Chapter 7, need new mortgage help please!

Anonymous · ‎11-11-2016

New here... Looking for some great advice, cannot find exactly what I'm looking for so far.

Back story - Husband and I filed Chapter 7 2013, discharge date October 2013. Never Re-affirmed our current mortage, ( condo ).

We have continued to live here and make payments on our mortgage loan. Now we have built up our credit to over 700 scores, saved money for a new house. Talked to bank this week, were denied mortgage with the same bank that our current loan is with. Additionally, they are telling me that I could walk away from the current mortgage because the debt has been wiped away. We didn't forclose on the property 3 years ago because my husband works for a bank and he didn't want to lose his job because of the forclosure. We could talk our way out of the bankruptcy if they found out, but not a forclosure. The problem is we want out of our condo, we have 2 kids and need a bigger place ASAP. We want to move on with our lives and purchase a new home soon. We live in Michigan, so I'm not sure if that affects the rules of this at all. We have contacted our attorney who we filed bankruptcy with to set up a meeting for next week to figure out what to do. Do we stop paying our mortgage and live here for another year to save money for the new house ?? If we do that, what happens when we go to try to get a new loan in 1 year from now, will the new lender find out what we did ? Does the current loan go into forclosure, and then we have to wait another period of time to buy ?? Plus, we live in a condo association so what happens with them, I assume we keep paying our dues to live here if we stop paying the loan...

Obviously we cannot do anything that would jeopardize my husbands job so we need to make sure to do the right thing here....

Any help is appreciated !!

Thanks!

VALoanMaster · ‎11-11-2016

@Anonymous wrote:
New here... Looking for some great advice, cannot find exactly what I'm looking for so far.

Back story - Husband and I filed Chapter 7 2013, discharge date October 2013. Never Re-affirmed our current mortage, ( condo ).

We have continued to live here and make payments on our mortgage loan. Now we have built up our credit to over 700 scores, saved money for a new house. Talked to bank this week, were denied mortgage with the same bank that our current loan is with. Additionally, they are telling me that I could walk away from the current mortgage because the debt has been wiped away. We didn't forclose on the property 3 years ago because my husband works for a bank and he didn't want to lose his job because of the forclosure. We could talk our way out of the bankruptcy if they found out, but not a forclosure. The problem is we want out of our condo, we have 2 kids and need a bigger place ASAP. We want to move on with our lives and purchase a new home soon. We live in Michigan, so I'm not sure if that affects the rules of this at all. We have contacted our attorney who we filed bankruptcy with to set up a meeting for next week to figure out what to do. Do we stop paying our mortgage and live here for another year to save money for the new house ?? If we do that, what happens when we go to try to get a new loan in 1 year from now, will the new lender find out what we did ? Does the current loan go into forclosure, and then we have to wait another period of time to buy ?? Plus, we live in a condo association so what happens with them, I assume we keep paying our dues to live here if we stop paying the loan...

Obviously we cannot do anything that would jeopardize my husbands job so we need to make sure to do the right thing here....

Any help is appreciated !!

Thanks!

Hi Desgrl8110,

You're in a tough spot.

Here are the basics from a mortgage guideline stand point.

1) If you're eligible for a VA mortgage, it doesn't matter what you do with the current mortgage, VA guidelines require a 2 year wait after a BK discharge.

2) If VA is not an option & you need to go FHA, your eligibility does not start until the bank takes back title to your condo & then it's a 3 year wait.

3) If you can go conventional, your wait is 4 years from the BK discharge date as long as we can document the mortgage was included/discharged in the BK.

Another concern is the type of mortgage that you discharged. If was a government backed loan (FHA, VA, USDA) you'll probably be in the CAIVRS system which adds an additional hurdle.

Whatever you do, DO NOT stop making payments. You never know if the new loan will require a 12 month housing history for approval whether it's required for "payment shock" or just credit approval.

VA Mortgage Expert. Mortgage Banker lending in All 50 States.
VA, FHA, USDA. Jumbo, Conventional.
CAIVRS Expert.

