topic Re: After Chapter 13 "discharged", mortgage question! in Bankruptcy

After Chapter 13 "discharged", mortgage question!

castor4072 — Wed, 05 Apr 2023 23:01:37 GMT

After my Chapter 13 discharge, is there a waiting period to apply for a mortgage loan? Question is - My mortgage WAS NOT INCLUDED in my Chapter 13. Obviously, I'll have to wait until the Chapter 13 is off my credit report before I apply. Anyone experience this, sell your house and buy another house after all the BK stuff has cleared of the CR?

Thanks,

Cas...

Re: After Chapter 13 "discharged", mortgage question!

FireMedic1 — Thu, 06 Apr 2023 09:03:01 GMT

I'll ping @ShanetheMortgageMan for the best responce.

Re: After Chapter 13 "discharged", mortgage question!

ShanetheMortgageMan — Thu, 06 Apr 2023 16:32:12 GMT

Hi cas,

After a Ch 13 BK is discharged there is a 2 year waiting period before you can qualify for what is typically the most coveted type of conventional financing, which is Fannie Mae & Freddie Mac. However, with FHA, VA or USDA financing there is no waiting period after a Ch 13 BK discharge. FHA allows just a 3.5% down payment, VA and USDA financing don't require any down payment but certain eligibility requirements apply (i.e. have to be a veteran or active military in the case of VA, and household income must be within limits and must be purchasing in a rural area for USDA). FHA doesn't have any eligibility requirements like that, but does have loan limits depending on the county you are buying in.

Let us know if you have any other questions!

Re: After Chapter 13 "discharged", mortgage question!

castor4072 — Thu, 06 Apr 2023 16:40:11 GMT

Thanks Shane for your time for the response. I thought this was the case too, but I wanted to ask someone that had more veteran experience if this was the case or not. I appreciate again! Now I need to search this board and find out how long it takes to clear off my CR. Have a good day.

Cas...

Re: After Chapter 13 "discharged", mortgage question!

Horseshoez — Thu, 06 Apr 2023 16:49:33 GMT

@castor4072 wrote:
Thanks Shane for your time for the response. I thought this was the case too, but I wanted to ask someone that had more veteran experience if this was the case or not. I appreciate again! Now I need to search this board and find out how long it takes to clear off my CR. Have a good day.

Cas...

If you're asking when your Chapter 13 falls off of your credit reports, it is typically 7-years from your filing date. My 2015 filing fell off in late 2021 and early 2022.

Re: After Chapter 13 "discharged", mortgage question!

ShanetheMortgageMan — Thu, 06 Apr 2023 20:49:13 GMT

@castor4072 wrote:
Thanks Shane for your time for the response. I thought this was the case too, but I wanted to ask someone that had more veteran experience if this was the case or not. I appreciate again! Now I need to search this board and find out how long it takes to clear off my CR. Have a good day.

Cas...

You're welcome! Just so you know, the bankrtupcy doesn't have clear off your CR in order to get the mortgage.

Also, for others that are following, you can actually get an FHA, VA or USDA mortgage while in a Ch 13 BK as long as 12 months of payments have elapsed with all payments paid as agreed. The trustee will need to give written approval as well.

Re: After Chapter 13 "discharged", mortgage question!

castor4072 — Fri, 07 Apr 2023 02:42:48 GMT

When I buy another home, it'll be a manual review I would think. Kinda sucks because the trustee still notified my lender and my account says it's in bankruptcy, though NOT included in my BK13.....grrr

Re: After Chapter 13 "discharged", mortgage question!

ShanetheMortgageMan — Fri, 07 Apr 2023 03:55:29 GMT

@castor4072 wrote:
When I buy another home, it'll be a manual review I would think. Kinda sucks because the trustee still notified my lender and my account says it's in bankruptcy, though NOT included in my BK13.....grrr

Correct, with less than 2 years from a Ch 13 BK discharge and using FHA financing then manual underwriting guidelines would apply.

It's been my experience that if someone has a mortgage and they file Ch 13 BK, regardless if the mortgage was included or not, the payment history typically stops reporting and may even have a "Account included in bankruptcy" notation. The bankruptcy paperwork trumps the way it reports on credit though, so it wouldn't have any impact on qualifying for a mortgage. Further, once it's been discharged for at least 2 years you'd also be eligible for Fannie Mae or Freddie Mac financing, and if there is erroneous reporting on a mortgage trade line that makes it look like it was included in foreclosure then a loan officer is able to override the automated underwriting system.

Re: After Chapter 13 "discharged", mortgage question!

TRC_WA — Fri, 07 Apr 2023 08:01:07 GMT

@ShanetheMortgageMan wrote:

Let us know if you have any other questions!

@ShanetheMortgageMan

Just wanted to chime in and say thanks for this info. I'm in a similar position as the OP. Not really ready to buy now but definitely looking into it down the road. Ch 13 was discharged 13 months ago and am waiting on the last baddies to fall off my reports in the coming months. All should be clean by the end of the year. My current mid score is a 695 so I feel pretty good even at the 6+ year mark of my credit issues.

Re: After Chapter 13 "discharged", mortgage question!

ShanetheMortgageMan — Fri, 07 Apr 2023 22:49:17 GMT

@TRC_WA wrote:
Just wanted to chime in and say thanks for this info. I'm in a similar position as the OP. Not really ready to buy now but definitely looking into it down the road. Ch 13 was discharged 13 months ago and am waiting on the last baddies to fall off my reports in the coming months. All should be clean by the end of the year. My current mid score is a 695 so I feel pretty good even at the 6+ year mark of my credit issues.

You're welcome. A 695 score is excellent just 13 months out of a BK, just another 11 to go and you'll have Fannie/Freddie as options, time to get the score well into the 700's too. The different credit score tiers with Fannie/Freddie now go all the way up to a 780 in 20 point increments, for example 700-719, 720-739, etc.