topic Mortgage After BK 7 in Mortgage Loans

Mortgage after Bankruptcy

Lil_Me — Fri, 20 Jan 2012 16:09:47 GMT

Hello All,

Has anyone gotten approved for a mortgage after filing a chapter 7 bankruptcy? If so how long were you out of your chapter 7 before you were able to get pre-approved? What kind of scores did you have at the time of pre-approval?

I was discharged in Feb. 2011 and have been building credit since then. I have one more year left before I am able to apply. I used that first year to find credit that would approve me and now I am taking this second year to bring every thing to a 0 balance.

Any type of information would be helpful.

Re: Mortgage after Bankruptcy

johnsj21 — Sat, 21 Jan 2012 14:07:44 GMT

Everything I have heard is that you have to wait 2-3 years to apply from the date of discharge for a Chapter 7. I think it's actually closer to 3.

Re: Mortgage after Bankruptcy

StartingOver10 — Sat, 21 Jan 2012 17:02:54 GMT

Did you own property in the BK? If so, what was the disposition of that property?

This is a major factor in determining the time period for which you are eligible for a new mortgage.

Re: Mortgage after Bankruptcy

Lil_Me — Mon, 23 Jan 2012 13:49:52 GMT

No, I never had a mortgage before.

Re: Mortgage after Bankruptcy

StartingOver10 — Mon, 23 Jan 2012 14:06:34 GMT

@Lil_Me wrote:
No, I never had a mortgage before.

FHA is 3 yrs unless you had a hardship for your bankruptcy (serious illness, death of a primary wage earner etc), then its 2 yrs.

There have been people that have gotten a mortgage 12 months after BK, but that is highly unusual.

Make sure you re-establish your credit after BK. They will want to see that it is re-established with 3 active tradelines minimum. You don't have to have large tradelines at all. The underwriter will want to know what caused the bankruptcy and what steps you have taken to prevent it from occuring again.

Conventional loans require a longer time from discharge (can't remember now if its 5 or 7 years).

Re: Mortgage after Bankruptcy

Anonymous — Mon, 23 Jan 2012 15:51:59 GMT

http://portal.hud.gov/hudportal/HUD?src=/federal_housing_administration

It's two yrs after bk7 for fha, 1 for extentuating circumstances but very hard to pull off, 3 for fha after foreclosure, and 3 and up for bk7 w conventional.

We had no problems getting a fha mortgage. We got preapproved 1 3/4 yrs after our discharge (our PA letter just said we couldn't close until our 2 yr anniv) and closed a few mos after our 2 yr. Our ficos were low 700's. Keep doing what you're doing, it works!

Re: Mortgage after Bankruptcy

Anonymous — Mon, 23 Jan 2012 16:29:00 GMT

FHA rules are 2 years. Most banks say 3 years, some banks (Aimloan.com) Say 4 years.

Check with your bank. But keep in mind that MOST Mortgage people, are SALESMEN first. Read, Learn, Understand, THEN APPLY.

Re: Mortgage after Bankruptcy

StartingOver10 — Mon, 23 Jan 2012 16:30:21 GMT

http://www.fha.com/fha_requirements_credit.cfm

The general BK requirements for an FHA loan are in the above link; however, individual banks/lenders can tighten up the criteria.

If you are in a state, like Florida, that was hit very hard by the recession, the loan criteria is more strict by the individual lenders. If you are in a state that has not been hit very hard, then your loan criteria will be closer to the minimum criteria stated by FHA.

The only way to know for sure is to speak with a lender in your area so you can plan appropriately.

Re: Mortgage after Bankruptcy

Anonymous — Tue, 24 Jan 2012 22:02:08 GMT

@StartingOver10 wrote:
Did you own property in the BK? If so, what was the disposition of that property?
This is a major factor in determining the time period for which you are eligible for a new mortgage.

Hello StartingOver10,

Im looking for the answer to your comment here. I discharged (surrendered) my home on BK7 3 years ago and was forclosed soon after. I would like to know when can I start looking for a home. Also if you have any links to this info will be great. Thanks

Re: Mortgage after Bankruptcy

StartingOver10 — Wed, 25 Jan 2012 14:46:00 GMT

http://www.fha.com/fha_requirements_credit.cfm

When you surrender a property in BK, the bank still has to complete the foreclosure in order to wipe out the lien. Those are two different actions. The BK eliminates your personal liability to repay the loan on surrendered property (when successfully discharged from the BK); and the foreclosure eliminates the banks lien and is the actual process by which the bank gains ownership of the property.

The time period that begins the "clock" is the event that occurred later. If the BK discharge was after the foreclosure, then the 3 yr date starts from the discharge date. If the official bank sale date was after your discharge date, then the 3 yrs begins from that date. If you can show your BK was from extenuating circumstances, then your time period would be less than three years. It is up to the underwriters discretion. Extenuating circumstances is not "I lost my job" or "divorce" or anything of that nature.

Re: Mortgage after Bankruptcy

Anonymous — Wed, 25 Jan 2012 19:07:33 GMT

Thanks StartingOver10 for your information very helpful.

Re: Mortgage after Bankruptcy

Lil_Me — Wed, 25 Jan 2012 20:09:50 GMT

Twizzle,

What bank did you use? Did you go to your personal bank that you bank with or you went through a mortgage broker?

