topic Re: Chapter 7. Is a new mortgage loan possible two years after discharge? in Mortgage Loans

Chapter 7. Is a new mortgage loan possible two years after discharge?

Anonymous — Tue, 26 Oct 2021 22:56:51 GMT

Hello,

Newbie questions. Sorry. Wife did a Chapter 7 one year ago (by her self). I did a chapter 7 four years ago (by myself). We didn't loose our house, never late on house payments. We didn't loose our vehicles either, never late on those either. One is now paid off. We had extenuation circumstances. I lost my income and claimed chapter 7. Wife lost her second job due to Covid last year thus she claimed chapter 7. Since then, she got a higher degree than previously. Better paying job to avoid the need for a second job. Solving the issue. Our down payment would be 30% of the house price. Our scores are 680/717. We have established new lines of credit (credit cards and auto loans). Could we get a mortage two years after discharge or do we have to wait the four years for conventional loan? I don't want FHA and have to pay PMI since we have a large down.

Re: Chapter 7. Is a new mortgage loan possible two years after discharge?

Mortgage-Specialist — Tue, 26 Oct 2021 23:48:46 GMT

You may qualify on your own now. Or wait to include your wife a year from now and go FHA. Wouldn't make a whole lot of sense waiting 4 years to avoid mortgage insurance when you can always refinance out of an FHA loan and go into a conventional loan later on.

Is it possible to qualify for a conventional loan less than 4 years after a ch 7? Yes, but unlikely. If the automated system approves you then underwriting would follow suit. But the majority of the time, the automated system acknowledges the ch 7 and usually will not give the approval.

Re: Chapter 7. Is a new mortgage loan possible two years after discharge?

Anonymous — Tue, 26 Oct 2021 23:55:56 GMT

Thank you for the reply. So after 2 years FHA is ok regardless of circimstances? How much is PMI (percentage of loan) until we could re-fi the loan?

Re: Chapter 7. Is a new mortgage loan possible two years after discharge?

Mortgage-Specialist — Wed, 27 Oct 2021 00:40:57 GMT

If you put 10% down or more the annual MI rate is 0.8% Basically if your loan amount was 300k your monthly MI would be roughly $197 per month. But with FHA, the interest rste is fairly lower than Conventional. So don't look at it like you're overpaying $197 per month because the difference with the lower rate - it would likely be closer to your FHA Payment being only $75 per month higher than a Conventional payment

Re: Chapter 7. Is a new mortgage loan possible two years after discharge?

Anonymous — Wed, 27 Oct 2021 04:47:23 GMT

My reading says PMI will be removed after 11 years if more than 10% is put down on FHA. Anything else for removal? Thanks

Re: Chapter 7. Is a new mortgage loan possible two years after discharge?

VALoanMaster — Thu, 04 Nov 2021 19:26:22 GMT

@Anonymous wrote:
My reading says PMI will be removed after 11 years if more than 10% is put down on FHA. Anything else for removal? Thanks

If you put 10% or more down and you take a 15 year term, the MI is cut from .8% to .45% and will drop off after 11 years.

The only other way to get rid of the FHA Mortgage Insurance is to refinance out of FHA into a conventional loan once you have at leats 20% equity.

Re: Chapter 7. Is a new mortgage loan possible two years after discharge?

Anonymous — Thu, 04 Nov 2021 19:42:53 GMT

So 30yr loan and 30% down (over the 10% required) it wont drop off after 11 years? Glad I asked here. The other blog said yes. Thank you!

Re: Chapter 7. Is a new mortgage loan possible two years after discharge?

VALoanMaster — Thu, 04 Nov 2021 20:26:25 GMT

@Anonymous wrote:
So 30yr loan and 30% down (over the 10% required) it wont drop off after 11 years? Glad I asked here. The other blog said yes. Thank you!

Yes, it will.

Re: Chapter 7. Is a new mortgage loan possible two years after discharge?

homeloanexpert — Sat, 06 Nov 2021 13:31:33 GMT

@Anonymous

Chiming in on this. There are allowances that can be made making it possible to qualify for a loan earlier under extenuating circumstances, but it can be a hard sell in some cases. I've closed a few this year so it 's still fresh in my mind. If you don't qualify under extenuating circumstances, and need your spouse's income to qualify, there are non-agency loan products that will allow a BK Chapter 7 with only 1 year seasoning. These NonQM loans programs do have higher rates as you might imagine, but can be a viable option for some borrowers to purchase or refinance. They do have adjustable and fixed rate options.

Best wishes to you!

Re: Chapter 7. Is a new mortgage loan possible two years after discharge?

Anonymous — Sat, 06 Nov 2021 17:24:40 GMT

Thank you Sir!

Re: Chapter 7. Is a new mortgage loan possible two years after discharge?

homeloanexpert — Sat, 06 Nov 2021 18:09:47 GMT

@Anonymous

Yes

Re: Chapter 7. Is a new mortgage loan possible two years after discharge?

Anonymous — Mon, 08 Nov 2021 10:07:34 GMT

Thank you, it's interested. I've thought it's impossible after two years

Re: Chapter 7. Is a new mortgage loan possible two years after discharge?

Anonymous — Sun, 14 Nov 2021 16:16:03 GMT

Extenuating circumstances is a hard sell most of the time. It can be done, but you would need to show catastrophic loss of income or an insurmountable amount of bills that forced the issue. Generally speaking we're talking someone got diagnosed with a serious illness and racked up hundreds of thousands of dollars in medical bills. The other situation would be the main breadwinner loses their job for multiple years in a row forcing a catastrophic set of circumstances.

You could theoretically get a conventional loan through FHLMC as they do not have waiting requirements you just have to get an "accept" through their automated underwriting system but the credit risk algorithm is pretty in line with FNMA's who has the 4 year waiting requirement. You could try, but it's unlikely to be approved until you hit that four year mark.

There are obviously non-qm alternatives that will allow you to get a mortgage with the BK but the rate reflects the risk. We're talking 5.5%+ at minimum to start for borrowers with excellent credit scores and low LTV loans.

Re: Chapter 7. Is a new mortgage loan possible two years after discharge?

Anonymous — Sun, 14 Nov 2021 16:21:22 GMT

Our score is ok at 715. Two cc and a car note. Both low balances. But it would be 5.5% vs an FHA at 3% and FHA I can do after 2 years.

Re: Chapter 7. Is a new mortgage loan possible two years after discharge?

ToofDoc — Sat, 20 Nov 2021 04:12:20 GMT

I'm going through the same thing as you as we speak. My Chapter 7 just turned 2 years and I found a $425K townhouse that I want to buy.

My 5/4/2 FICO scores are:

EQX 689

TU 681

EXP 625

Here are my pre-approved options:

1) FHA loan

Rocket Mortgage

15-year fixed at 2.375%

47% down ($200K)

2) Non-QM loan

mBanc

30-year fixed at 5.75%

20% down ($85K)

3) Portfolio loan (conventional)

Northwest Bank

15-year fixed at 3.0%

30-year fixed at 3.85%
57% down ($243K)

Guess which one I'll be going with?

Re: Chapter 7. Is a new mortgage loan possible two years after discharge?

Anonymous — Sat, 20 Nov 2021 13:04:22 GMT

Great reply.

With the FHA you have PMI for 11 years or until you re-fi and with Convent one, no pmi. With rates said to increase next year making a refi more %, i'd assume #3? If not walk me through your thoughts.