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2nd home after BK

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  • 2nd home after BK

    The BK was discharged in Oct 11. We own our home and didn't reaffirm our mortgages. We wanted to buy a second home within the same town. We would allow my mom & sister to live here. I wonder whether we can qualify for both mortgages? We tried modifying our mortgages but to no avail. We are underwater by 80k. We would like to continue paying on the main mortgage and have my mom take over both. I would need to secure a FHA loan. Is this allowed? I would love to have my mom and Sis close by due to the kids. What are the requirements to do this? Do I need 12 months of on time payments? Can someone guide me? I was reading some threads and there doesn't seem to be any consensus. Some say I am already foreclosed because the mortgages were IIB. Others say that since I am paying and staying I need to foreclose and wait 3 years. Can someone lay out the actual rules?

    Thanks in advance

  • #2
    In order to get a loan under the FHA program (and may other "government" backed programs such as Fannie, Freddie and USDA), you must wait at least 2 years after filing for bankruptcy. The 2-year wait is if you did not have a foreclosure as well. Foreclosures pushes this to 3 years after the foreclosure sale. (There are a few exceptions for exceptional circumstances.)

    Typically, a second home is going to be a little more difficult to finance anyhow. I would say that most banks are not going to like a "recent" bankruptcy (within 2 years and certainly within "months") on a second (vacation) or investment home.

    I do not know what online forum you were reading where you were told that you were "already foreclosed because the mortgages were IIB". Nothing is further from the truth. An IIB only indicates that your legal responsibilities under the terms of the Promissory Note have been discharged. However, you are still the owner and only a foreclosure, short sale, or deed-in-lieu could change that. (I love the Internet!)

    The actual rules are quite simple. As listed above, the government backed loans are typically 3 years after a foreclosure sale or 2 years after a bankruptcy (whichever period is longer). Obtaining a second residence is going to be very difficult for a recent bankrupt to do, if at all possible without significant down payments and still waiting the 2 years. Most banks will not allow a second home (vacation home) to be within so many miles of your current home. That means another home "in the same town" will not be seen as a second home/vacation home. It will be seen as an investment property and that will typically require a significant down payment.

    I do not know what you're trying to do, but you just exited bankruptcy and are underwater. If the reason the banks are denying your modification request is due to you not being able to afford the mortgage under their "formula", then that should say something. Otherwise, I would try to get a modification under HARP/HAMP or whatever is available. Unless your home is worth $700K+, being $80K underwater is not a good thing.
    Chapter 7 (No Asset/Non-Consumer) Filed (Pro Se) 7/08 (converted from Chapter 13 - 2/10)
    Status: (Auto) Discharged and Closed! 5/10
    Visit My BKForum Blog: justbroke's Blog

    I am not an attorney. Any advice provided is not legal advice.


    • #3
      You haven't been out of BK long enough to qualify for an FHA loan. Even if you were, you'd have to look far and wide to find a lender who will approve an FHA mortgage on a pay and stay situation even if more than 3 years has passed. I know they're out there. I've seen 2 people here who were successful with FHA on pay and stay in the last 6 months. But those lenders are difficult to find. I've been searching for one for 6 weeks now and it's taken up a lot of time only to have doors keep closing. I'm 3+ yrs out of my BK, stayed in my home, mortgage is and always has been paid on time, we have income to cover both the current mortgage (while we look for a renter) and the new one, and have money in the bank. Still, due to not having signed a reaffirmation, which was never issued even though our papers say that we intended to sign, we've been turned away by 8 lenders thus far. All of them stated the reason was that we didn't reaffirm our mortgage. Our broker has sent our pre-approval info to a non-conforming lender and we're waiting to hear back. In the meantime, I'm still searching for an FHA lender but I'm not very hopeful. Best of luck in your home buying journey!
      Last edited by downsized; 12-23-2012, 08:02 PM.
      filed chapter 7 BK 4/27/09
      341 meeting 6/4/09
      DISCHARGED!!! 8/5/09


      • #4
        No I am not looking to get a mortgage now. Maybe two years from now. We tried modifying the mortgage but we were denied due to high income. We don't qualify for Harp. I don't want an investment property. I want my mom to live in my current home while I buy another home. I really rather not foreclose. What is a deed in lieu? We can afford two mortgages if need be but don't know if we would be approved. I guess it's a no go. I was thinking of settling my second and selling the home. I guess I need ideas. Thanks


        • #5
          I've been advised not to let my home go into foreclosure but to keep searching new mortgage options instead. Letting my home foreclose will, without a doubt, start that foreclosure clock and I'd have to wait 3 more years from the deed transfer. I might stand a chance with a lender if I'm current. Just probably not FHA. I've also been advised to short sell. That way, upon sale, the deed is out of my name and I'm already beyond the 2 year post BK FHA requirement so I would likely get approved for an FHA mortgage right away. I wouldn't say it's a no go, just that it won't be easy. We've considered quit claim deed'ing our house into my name only. That way his name isn't on the title anymore. He alone has enough income to cover 2 mortgages, so that could benefit for us. Still researching that. Since you are still a couple of years away from buying, you might want to really look heavily into that option. That way, the timeline from deed transfer is well under way by the time you're ready to house hunt. I hope that made sense. It's been a long day.
          filed chapter 7 BK 4/27/09
          341 meeting 6/4/09
          DISCHARGED!!! 8/5/09


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