate for 26 yrs. (no balloon payments) It was like a continuation of the original loan but a lower interest rate. 4 months after discharge I finally got offered a job.

HELOC cannot be included in a CH7. It can in a 13. If we walk away from the house before it gets equity back we are not responsible for the HELOC. At least I believe so. We want to buy a house (when the wait period is over) and eventually let this one go. Or we can stay in this one, but would like to downsize at some point.

I think you are wrong any account you had before you filled then it's included in the chapter 7 bankruptcy by default. You can not favor one debtor over another by law any debt must and was part of your estate at the time of filing. But if it was not then simply go to the court and amend the filing, even if it's close.
This will cost you $26.00 and protect you from the lender coming after you for the loan balance in the future. You will request to add the HELCO to the case and since it was chapter 7 no assets there should be no problem. But how did your attorney let you not included the HELCO? How did he figure your mean test with out asking about your mortgage plus it's on your credit report .

[debee]

If it were me, I would be in touch with my lawyer to make sure my HELOC was included. The lien survives bankrutpcy but if you didn't list the money debt, it can follow you. Some districts have case law establishing that forgotten debts are still discharged, but other districts have case law establishing the opposite: forgotten debts are NOT discharged. So first, you need to find out where you stand with that HELOC.

Also, I would make a few calls to mortgage lenders to see what the underwriting requirements are now for people who want to turn their former principal residence into a rental and buy a new home. It may help you to know what ducks you need to have in which rows.

The last time we went in for a mortgage we were told that we would need a reason for the new home (like job transfer to a place 50 miles away) and a signed lease, or we would need a rental history (I thought they wanted two years, but maybe it was only one). Plus they wanted to see 6 months reserves.

Good luck and keep us posted!

[IHateToBeEmo]

Just throwing around ideas and would like opinions.

We filed CH7 and were discharged May 2010. We got a modification on the house (in the nick of time), but we did not reaffirm so it's included in the CH7. We DO have a HELOC on it though that was not included in the CH7. So at some point if and when it there's equity in it they'll come after us for it. Anyway, we've thought about (in a year at the 2 yr post discharge mark) buying a smaller home. The thought was to rent this one out as long as possible. If it goes unrented we could let it go as it's covered in the CH7. But would we be tanking our credit again? Id on't know if I explained that very well. Basically we want to approved for another home and eventually let this one go. Don't want to rent for 2 years in between.

I agree with debee. Things have really changed since the recession. Only if you have the cash/income for 2 homes can you get the new home loan approved.

When we bought our second house in the '80's, we were able to count the rent from our first house as income, even though we hadn't rented it out yet. When we got our next house about 10 years ago, we were also approved for the loan based on renting out the house we were living in (that we hadn't moved out of yet or rented out).

A couple of years ago we wanted to buy a new house and then rent out our current house, and again included the proposed rent in our application. The lender said no dice. We had to have already rented it out and the tenants had to have been there 6 months before we could get the loan on the new house.

So, you can buy a new home, but you have to have the income/savings to support both houses in order to get approved now.

[tobee43]

i also agree with debee. i have heard many times on this forum if a debt is left off it's still can be included later.

i find a 2nd mortgage would be less likely to be included in that forgiveness.

we were able to buy this home less than 2 years out of bk...but it was a rare rent to buy and 100% financed by the owner. in these really difficult times, if you are lucky enough to find a owner that actually owns their house you can work directly with them.

and, if not, i have written about this before, you can attempt to approach people desperate to sell and see if you can do a land contract and wrap around their existing mortgage. so, you can get your own house again, one just must push and pull until the right opportunity arises.

it will happen, i know it's difficult, we rented for just about 2 years also.