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Chances of getting a Conventional Mortgage 3 years post CH7 Discharge with explanation of Divorce

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Frequent Contributor

Chances of getting a Conventional Mortgage 3 years post CH7 Discharge with explanation of Divorce

My divorce was horrible I have 2 girls who were like 10 and 12 when this started.

Ex became hooked an pain killers and alcohol.

She received a DUI with my then 10 year old in the car.

She also has mental issues.

Neither the drug/alcohol or mental issues were known before the seperation and divorce started.

Because she was in and out of mental hospitals 7 times for as long as 6 weeks at a time the proceedings started and stopped and started and stopped. 

Child protective services was involved and labelled her as having abused/neglected the kids.

I took a $25K pay cut at the time for a job where I could mostly work from home to take care of them as one was finishing middle school in a different town and the other just started high school where I moved.

Finally divorced in 6/2015  Ch7 discharged 6/2016.

 

I want to apply for a mortgage 6/2016 after 3 years post discharge.   I would like to get a conventiona.

Don't worry too much about my scores or DTI just assume I would get a mortage with a midlde mortgage score between 680 and 700.

 

The question is assuming mortgage would otherwise fly, is the explanation of divorce, custody battle, etc. enough to qualify for a Conventiol mortgage?   I see that they want 4 years post discharge but with an explanation like divorce, medical bills, loss of job etc they may allow it earlier.

 

Does anyone know first hand about these explanations and if it will allow the lender to give me a Conventional 3 years post discharge CH7?

Message 1 of 8
7 REPLIES 7
Established Contributor

Re: Chances of getting a Conventional Mortgage 3 years post CH7 Discharge with explanation of Divorc

Although I feel your pain, it's not likely your situation meets the guidelines for the extenuating circumstances exception and therefore I honestly recommend that you "shorten" your search for an exception (don't give up, but by all means don't begin spending money towards a conventional loan) and begin to embrace the benefits of an FHA loan.

 

While most people would agree that a conventional loan is the "best in show", just don't beat yourself up over the fact that don't qualify for one until that waiting period is met because there is absolutely nothing wrong with an FHA loan.    Sure, folks will argue that PMI is due for a longer period of time than with a conventional loan, but if you want to "beat the bank", simply pay extra principle early and often in the loan's life so that you pay it off sooner as this is a surefire way to lower your APR to the ranks of conventional APRs.

__________________________________________________

Licensed NC Mortgage Loan Originator
Message 2 of 8
Frequent Contributor

Re: Chances of getting a Conventional Mortgage 3 years post CH7 Discharge with explanation of Divorc

Thank you so much for your reply.

 

Just to be clear  when I see this about Fannie Mae after they published their new guidelines for derogatory events (which I think happened last year)  and it includes divorce as an extenuating circumstance your opinion as a mortgage loaner is that divorce is not a good enough extenuating circumstance.

 

For a Fannie Mae loan, “extenuating circumstances” are situations which (1) occur one-time only; (2) are beyond the borrower’s control; and, (3) result in a sudden, significant, and prolonged reduction in income.

The label of “extenuating circumstances” may also be applied to situations in which a borrower is subject to a catastrophic increase in financial obligations.

Examples of extenuating circumstances may include divorce, illness, sudden loss of household income, and/or job loss.

Mortgage applicants wishing to apply for a loan using Fannie Mae’s Extenuating Circumstances program should be prepared to provide documentation in support of the claim. Valid documentation may include a copy of a divorce decree; medical bills; and, notice of job loss or job severance papers.

 

It's OK I have options.  For what we want to do first my wife shoudl qualify by herself and then in 1 year we can refinance under both names and pull out some equity or we can do FHA.

 

I just needed clarification that even though I see divorce listed as an extenuating circumstance it doesn't really matter for conventional.  if that's the case it's really OK just want to understand.  

 

As a mortgage lender you would know better than I what the above means.

 

Thanks again.

Message 3 of 8
Valued Contributor

Re: Chances of getting a Conventional Mortgage 3 years post CH7 Discharge with explanation of Divorc

Hi Njcobra10tha,

 

I think the biggest issue you'll have is finding a lender that will allow a conventional loan to be manually underwritten.

My bank has 14 different lenders/investors that we sell our loans to & not one of them will allow a manual underwrite on a conventional loan. 

It will be way easier to get an FHA loan & you'll most likely end up with a lower overall payment.

VA Mortgage Expert. Mortgage Banker lending in All 50 States.
VA, FHA, USDA. Jumbo, Conventional.
CAIVRS Expert.
Message 4 of 8
Frequent Contributor

Re: Chances of getting a Conventional Mortgage 3 years post CH7 Discharge with explanation of Divorc

Thanks so while possible - highly unlikely.

 

So it looks like I have 2 options let wife get mortgage on her own or go FHA.

 

Thanks again.

 

I did have a preliminary conversation with DCU my credit union - no credit pulls just questions about what they are looking for and he said it's possible but the guideline is 4 years post discharge.  I know they seem to have a 2 years post discharge for car loans etc so not sure how flexible they would be and based on what you are saying not very likely.

 

Thanks again for the info still in planning stages.

Message 5 of 8
Valued Contributor

Re: Chances of getting a Conventional Mortgage 3 years post CH7 Discharge with explanation of Divorc


@njcobra10tha wrote:

Thanks so while possible - highly unlikely.

 

So it looks like I have 2 options let wife get mortgage on her own or go FHA.

 

Thanks again.

 

I did have a preliminary conversation with DCU my credit union - no credit pulls just questions about what they are looking for and he said it's possible but the guideline is 4 years post discharge.  I know they seem to have a 2 years post discharge for car loans etc so not sure how flexible they would be and based on what you are saying not very likely.

 

Thanks again for the info still in planning stages.


Did DCU say they needed 4 years post discharge on FHA or just conventional?

The conventional guidelines require 4 unless you have extenuating circumstances, then it can be as little as 2 years post discharge.

VA Mortgage Expert. Mortgage Banker lending in All 50 States.
VA, FHA, USDA. Jumbo, Conventional.
CAIVRS Expert.
Message 6 of 8
Frequent Contributor

Re: Chances of getting a Conventional Mortgage 3 years post CH7 Discharge with explanation of Divorc

It was a preliminary conversation and I'm trying to remember the exact words but it was said it's supposed to be 4 years post discharge but it might get approved if extenuating circumstances.  I'm not sure if DCU does FHA or just conventional.  I did not speak to underwritting  just a generic loan representative.

 

 

Message 7 of 8
Contributor

Re: Chances of getting a Conventional Mortgage 3 years post CH7 Discharge with explanation of Divorc

Try Langley federal Credit union. I recently spoke with a mortgage loan officer and he stated that they've portfolio loans that allow first time home buyers 3 yrs post BK 7 that go up to 90% LTV for portfolio loans and for FHA up to 85% LTV. The terms apply to home refinancing after BK 7 which is what i was looking for. IMHO There are plenty of CU out there that have there own loan products outside of fha and conventional rules which are 2 and 4 yrs post bk but it will require research. Good luck to you and please report back on your progress once you find one. Thanks.


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