Looking for a FHA Loan

[Restore2011]

I've split your post off to start a new thread. All I've changed is the title. If you want to change it to something else it is possible to edit your own post. To edit your post, go to the post. To the right you'll see "Options." Click on "Options" and select "Edit Message" from the drop-down menu.

--marinevietvet, myFICO moderator

Hello All,

I'm bumping this because I have pretty much the same question. I'm reposting because although I share some similarities with the originial post, I also have one big difference.

Here's the scenario--and please forgive me if I'm overlooking any "newbie" protocol. Trying to make it short and sweet.

• Divorce (and as a result) Ch. 7 Bankruptcy in 4/2009.
• Included in the BK were my townhome, car, all credit cards (all reporting as "Included in Bankruptcy" on the reports).
• BK discharged in 7/2009
• Got one credit card in April 2010
• Zero balance currently (though not yet reflected in Bureau reports)
• Student loans reported as "Paying or Paid as agreed" though they have been late in past years.
• Income= Approx. $90k--been at job for 5 yrs 5 months
• Would like to have $250k approved (that I could get a nice home for this much in Cali speaks to what the market is right now!)
• Will have 3.5% down by June
• As pulled from this site TU=629; EQ=667

What are my chances for FHA looking like with the BK being 18 months old and those scores? For the LIFE of me I can't figure out why there is such a discrepancy between the two scores (though I'm inclined to believe someone here can help me with that). Though my credit card (only new debt since the BK) is not yet reporting at a zero balance, the FICO simulator doesn't show there being that big a difference between my scores now and after the zero balance is accurately reflected. But the stimulator also only offers that  action step (zero balance on my card) as the one thing that will improve my score.

is there anything else that I should do? I also have been paying on the loan for the car my grandfather gifted me after I filed for the bankruptcy. Would proof of those payments help/hurt/impress my chances with the lender? Should I start speaking to a mortgage broker now or wait?

Thanks in advance for any and all assistance. This board has been very helpful thus far.

[ShanetheMortgageMan]

Welcome to the FICO forums, however most people share your same question, "What are my chances?", so it's suggested that you start a new thread about your own situation.  It's possible a moderator will come around and break your question and it's replies into it's own thread.

You'd need to wait until the BK has been discharged for 24 months, and it appears even longer, as FHA only permits less than 2 years from a Ch 7 BK discharge when it is due to extenuating circumstances, which divorce does not normally fall under.  I say it appears even longer, because you said you townhome was included in BK, so I believe you meant your mortgage(s) were included in BK, and that is considered the same severity as a foreclosure.  Foreclosures require 3 years from the foreclosure date in order for you to be eligible for FHA financing.  The date that the seasoning starts is when your mortgage lender took legally took back the home.  If you aren't sure of that date, you can contact the country recorder's office and ask when the sheriff's sale or trustee sale was.  At that point, you'll also want to make sure you have sufficient re-established credit.  Re-established credit is typically considered 3 new trade lines of at least 12 months old each, and no late payments or new negatives since the BK or foreclosure.  It appears you have 1 trade line already, the credit card you obtained in April of 2010, but you'd need at least 2 others.  Were your student loans re-affirmed?  If so and you are making payments on them (including them being all caught up), then those could count towards re-established credit.  But to get your scores up, you'll want to obtain a couple more revolving trade lines so you have a good amount of diversity amongst your credit report.  You will want to aim for at least a 640, and since you have essentially another 1.5 years (July of 2012 would be the 3-year mark on the BK discharge, which the foreclosure may have coincided with) it's pretty conceivable you could obtain scores in the upper 600's/low 700's by that point.  Your income should qualify you just fine for a $250k sales price, even if mortgage rates were at 6.5% and you had $1,000/mo in consumer payments.

[Anonymous]

*Edited because I'm a dork and used the wrong log in credentials.*

[Restore2011]

Shane,

Thank you so much for your answers! I'd seen in one post that you were in California (like me) and I thought to PM you because I thought you might be able to speak even more specifically  to my situation.

I will contact the County Recorder's office tomorrow so that I can make sure that I know the exact date to use to begin to countdown from. Since it seems like I have a bit longer to wait before I can qualify, may I ask a few follow up questions on the way to getting there?

I haven't taken the opportunity to apply for other credit cards because I didn't want to take the inquiry hit on my credit since I don't have points to spare right now. But since it doesn't look like 2011 (or 12) will be my year for home ownership and inquiries really only count against you for 6 months (right?) would it be safe for me to shop around (If I apply for the same type of thing within 30 days it doesn't "ding" you as bad, right? Please correct me if I'm wrong) for some new tradelines? Does that credit union 2 for 1 idea work for me in this instance--one credit card and one personal loan? The company that holds my current card has offered me a new card but I just told them no at this time, again because of the hit I would take.

