Mortgage after medical bankruptcy

[Anonymous]

Hi,

I had to claim medical bankruptcy due to a terminal illness in between  jobs.  After 2 years and a credit score of 640 I was hoping to sell my house which I owe 268,000 on to get a cheaper home (say 175,000).  I have kept my mortgage and never missed or was late in a payment through out the  health problem and my monthly payment was around 2228.00.  I now have a credit card with no payment issues.

My current mortgage company is refusing a new loan due to a rule that no new financing can happen until 4 years after a bankruptcy.  This is even though the loan would be much smaller and they will have the larger mortgage paid.  I wonder if this is on purpose because the loan is going to become variable in 2013.

Does any one now any options for someone like me to get into a cheaper home?????

[ShanetheMortgageMan]

Hi jab, welcome to the FICO forums.

After a bankruptcy that was due to extenuating circumstances (which can be documented), you can be eligible for a new mortgage within 1 year of the BK discharge by getting an FHA mortgage.  Reestablished credit is needed, and no negatives (late payments, collections or similar) can occur in that time period.  It's been tougher to get those situations approved recently, but with the right lender and properly documenting everything it can still be done.  Conventional financing is what requires a 4 year period after a BK to elapse, and so it appears that your mortgage lender doesn't offer FHA financing so they were only telling you what they could do.  "When all you have is a hammer, everything looks like a nail."