No, its not throwing me off. The u/w will be looking at that tradeline and if you read the u/w requirements any mortgage 120 days past due is treated as f/c for purposes of "qualifying for the new mortgage".
I think it is a good thing you were able to get off the treadmill for the past loan where you were not able to catch up. It is qualifying for the new mortgage loan.
They will want to know the disposition of the previous loan and the previous property. Since you deeded the property to Habitat, you have 'completed' that cycle, but the 120 days is your last record with that loan.
Your best shot will be FHA because they have a 3 year requirement. Or the Back to Work program if you meet the criteria and it is only 1 year. USDA is 3 years and the VA is 2 years if you qualify for that program.
