Looking for a mortgage with a BK showing

AbeLincoln · ‎08-19-2015

Mortgage shopping is overwhelming and especially with a BK. Hoping that some of the knowledge on this board can help guide me in the right direction. My specifics:

Purchase price $400k-$417k

FHA max for my county is $365k

Down payment of $15k

Fico8: 659,681,714 (no idea why Ex reports so much lower as it's identical to Eq?? Tu is the highest as the other two still show my previous mortgage with Chase as IIB)

BK discharged 1/2013, Chase mortgage IIB which still shows on Ex & Eq

Foreclosure 4/2014

Income $160k

Several new revolving accounts established in last 18 months; total credit lines are $80k, utilization 15%

Only two credit card accounts have aged more than two years

Two car loans aged about year

No derogs since BK

AAoA is 4.5 years

Inquiries: 21, 8, 7 (Lot of Tu inquiries, thanks to CLI with Barclays over the last year )

DCU and other credit unions have said need to wait 4 years after discharge. We wanted to wait another year so I could go with one of my credit unions and build up a larger down payment; however, the perfect house just came on the market. I'm anxious to start the application process, but concerned that the amount of inquiries, amount of new credit, the BK only being 2.5 years old, and the low down payment will prevent us from qualifying. I hate to take on the additional inquiries, or build up false hope if the mortgage is unlikely to be approved.

Appreciate any insight you can give. This board has been awesome in expediting my rebuild process.

StartingOver10 · ‎08-20-2015

The reason they are saying 4 years is because it is 4 years for a conventional loan from the discharge date of your Bk.

The 2 year date is for FHA mortgages.

The house you are looking at is much higher than the FHA max in your county according to your post and you don't have the difference in cash. Otherwise you could get an FHA mortgage.

The solution I see is either find something else or somehow beef up your down payment so you can take advantage of the FHA financing for this house and refi into a conventional mortgage when you qualify after 4 years from your discharge.

Or, wait until your 4 year anniversary before you look. There are always good properties that come on, and off, the market.

DallasLoanGuy · ‎08-20-2015

^^ cannot really add to this

Retired Lender

Anonymous · ‎08-20-2015

Unfortunately there are only a few options here:

1. Bridge the gap between county's FHA loan limit and your loan amount with a larger downpayment. Do you have a 401k you could borrow from? If so, only you can decide if this a good idea for your situation.

2. Look for lower priced homes in the same county.

3. Look at other counties with a higher FHA loan limit.

4. Wait until the 4 year mark and go conventional.

AbeLincoln · ‎08-20-2015

Thanks. For clarity, I have a few simple questions:

Is a conventional the only loan program available that covers our purchase price?
Do all lenders require a four year period from discharge? Does it vary from lender to lender?
If it's required by all lenders, is there anyway around the four years?

I've been told by some lenders that you can write a letter explaing the "extenuating circumstances" that led to the BK, and if they have a big heart they may waive the mandatory four years. Fine, but the issue is that you still have to apply, take the HP inquiry, go through the entire application process, then send the letter and hope they look pass the four years. I'm not too enthused to undergo the financial scrutiny,then sitting on pins & needles, only to get the BK rejection without real consideration.

Hoping there are other programs available that fit our current qualifications while still enabling an immediate purchase in the $400k price range.

Revelate · ‎08-20-2015

@AbeLincoln wrote:
Thanks. For clarity, I have a few simple questions:
Is a conventional the only loan program available that covers our purchase price?
Do all lenders require a four year period from discharge? Does it vary from lender to lender?
If it's required by all lenders, is there anyway around the four years?
I've been told by some lenders that you can write a letter explaing the "extenuating circumstances" that led to the BK, and if they have a big heart they may waive the mandatory four years. Fine, but the issue is that you still have to apply, take the HP inquiry, go through the entire application process, then send the letter and hope they look pass the four years. I'm not too enthused to undergo the financial scrutiny,then sitting on pins & needles, only to get the BK rejection without real consideration.

