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Mortgage after Chapter 7 BK

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landon06
New Visitor

Mortgage after Chapter 7 BK

I had a BK that was discharged 3 years ago. I have a credit score of 689 and my husband 715. My husband was not included in the BK. We just sold our home and have up to $45K to put down on a house in trhe $350K-$475K range that we are shopping in. We are buying in California.

Is our only option an FHA loan or can we get a conventional? If we are not eligible for a conventional now, how long do we have to wait? We are trying to avoid the PMI of course!

Any advice is appreciated!!!

 

Message 1 of 5
4 REPLIES 4
ShanetheMortgageMan
Super Contributor

Re: Mortgage after Chapter 7 BK

FHA is an option after your BK (Ch 7 I assume) discharge is 2 years old.  Conventional financing is an option after the Ch 7 has been discharged for 4 years, however it can be an option after just 2 years if your bankruptcy was due to an extenuating circumstance*.

 

What Fannie Mae has to say about extenuating circumstances:

* Extenuating circumstances are nonrecurring events that are beyond the borrower’s control that
result in a sudden, significant, and prolonged reduction in income or a catastrophic increase in
financial obligations.
If a borrower claims that derogatory information is the result of extenuating circumstances, the
lender must substantiate the borrower’s claim. Examples of documentation that can be used to
support extenuating circumstances include documents that confirm the event (such as a copy
of a divorce decree, medical reports or bills, notice of job layoff, job severance papers, etc.)
and documents that illustrate factors that contributed to the borrower’s inability to resolve the
problems that resulted from the event (such as a copy of insurance papers or claim settlements,
property listing agreements, lease agreements, tax returns (covering the periods prior to, during,
and after a loss of employment), etc.).
The lender must obtain a letter from the borrower explaining the relevance of the documentation.
The letter must support the claims of extenuating circumstances, confirm the nature of the
event that led to the bankruptcy or foreclosure-related action, and illustrate the borrower had no
reasonable options other than to default on their financial obligations.

Free Mortgage Advice & Pre-Approvals (FHA, VA, USDA, Fannie, Freddie, Non-Prime, Construction, Renovation/Rehab, Commercial) since 2002
Located in Southern California and lending in all 50 states
Message 2 of 5
landon06
New Visitor

Re: Mortgage after Chapter 7 BK

Thank you for this information!

I was recently told that the waiting period to go conventional after chapter 7 is now 7 years. Is that true, or could it be just specific to one lender?

Message 3 of 5
chasmith
Valued Contributor

Re: Mortgage after Chapter 7 BK

NACA is considered conventional but will finance two years after discharge, if you have no shortsale, foreclosure or other mortgage derog.  No money down, no closing costs, very low rates.

BK7 Filed 8/11/2009 Discharged 11/23/2009. Purchased new home 4/11/2012
Starting Score:11/16/2009 EQ 566 11/16/2009 TU 538
Interim Score: 12/27/2012 EQ 683 09/17/2012 EX (lender) 670 1/01/2013 TU 701
Current Score: 11/06/2013 EQ 708 11/06/2013 EX 702 11/16/2013 702 11/06/2013 TU 729
Goal Score: EQ 740 EX 740 TU 740
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Message 4 of 5
ShanetheMortgageMan
Super Contributor

Re: Mortgage after Chapter 7 BK

The foreclosure requirement is 7 years on Fannie Mae & Freddie Mac financing, and if you are looking for a non-conforming loan amount then most jumbo lenders require 7 years on a bankruptcy as well.

Free Mortgage Advice & Pre-Approvals (FHA, VA, USDA, Fannie, Freddie, Non-Prime, Construction, Renovation/Rehab, Commercial) since 2002
Located in Southern California and lending in all 50 states
Message 5 of 5
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