At this time my student loans are deferred so I'm not paying them right now (but they aren't reporting negatively curently). When they come out, I'll need to negotiate a lower payment amount because the amount on the bills they've sent me are ridiculous! LOL

Thanks so much for these answers and those that you've already provided. I appreciate them greatly.

[Anonymous]

---

@Restore2011 wrote:

Shane,

Thank you so much for your answers! I'd seen in one post that you were in California (like me) and I thought to PM you because I thought you might be able to speak even more specifically  to my situation.

I will contact the County Recorder's office tomorrow so that I can make sure that I know the exact date to use to begin to countdown from. Since it seems like I have a bit longer to wait before I can qualify, may I ask a few follow up questions on the way to getting there?

I haven't taken the opportunity to apply for other credit cards because I didn't want to take the inquiry hit on my credit since I don't have points to spare right now. But since it doesn't look like 2011 (or 12) will be my year for home ownership

Agree since you won't be ready in 2011 and it doesn't look like you will be buying in 2012 u may apply for cards you think you will get accepted for to report and reestablish credit history.  Inquiries seem to hurt up to a point but another thing to note is that your score is just a tool for you to get approval and possibly lower rates.  It's not just a vanity contest you want to use your score down the road to secure a home loan and possibly a favorable rate therefore right now when you do not plan on attaining  a neccessary loan you can take the hit to get revolving accounts that you can get approved for in order to better your profile when you are ready again to buy a house.  In two years from now the first quarter of 2013 none of the inquiries you get now will be on your reports so this fits your timeline perfectly.

  and inquiries really only count against you for 6 months (right?)

1 year

 would it be safe for me to shop around (If I apply for the same type of thing within 30 days it doesn't "ding" you as bad, right?

This applies towards car loans and mortgages only and may get you denied by automated uw ing for cc's based on inquiry count alone

Please correct me if I'm wrong) for some new tradelines? Does that credit union 2 for 1 idea work for me in this instance--one credit card and one personal loan? The company that holds my current card has offered me a new card but I just told them no at this time, again because of the hit I would take.

At this time my student loans are deferred so I'm not paying them right now (but they aren't reporting negatively curently). When they come out, I'll need to negotiate a lower payment amount because the amount on the bills they've sent me are ridiculous! LOL

Thanks so much for these answers and those that you've already provided. I appreciate them greatly.

---

[Restore2011]

Thanks so much for your answers daboss.  I went to the County Recorder's office today and found out that the date of sell for my property (for a depressingly low price) was 9/21/09. So looks like 9/21/12 is the magic number at this point.

I called my credit card company to determine the limit they'd approved me for with the new offer and it's $100 less than the limit that I have on the card I have with them now although I've been an excellent customer, AND I have to pay them $150 for the privilege! I suppose I should just go ahead and get it. Guess these are the brakes for making the mistakes I've made with my finances these past years. If I get this card and one other secured card that will be the three Shane talked about, though I'd rather get a secured personal loan for the third.

And thank you for reminding me that this is not a vanity contest. I think I may have been getting caught up a bit in that. A couple hits now for greater rewards later is the goal I need to keep in mind. Thank you for that.

[Restore2011]

Just a quick update since you all were so helpful...

I visited a local CU and was told that because they saw the BK as still relatively new (they'd begin to consider at 2 years + post-discharge) the only thing they could offer me at this time was a secured card. They do not pull a credit report, and they report to each bureau monthly. I did not ask whether it ever converted, but it really doesn't matter at this point because I'm not going to be using that money anyway.

I also went ahead and secured the second card w/the company that I have a card with now. I've already set aside some money to pay the fees as soon as I get the card. I got an alert today that there was a TransUnion inquiry and for a second I was sad because it's my lowest score (well, maybe not, because I don't *really* know what my Experian score *really* is), but I quickly redirected my mind to the greater longer short-term goals.

So by the end of the month I'll have three revolving trade lines--two new ones for only one hit, will use only one, keep it at 9% or less, and expect good things within a while. 

Thanks for all your help and input!

[Anonymous]

Be aware that if you set up ballon payments or weighted paymetns (payments get higher down the road) on your students loans, they will not liekly use the lower payments when factoring DTI for a new mortgage.  It will likely still show up under the payment amounst listed in your credit file.  If the number is up in the air (like above situations), lenders have a formula based on the terms of the loan they often use.  I only bring this up because some people think negoatiating tiered payments or lower initial payments will help DTI and it usually does not.