Hoping there are other programs available that fit our current qualifications while still enabling an immediate purchase in the $400k price range.

You'd need to find a portfolio style lender; someone playing by Fannie and Freddie guidelines has just that: things they have to do or they cannot get rid of the loan and they are stuck with it and the vast majority of Agency conventional lenders ain't holding on to those loans.

There *might* be some who would be willing to portfolio it for a period of time (it's longer than the standard) and then sell it as I only hazily aware that my former employer could do some truly interesting things for employees at one point if they simply held the mortgage for longer than the standard qualifying time and that eventually no matter what the original underwriting issue it could be sold after demonstrated on time payments of some period. I don't know that level of financing frankly, and one of the standard mortgage mills likely won't play ball on that one as any funds they tie up off their warehouse line is going to be dead capital as the money is in originations not holding the mortgages for most current market lenders.

You're going to have to dig if you want the mortgage right now, and I'd strongly suggest hoarding cash as unless your expenses are non-trivial, 15K isn't a lot to have saved on your income that many years post BK. If you had more cash you could get it done with a number of lenders (I know my former employer will do an alt-doc mortgage at 20% down on a non-qualifying mortgage which is what you are currently), but without that you're going to have to find a lender that will work with you, likely with a higher interest rate but you will probably have time to refinance later once you get past the BK issue for a standard loan.

StartingOver10 · ‎08-21-2015

@Revelate wrote:
@AbeLincoln wrote:
Thanks. For clarity, I have a few simple questions:
Is a conventional the only loan program available that covers our purchase price?
Do all lenders require a four year period from discharge? Does it vary from lender to lender?
If it's required by all lenders, is there anyway around the four years?
I've been told by some lenders that you can write a letter explaing the "extenuating circumstances" that led to the BK, and if they have a big heart they may waive the mandatory four years. Fine, but the issue is that you still have to apply, take the HP inquiry, go through the entire application process, then send the letter and hope they look pass the four years. I'm not too enthused to undergo the financial scrutiny,then sitting on pins & needles, only to get the BK rejection without real consideration.

Hoping there are other programs available that fit our current qualifications while still enabling an immediate purchase in the $400k price range.
You'd need to find a portfolio style lender; someone playing by Fannie and Freddie guidelines has just that: things they have to do or they cannot get rid of the loan and they are stuck with it and the vast majority of Agency conventional lenders ain't holding on to those loans.

There *might* be some who would be willing to portfolio it for a period of time (it's longer than the standard) and then sell it as I only hazily aware that my former employer could do some truly interesting things for employees at one point if they simply held the mortgage for longer than the standard qualifying time and that eventually no matter what the original underwriting issue it could be sold after demonstrated on time payments of some period. I don't know that level of financing frankly, and one of the standard mortgage mills likely won't play ball on that one as any funds they tie up off their warehouse line is going to be dead capital as the money is in originations not holding the mortgages for most current market lenders.

You're going to have to dig if you want the mortgage right now, and I'd strongly suggest hoarding cash as unless your expenses are non-trivial, 15K isn't a lot to have saved on your income that many years post BK. If you had more cash you could get it done with a number of lenders (I know my former employer will do an alt-doc mortgage at 20% down on a non-qualifying mortgage which is what you are currently), but without that you're going to have to find a lender that will work with you, likely with a higher interest rate but you will probably have time to refinance later once you get past the BK issue for a standard loan.

Rev has excellent points. ^^^

Shorter version: cash cures most mortgage problems. You are light on down payment cash for your purchase.

Find a portfolio lender. However, even portfolio lenders will be looking for a larger down payment from you.

Extenuating circumstances is a difficult threshold to meet. You need to show that

It was a one-time event
the event was beyond your control
and the event caused a sudden, significant and pro-longed loss of income.

You will need to show documents supporting your claim and that you recovered and have taken steps to prevent it from happening again. As an example you would be better able to show your recovery if you had a larger down payment and cash reserves after you have put down your down payment. It is not necessarily a bad thing to find either a less expensive property or to wait until you have built up your savings.