Obtained post bankruptcy pre-approval for FHA loan, but worried...

[angie204]

My husband and I were one of the first homebuilders to go under, and ended up filing for Ch 7 bankruptcy.  It was discharged two years ago, on 8/29/07.  

We had excellent credit prior to filing, 120 days past due while waiting (told not to pay any creditors), then near flawless credit again except for two weird glitches.  One was a "government wage overpayment" that we learned of when it was seized from our tax refund ($149), and the other was a $480 medical bill which was apparently sent to the wrong address for many months.  We settled for half.  Therefore, aside from our three current loans, all our balances show zero, with no collections in 23 months.

Last week we went to a local bank and obtained pre-approval.  We earn $80k a year, and our midscores are in the 640's.  Our ratios are approximately 18%/32%, based on the purchase price of $161,400 at our locked in rate of 5.00%.  We are putting 3.5% down.

So why the sudden worry?  Well, several things...

I have three years on the job, but my husband will only have 23 months on the job as of closing date.  Is that a problem?

 Despite it being PIF, we disputed the government collection, as we had no reason to believe he was overpaid and were never notified of the debt.  His credit report shows "this item is being disputed" and a zero balance.

The original asking price of the house was $159,900, but we negotiated $161,400 with seller paying $6k in costs. So now I'm wondering if it will even appraise.  The original listing price of the house was $169k a year ago...it has been on the market that long.  There are no comps within 1 mile that have sold in the last six months.  What will the appraiser use to determine the value?

Our LO says everything is fine.  She says just don't worry, closing is in 45 days and she sees no problems at all with our file.  However, I see (from this board) that UW can be a problem.

The bankruptcy was very traumatic for us.  We lost all our investment houses (did deed in lieu for the business properties, no foreclosures), had to move to another city, and my poor husband has never not paid a bill in his life.  LOL, did I mention that we have 7 kids?  Therefore I am a nervous wreck.  Of course I know that worrying helps nothing.  That is why I am attempting to get others' opinions (hopefully reassurance).

Thank you for reading my rambling, assuming you've gotten this far.

[BrianB_The_Loan_Professor]

I would not be so sure of myself if I were your agent. There are holes in your file that only an Underwriter can approve

The lates post BK are a big deal for FHA but can be explained and hopefully not a deal killer

The 120 day lates that you mention... did your mortgage get 120 days late? If it did that could be caught by an UW and be seen as a foreclosure. If it is you are done as they will require 3 years since those lates.

Not trying to be doom and gloom but also not just going to tell you what you want to hear

There are some concerns

Hopefully it all works out for you

Good Luck

B

[angie204]

I don't feel you're being doom and gloom.  I wanted opinions like yours! :-)

Our bankruptcy was discharged late Aug, 2007.  There is only one "collection" in the last two years.  Of the two accounts I mentioned, the "wage overpayment" was deducted from our tax refund before we filed bankruptcy.  The other is from NCO financial, for a medical bill.  It shows up as:

Date assigned [?]

Aug 09, 2007 Date reported [?] Nov 01, 2007 Date last active [?] Not Reported Date paid [?] Not Reported Date closed [?] Oct 01, 2007

So I was wondering if it will be considered as a late in the last two years.  We expect to close on the loan the first week or two of October.  I'm pretty certain we paid it in Sept of 2007.

No, our mortgage was only 90 days late when we sold the house and paid the loan.  I received a phone call from Washington Mutual, stating that if payment wasn't made in 5 days that foreclosure proceedings would follow.  I told the representative that we were closing on the house that Monday and that payment would be sent.  She said she would make note of it and that they would not foreclose.  Sale went through without problems, WM received their money and we got a check for the difference.

What do you think?  :-)

[BrianB_The_Loan_Professor]

It sounds like if it does come upa good letter of explanation should take care of things

Good Luck