Re: Mortgage after Bankruptcy

Anonymous — Sun, 10 Feb 2013 21:28:00 GMT

I discharged chapter 7 in 2010. I was able to reaffirm my auto loan, and I was able to keep my house as long as I still paid every month as usual. The auto loan applied to my credit score & report, but the mortgage no longer did. The bankruptcy attorney I had said she didn't do any kind of reaffirmation for the house, like for the car, in case I couldn't keep up with payments. In that case I could either just walk away from the property or sell it. I'm needing a house with more space soon, and I'm wondering how possible it is to get a new mortgage?

Re: Mortgage after Bankruptcy

Anonymous — Sun, 10 Feb 2013 22:00:18 GMT

@Anonymous wrote:
I discharged chapter 7 in 2010. I was able to reaffirm my auto loan, and I was able to keep my house as long as I still paid every month as usual. The auto loan applied to my credit score & report, but the mortgage no longer did. The bankruptcy attorney I had said she didn't do any kind of reaffirmation for the house, like for the car, in case I couldn't keep up with payments. In that case I could either just walk away from the property or sell it. I'm needing a house with more space soon, and I'm wondering how possible it is to get a new mortgage?

What are you planning to do with your house you are in presently?

Are you selling?

Are you walking away?

Are you keeping and purchasing a new larger home?

How are your present scores?

How is your income?

What debts do you currently have?

Are you self employed or W2 employee?

Re: Mortgage after Bankruptcy

Anonymous — Sun, 10 Feb 2013 23:10:00 GMT

I plan to sell it, hopefully. I might get about 40k out of it to put towards a new house, but the houses here start at 250k so it's still a lot to get a mortgage for. The only debts I have are an auto loan and credit card, but it's still a high debt to income ratio. I work for a large hospital and I've been the there for almost 10 years. I make about 43k a year. My current credit score is about 650.

Re: Mortgage after Bankruptcy

Anonymous — Sun, 10 Feb 2013 23:57:54 GMT

I filed Chapter 7 in 2003 and a Chapter 13 in 2005. Chapter 13 was paid off successfully and discharged in 2011. The Chapter 13 deleted in Oct of last year and the Chapter 7 will delete Aug 2013. I just closed on our second home 2/6/13. We lost our first home in foreclosure in 2007.

My credit improved very slowly over a 7 year timeframe as the old derrogatories fell off. I qualified with a mid fico of 703.

Re: Mortgage after Bankruptcy

Anonymous — Mon, 11 Feb 2013 00:11:13 GMT

@Anonymous wrote:
I plan to sell it, hopefully. I might get about 40k out of it to put towards a new house, but the houses here start at 250k so it's still a lot to get a mortgage for. The only debts I have are an auto loan and credit card, but it's still a high debt to income ratio. I work for a large hospital and I've been the there for almost 10 years. I make about 43k a year. My current credit score is about 650.

Just my opinion..

At 43K a year annual salary, purchasing a home at 250K plus is not realistic, and most likely would not be qualifiable. But possibly with a larger down payment it is possible. Unless you have another person who will help out with the mortgage on the loan, that would also increase your chances, if they are also qualifiable.

You mention your DTI is high, so that will also play a big part in how much home you can afford.

Your score is qualifiable at 650 mid score if it is a FICO score.

Your employment history is good.

I would do a comparison on what the homes are selling for over the last 6 months, homes comparable to yours. Or just contact a realtor and they will do the comparables and give you a selling price according to their professional opinion.

Once you have an idea, now you need an idea how long it may take to sell, so check how long homes are staying listed in your area, or once again ask your realtor.

After you have the basic information, you can see how much equity you can obtain from the sale of your home.

You can use the equity to help with down payments, pay down debts, closing cost, etc etc... or just save it if you have the funds to purchase another home.

@Being realistic... 250K - 40K down payment from equity of sale = 210K @ 3.625% (low rate for conventional, which your scores may not qualify for) for 30 years = 957.71... Plus Insurance, and Taxes, which would put you right around 45% of your take home pay.

If you have to pay PMI or MIP you will be at or over 50% of your take home pay and that does not include any other debts you have.

Something you need to be well aware of, so you do not find yourself in a tight position struggling month to month.

Re: Mortgage after Bankruptcy

Anonymous — Mon, 11 Feb 2013 00:25:11 GMT

+1, you would need to come up with $50,000 down for a $250K home and even after that much down, your DTI is maxed out. With today's interest rates, the max you can afford is 4x your income.

Re: Mortgage after Bankruptcy

Anonymous — Mon, 11 Feb 2013 00:29:22 GMT

The max you qualify for (assuming low debt) is about $172,000. Anything above that, you will have to pay for upfront through your downpayment.

Re: Mortgage after Bankruptcy

Anonymous — Mon, 25 Feb 2013 03:14:52 GMT

Hi I am new here and I have the same type of question. I think i might have messed up the posts though. sorry.

My husband and I are trying to purchase a home. we are 20 months out of chapter 7. (BK was due to a credit card repayment scam). Our credit scores are now good (650's), we have $6500 gross monthly income, and long term employment history (10+ years each at the same job). We have found our dream home but the real estate agent and mortgage broker say that we have no choice but to wait until June for the preapproval. Is this true? I keep reading that there are ways around that but not really getting any good answers. any help would be appreciated! thank you!!