06-08-2010 01:45 PM
My Wife and I are waiting for our Chapter 13 to fall off our credit reports in 15 months from now meaning we are 5 years and 9 months into it. We would like to take advantage of the historically low mortgage interest rates, but not sure if we should jump now? Both of our credit scores average to 700, we both have stable job histories, $150k worth of equity, a variable 2nd and a 30 yr fixed. Our goal is to refinance into one 30 year fixed and maybe pull out $10k cash for home improvements.
Any feedback would be appreciated.
06-10-2010 06:26 AM
Just closed on an FHA cash out re-fi on Monday, with mid-scores of 650 ish and just discharged from our BK on 4/6/10.
Biggest things they want to see are: At least 2 years steady employment. 1-2 years on time mortgage payments, NO lates since your discharge....
It can be done. Good Luck!
06-10-2010 06:27 AM
I forgot to add they will want to see 1-2 years of on-time Chapt 13 payments as well!
Standard debt/income ratios, etc.. apply.
06-17-2010 10:04 AM
Thanks Krielly! What do you think about having to pay your property taxes as part of your monthly house payment when you go through FHA? Did you find this requirement a financial burden or was it easier to budget?
06-20-2010 04:29 PM
So do you work for FHA or VA as a loan officer? Did you have to ask the trustee prior to refinancing. I am currently in chapter 13 and would like to refinance my home to lower the repayment plan monthly payment. Is this possible? I know I sound dumbfounded because I am. What are the stipulation to obtain a refinance loan. I was a lucky member of Countrywide Home Loans, who has since sold to Bank of America, which I have been told are not any better. Any advice soon will be helpful, as I am thinking about dismissing the Chapter 13 repayment plan and negotiating on my own or hire a negotiating firm who is in the BBB.
Thanks so much.
06-20-2010 10:13 PM
Loan officers don't work for FHA or VA, both FHA & VA are government organizations which put forth mortgage guidelines that FHA and/or VA approved lenders are able to offer.
Trustee has to give permission in order to refinance the mortgage. You have the option of refinancing the mortgage only and keeping the Ch 13 BK repayment plan intact, or you can refinance the mortgage and if you have enough equity can do a cash out refinance and pay off the remaining balance on the Ch 13 BK repayment plan. FHA permits cash out to 85% of the home's value and VA permits cash out to 100% of the home's value but these days pretty much all lenders cap VA cash out refinances to 90% of the home's value. So if you are paying off the remaining Ch 13 BK balance, that figure along with the mortgage balance couldn't exceed 85% (FHA) or 90% (VA) of your home's value. You also have to be an eligible veteran in order to use VA financing. Plan on at least 45 days to do this, as in my experience the BK trustee usually takes several weeks to approve the refinance.
06-21-2010 06:27 AM
Thanks for your information. I have never attempted to refinance, so do I ask the trustee first if refinancing is possible or do I contact FHA or another lender to propose a plan and then present it to the trustee? I don't where to start. The equity in the home is very little, so just refinancing the mortgage and continue with repayment plan is the option at this time or at least I think it is the only option. I just want to lower the repayment plan, so I can breathe. I have developed a tremendous amount of anxiety, depression since my husband's company sold 1 month after we purchased our home 5 years ago. The creditors and BK 13 has just about done me in.
06-21-2010 08:20 AM
Unless you already know, you'd first contact the trustee to find out how much the balance remaining on the Ch 13 BK plan is. You'd then contact an FHA approved lender and inquire if you would qualify for a refinance, however with very little equity you wouldn't be able to refinance and pay off the Ch 13 BK balance, as you need 15% equity AFTER the refinance if complete... and from 9 years in the mortgage industry when I hear "very little equity" it usually means less than 5-10% equity, if even that. Anyway assuming you had the required equity, after you contact an FHA approved lender to confirm you can qualify, you and the loan officer at the lender would contact your trustee and go over what documentation the trustee would need in order to approve the BK buyout. Probably a copy of the loan application & some sort of good faith estimate itemizing the costs, interest rate & proposed payment. The trustee usually takes several weeks to review that information, and then would issue their decision (hopefully it's an approval). But since it appears you wouldn't have the equity needed, then you could still inquire about just refinancing your mortgage, as there could be potential savings (not sure what your interest rate is now, your mortgage balance, payment, etc.).
Sorry to hear about how the Ch 13 BK repayment amount is making you feel, I have several friends who have gotten themselves into similar situations and their emotional and physical health have also been affected. I often wonder if it's worth the personal toll on their lives take to keep on making payments to all their creditors, or if it'd be in their interests to file a Ch 7 BK and start over fresh. Not sure what the odds are of you being able to renegotiate the Ch 13 BK repayment plan, or if it's even possible, but if you choose to stop repaying it, before you stop repaying it, I'd approach the trustee and inquire about modifying the repayment plan. I'm sure the creditors would still like to get something rather than nothing. If you do choose to stop paying the Ch 13 BK repayment plan, you would want to find out what repercussions there would be (judgment, garnishment, etc.) by talking to the trustee or a separate BK attorney (I've found sometimes the trustee has unaligned interests with the people who have filed BK). It may also be possible to convert the Ch 13 BK to a Ch 7 BK (I had a past client do that many many years ago, was complicated to explain to the new mortgage underwriter but they eventually understood). You can get advice on that in the bankruptcy section here at the FICO forums, as well as other message board forum websites that offer great BK information.