Anonymous · ‎11-11-2016

Are you selling the condo? Try for preapproval with a different lender. We reaffirmed on our RV in chapter 7 and paid every payment for 8 1/2 years on time but they wanted nothing to do with our new purchase so we just went with a different lender.

Anonymous · ‎11-11-2016

Do you have any equity in the condo? If so, you can sell it the regular way then just buy another property. I would speak to a knowledgeable realtor/ loan officer about your specific situation.

StartingOver10 · ‎11-12-2016

@Anonymous wrote:
New here... Looking for some great advice, cannot find exactly what I'm looking for so far.

Back story - Husband and I filed Chapter 7 2013, discharge date October 2013. Never Re-affirmed our current mortage, ( condo ).

We have continued to live here and make payments on our mortgage loan. Now we have built up our credit to over 700 scores, saved money for a new house. Talked to bank this week, were denied mortgage with the same bank that our current loan is with. Additionally, they are telling me that I could walk away from the current mortgage because the debt has been wiped away. We didn't forclose on the property 3 years ago because my husband works for a bank and he didn't want to lose his job because of the forclosure. We could talk our way out of the bankruptcy if they found out, but not a forclosure. The problem is we want out of our condo, we have 2 kids and need a bigger place ASAP. We want to move on with our lives and purchase a new home soon. We live in Michigan, so I'm not sure if that affects the rules of this at all. We have contacted our attorney who we filed bankruptcy with to set up a meeting for next week to figure out what to do. Do we stop paying our mortgage and live here for another year to save money for the new house ?? If we do that, what happens when we go to try to get a new loan in 1 year from now, will the new lender find out what we did ? Does the current loan go into forclosure, and then we have to wait another period of time to buy ?? Plus, we live in a condo association so what happens with them, I assume we keep paying our dues to live here if we stop paying the loan...

Obviously we cannot do anything that would jeopardize my husbands job so we need to make sure to do the right thing here....

Any help is appreciated !!

Thanks!

The best thing to fo is to sell your condo and buy something else. It has been longer than two years since your Bk discharge (Oct 2013). You have been making the monthly payments on time according to your post. Do not stop making payments, do not walk away from your condo. You may need to rent for a little while after the sale to find a new place and get it financed, but other than that, it should be a simple process. You just need to have awsome records.

You can do an FHA loan if you have been current during and after the Bk on this property you own. You just need to prove that you made all the payments. Once you sell it, you would still need to show you made the payments on time to the next lender for the new loan. I have had clients that have been in your situation and they only had to prove the payments and show the Bk discharge paperwork and the closing statement for the sale.

Your payments probably have not been reported on your CR since it is iib, but I am assuming you can show that you have made the payments on time (ACH payments on your statements or cashed checks for each payment). Once you have sold and closed on the sale, the new lender will most likely want to see the closing statement and the proof that you paid the payments on time. There are many lenders that will issue you a mortgage if you qualify for one. A Bk 3 years ago isn't a disqualifier. Go to a regular mortgage banker - not a big box bank.

Anonymous · ‎11-14-2016

Thank you Everybody - we could sell but we would probably break even if were lucky. We are underwater but not by much anymore. We certainly don't want to wait another year to move, much less 3-4 more. So I think we'll just try to sell the condo first, and hopefully we at least break even and not have to bring money to the table.

Does anybody have any lenders that deal with people in our situation we can really use a great reference. I think we are going to explore talking to our attorney soon and we'll hopefully have all the legal questions finally answered.

This was really helpful, thank you again

Anonymous · ‎11-14-2016

Talk to your lawyer but even a short sale will hurt you for a few years. We walked away from our mortgage IIB because it was very much underwater and not reaffirmed but we did have to wait for 3 years while renting and we did have to wait for CAIVRS to get cleared since it was a FHA loan previously and that date doesn't start until deed is transferred out of your name via sheriffs sale and that was a whole year after we gave the property back to the bank and we gave it back right away.