Mortgage after Ch7 BK - advice needed!

[alyssamarie]

I need advice for my parents, I'm trying to help them out. They're both really hard working people but completely clueless about finances, money, credit, etc. I'm only 21 and haven't bought a house yet so I don't have personal experience, but I've been trying to find out what I can from reading online and I figured I'd probably be able to get some good advice from some of you on here as well. 

I pulled up my mom's credit report (with her permission), it lists "CHAPTER 7 BANKRUPTCY DISCHARGED," Date Filed: 09/2010, Date Paid: 01/04/2011, Date Updated: 01/05/2011. If I'm understanding the report correctly, 01/05/2011 would be the discharge date, right? 

My mom's name wasn't on the house they lost in the bankruptcy (she wasn't sure of it so I checked their credit reports, it shows up on my step dad's as an individual mortgage and it didn't show up at all on my mom's, they bought it before they were married). So as far as I can tell, her name was not on the house and the foreclosure is not on her credit report (I check TU and Ex). The foreclosure finalized early this year, so as far I've read online, they do not have the option to buy a house together right now. I'm trying to find out how my mom could go about applying for a mortgage in just her name since the foreclosure isn't listed on her report and it's been 3 years as of yesterday from the bankruptcy discharge date. Does this sound reasonable? She is okay with only having her income considered for the mortgage because it should be enough for the type of house they are looking for. 

So now this is the part where I'd really appreciate some advice. What kind of mortgages are available to her 3 years out form a bankruptcy? How much of a down payment would she need (they are only looking for a $60,000 or less house). Can she even buy a house alone being married, we're in Florida btw. 

I don't know her exact credit score, she has no open credit cards (I'm going to add her as an AU on a couple of mine, will that help her score?), credit karma estimates her score at 640 just to get a general idea. They are overpaying in rent and just want to get into a house with a much lower mortgage payment as soon as possible so I'm trying to find out everything I can to help them out. Sorry it's so long, any help is really appreciated!

[Gerald56]

2 years out from BK discharge she is eligibe to get a FHA loan..minimum 640 score (FICO) she needs a credit card to start getting credit going. try cap 1 ...look in credit card section of forum for advice...i just reieved a kohls card 30 days after discharge,,read up on bankruptcy for more info...good luck!

[StartingOver10]

Yes, she can buy without her husband and be the only one on the mortgage because Fl is not a community property state.

The important info that is needed is her gross income and her debt.

With 3 years from BK, she can go for an FHA mortgage.The minimum downpayment for an FHA mortgage is 3.5% plus closing costs. It is possible to negotiate in the purchase and sale agreement for the seller to pay some or all of your Mother's closing costs.  Some areas here also have USDA morgages available, I don't know where in Fl you are located, but that should be a viable option too since she is 3 yrs from her discharge.

[alyssamarie]

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@Gerald56 wrote:

2 years out from BK discharge she is eligibe to get a FHA loan..minimum 640 score (FICO) she needs a credit card to start getting credit going. try cap 1 ...look in credit card section of forum for advice...i just reieved a kohls card 30 days after discharge,,read up on bankruptcy for more info...good luck!

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I suggested the Cap1 secured card to her also, she's going to get one. Is 640 definitely needed? where did you find that? I don't know what her score is, I just added her to two of my accounts which I'm hoping will help because right now she has no open accounts, not sure how long it will take to show up on her report though. She wants to try for a pre-approval this month if possible. 

[alyssamarie]

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@StartingOver10 wrote:

Yes, she can buy without her husband and be the only one on the mortgage because Fl is not a community property state.

The important info that is needed is her gross income and her debt.

With 3 years from BK, she can go for an FHA mortgage.The minimum downpayment for an FHA mortgage is 3.5% plus closing costs. It is possible to negotiate in the purchase and sale agreement for the seller to pay some or all of your Mother's closing costs.  Some areas here also have USDA morgages available, I don't know where in Fl you are located, but that should be a viable option too since she is 3 yrs from her discharge.

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Her income is only $27,000 but I think that should be enough for a $60,000 mortgage (from what I've looked up online at least). She has no debt at all, no credit card payments, car payments, etc. We are in the central Florida area btw. Thanks for the information!

[BrianB_The_Loan_Professor]

She may get by with a 620 - there are some banks that will still work with scores in this range - be careful with adding her to accounts this is a re flag for underwriters as they know it is a quick way to add points and may have issue with it - 

Good Luck

Brian

[alyssamarie]

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@BrianB_The_Loan_Professor wrote:

She may get by with a 620 - there are some banks that will still work with scores in this range - be careful with adding her to accounts this is a re flag for underwriters as they know it is a quick way to add points and may have issue with it - 

Good Luck

Brian

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thanks, I was a little worried about that. She has no open accounts otherwise, so I thought it might be worth it to add her. If it's not, will the lender let us just remove it? 

I've been reading more online and I'm pretty sure she should go for an FHA loan, now I'm just trying to figure out where to go to get pre-approved for one!

[BrianB_The_Loan_Professor]

Yes FHA would be the only option (possibly USDA is she lives in a rural area)

I am not sure how the underwriters will look at it I havent encountered this scenario - 

It used to be a common way to boost the scores - just like disputing things could get you a bump in scores - 

banks smartened up and realized that the scores were artificially being inflated and shut that stuff down

Has she done anything to reestablish credit since the BK?

[alyssamarie]

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@BrianB_The_Loan_Professor wrote:

Yes FHA would be the only option (possibly USDA is she lives in a rural area)

I am not sure how the underwriters will look at it I havent encountered this scenario - 

It used to be a common way to boost the scores - just like disputing things could get you a bump in scores - 

banks smartened up and realized that the scores were artificially being inflated and shut that stuff down

Has she done anything to reestablish credit since the BK?

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unfortunately, no. she didn't know anything about credit at all, she still wouldn't if I wouldn't have already started looking all this up for my own benefit. They are just store cards so I think it seems reasonable to have her on them as an AU but I have no idea how lenders think. Hopefully it won't be an issue. I looked up the usda loan, they  actually lives close to a rural area but I don't think they want to move out any further. It's something to look into though!

[Gerald56]

love it! thanks for usda lead ;-)