Confused and looking for some guidance

[Joshm24]

Hi everyone. I've found these forums to be very helpful in the past, and I'm hoping someone can shed some light on my current situation, and how I should proceed from here. There's a quite a bit of info here, so fair warning. I'll do my best to be concise and break things up. Here we go...

-- Due to mounting credit card bills and unemployment, I filed for CH7 and was discharged in Feb. 2014.

-- At the advice of our attorney (who was fantastic) we did NOT reaffirm our mortgage. I knew what that meant, and agreed it was the best option,

-- Fast forward 2+ years, and mostly on-time payments (sometimes I would be a month behind, but would catch up), we have decided it's in our best interest to move closer to my job. I earned a promotion that required a move to another location within the same metropolitan area. But due to the infrastrcuture and shortcomings of public transportation (we only have our family vehicle) my commute is way too long at 1 1/2 hours each way.

-- Compounding to this is my desire to sell the house and look into purchasing our next home. I had debated renting, but the rental maket has driven prices through the ceiling, and I would be paying 4-500 more per month for the same house if renting. I've read that the waiting period is normally 2 years after CH7, but have also heard 3. I'm going with 2 years as the consense, and happy to be corrected if wrong!

-- I checked my FICO on this site, and my middle score is 638. I know, not wonderful but I believe still in the realm of acceptable should I seek another mortgage.

Since I did not reaffirm the mortgage, what exactly does this mean regarding my prospects of selling and buying another house? Under normal circumstances, I could not carry two mortgages, which would throw off my DTI ratio like crazy.

However, is it actually to my advantage that my current mortgage doesn't appear on my credit? For example, if I were to apply for an FHA loan today, would the lender even see my mortgage? Does this make it possible for me to seek out a mortgage while selling my house? Sounds too good to be true.

Also, what would happen if I stopped making payments while I'm fixing it up and prepping it to put on the market? In the past when I am a bit late, I have gotten letters from my mortgage company that include brochures and such about how to avoid foreclosure. Which doesn't make much sense if I didn't reaffirm it.

Anyway, my head is spinning because we very much need to move. One thing I didn't mention, but it vital, is that we live in a seller's market in our area, and I've had a few realtors assess my house's starting price at around $160K. I owe about $112K on the mortgage, which would allow me to make a bit of a profit on the sale.

Any and all advice is appreciated! I know I'm being a bit scattered about things, but I have so many things to think about.

Thanks all!

~Josh

[ezdriver]

" I've read that the waiting period is normally 2 years after CH7, but have also heard 3."

Try to state the actual questions precisely and you will receive much better feedback. Don't feel that you are alone in being confused...it is a very confusing issue.

There are two seperate events that happen:

1) A bankruptcy discharge. Simply means that you are no longer liable for debt not reaffirmed. This without a foreclosure has a two-year waiting period for FHA and more for conventional.

2) Foreclosure [and ultimately transfer of deed] that will eventually happen. This has a three-year waiting period for FHA and more for conventional mortgage.

The confusion is usually the result of not seperating the two items above. Good luck.

[Joshm24]

Hmm, I'm not quite sure if I understand.

Are you stating that once (if) I sell my house, it will be listed as a foreclosure? I don't think that's what you mean, but I want to clarify.

My BK was discharged Feb. '14. It's been more than 2 years, so I believe I am good to go on that front...

[StartingOver10]

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@Joshm24 wrote:

Hmm, I'm not quite sure if I understand.

Are you stating that once (if) I sell my house, it will be listed as a foreclosure? I don't think that's what you mean, but I want to clarify.

My BK was discharged Feb. '14. It's been more than 2 years, so I believe I am good to go on that front...

---

If you sell your home, it will not be listed as a foreclosure because you  have been making payments on it through the bk and afterward.

You will (may) have to supply to the new lender your proof of the payments you have made and the closing statement when you sell it to show that you no longer have this mortgage lien hanging out there and that you made the payments timely.  When was the last time you made a late payment? This is critical. Late payments after a Bk are difficult to overcome. 

[StartingOver10]

A few answers to some of your specific questions:

-You asked about your current mortgage:  yes you have been discharged and you are currently making your mortgage payment, right? The underwriter will want to see evidence of it.  S/he can see the TL on your credit report and will ask about it. Plus the mortgage lien shows in the public records.  So the debt will be included if you are still making the payments.  The best way around this is to have all of your documentation and to sell the property first. You can have it under contract and look for your new home with a pre-approval subject to the closing of the sale of your current residence.  It is done everyday.

-As to the question about "if you were to stop making payments...", this would be a new derog.  It wouldn't show on your credit report any differently, but the lender would have to foreclose on its mortgage lien and that information would be in the public records.  The time period would then be extended to 3 years after the foreclosure is completed which could very well be years away.  Depends on how long your lender takes to foreclose on the property.  I have seen lenders take years to foreclose and your new waiting period wouldn't begin until the foreclosure was finished. 

My advise:  continue to make your payments on time.  You need to have at least 12 months of on time payments leading up to the mortgage application. 

Sell if you want to sell and move. Take the profit and buy something else. JMO.