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Conventional Mortgage after Chap 7

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Conventional Mortgage after Chap 7

I know that the standard guidelines for qualifying for a conventional mortgage after BK7 is 4 years. But I read somewhere ( I believe it was on NoLo) that if circumstances beyond your control are the reason for filing for BK, then it lowers that period down to 2 years. Divorce was listed as one of those reasons and I am in the process of such. 

 

Does anybody know this to be true?? And if so, any details. For example, I live in NC and there is a mandatory year separation period before the divorce can be filed. Would I have to wait to file for bankruptcy until AFTER the divorce to use this as the unseen hardship?

Message 1 of 7
6 REPLIES 6
Moderator Emeritus

Re: Conventional Mortgage after Chap 7

Yes, you can qualify for FHA after 2... actually sometimes one year with enough down payment.

 

It's possible to qualify for an FHA loan after a bankruptcy filing. Depending on the circumstances, there might be a waiting period of 12 months to two years from the discharge date. After that period of time, an eligible borrower could get an FHA-insured mortgage loan to buy a house.

 

 https://www.fha.com/fha_article?id=305

Message 2 of 7
Member

Re: Conventional Mortgage after Chap 7

Thanks for the reply. Yea, im aware of being eligible for an FHA loan. That's not what I was asking. This is about the conventional mortgage guidelines. Since the mortgage insurance never drops off FHA loans....I cant fathom why anybody would ever want one.
Message 3 of 7
Senior Contributor

Re: Conventional Mortgage after Chap 7


@Rob_Lo wrote:
Thanks for the reply. Yea, im aware of being eligible for an FHA loan. That's not what I was asking. This is about the conventional mortgage guidelines. Since the mortgage insurance never drops off FHA loans....I cant fathom why anybody would ever want one.

Because they're easy to get, and after the loan drops below 80% LTV through payments and/or appreciation you can refi. And if you can get a conventional mortgage that soon after a Ch.7 the rate would be higher, cancelling any benefit of no PMI after 80% LTV.

 

And not to get polical or belittle NC, but sheesh, there is a mandatory year separation period before the divorce can be filed in NC???? I'd take a weekend in Vegas, instant divorce.


Fico 08: 720/721/719 TU/EX/EQ
Message 4 of 7
Member

Re: Conventional Mortgage after Chap 7

That's pretty speculative. Conventional loans can also be refi'd.

Yea, pretty silly law. I'm a transplant anyway...so no offense taken at all lol.
Message 5 of 7
Contributor

Re: Conventional Mortgage after Chap 7

I’ve read extenuating circumstances for FHA are very difficult to obtain and that divorce doesn’t qualify. Im with you regarding FHA and PMI.

As for conventional I have read (google FNMA Handbook) that divorce CAN qualify for the 2yr exception if it’s well documented. In my case, the divorce occurred then the bk 7 months later. Your case and sequence of events would make sense to me given the 1yr mandatory separation (that’s a really strange law).

FWIW I have spoken with navy federal several times about their mortgage requirements, as recently as 2 days ago actually, and the answers are scattered. The latest answer was “case by case” basis for the lending committee to decide. When I applied for a mortgage with NFCU back in January (<1yr post d/c), the LO said the UW told her 2yrs post ch7 d/c to qualify with extenuating circumstances, divorce counts if documented. The LO said the divorce decree would work along with LOE.

I’ve had conversations with some portfolio lenders as well who will loan as soon as 1 day post d/c but that’s with at least 20% down. Of course the rates are much higher too. One rate sheet I saw with that particular lender was around 8% for that loan product, and who knows how much their fees were. At least there was no PMI required 😐. You might post over in the mortgage sub-forum, one of the knowledgeable contributors there specializes in mortgages in your state.
Message 6 of 7
Regular Contributor

Re: Conventional Mortgage after Chap 7

Different lending companies have additional underwritting rules so it varies. Usually the general consensus is 2 years for FHA and 4 years conventional. FHA is fine to get started as others have said, you can refinance after 80% LTV.

BK7 08/2016 | DC 12/2016

Message 7 of 7
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