There are two rules in play here.
Yes, FHA is available 2 years after Chapter 7 discharge EXCEPT that if there is a foreclosure, the rule is 3 years after the foreclosure is complete - meaning generally 3 years from the date of transfer of the deed to the next owner (could be a buyer or the bank if they hold the property). So people with a foreclosure face a longer wait, and are subject to the whims of the lender.
I believe the 3 year rule was put in place to discourage "strategic defaults", those are where the homeowner decides it makes business sense to walk away from a property that is underwater, subject to a crushing interest rate adjustment, etc.
You are exactly right, CashisBetter, its all up to the lender. Btw can someone refer me to a good lender that will loan with a BK Chap 7 Discharged 7/08 with a mortage included. I have a great steady job and a mid score of 633. Let me know please.
Alot of lenders have moved their own post BK requriements to 3 years. This has nothing to do with foreclosure. Banks have just begun tightening up restrictions. Some banks still do 2 years, some do 3. Most that do 2 years still are running pretty tight restrictions on those approvals. also, alot of time it depends on the factors involving the BK. Was it just overspending, etc or was there a reasonable explanantion for it and reasonable expectation that it will not re-occur...(i.e family illness, divorce, job loss that has since been corrected...). Someone who just ran up too many bills and then BK'd will have a tougher time.
the LO was not correct. There are most certianly different guidelines when underwriting a loan with a previous BK. The main difference being that whereas a normal file can probably get approved with a single recent late or a couple in the last couple years, any lates post BK is generally a deal killer. Also, post BK, underwriters are going to pay alot more attention to DTI and reserves. Whereas someone without a BK may be able to get approved at 45-50% total DTI and/or with little or no reserves, underwriters are not going to allow someone who is only a couple years out of a BK to overextend themselves and are generally going to want to see some reserves to protect against another default.. The same stuff applies to someone with a past foreclosure as well. The process is the same, but the strictness in which they follow the guidelines is a whole lot tougher.
FHA underwriter rules state that you have to wait three years after a foreclosure before getting an FHA loan. It's not the date of your foreclosure that FHA uses for the three years -- it's the date the property sold after it was foreclosed, which will be either the "Date of Last Activity" or "Date Reported" on your credit/FICO report. I'm sure about the three years, and I'm sure about the sale of property date, but I'm not sure which column it is reflected in on your credit/FICO report. A mortgage lender can quickly tell you where this date is on your credit report. I recently purchased a house through FHA after waiting those three years.
...I know this thread is as old as the hills and I hate to beat a dead horse, but i want to encourge those of you who are in similar situations to remain persistant. Ultimately in 7 years my wife and I want to have a FICO of 0. Because who needs credit when you can pay with cash? Hope this was helpful!
Congrats on your successful struggle back from hard times!
And I certainly wish you well in your goal to live off the credit grid, because it's a free country, and we all have the right to follow the paths that make the most sense for us.
But I do want to point out that it's quite simple and easy to have credit without debt. Many of us here on the forums do this. Despite the fact that I pay for literally everything with a credit card, all I owe anyone is my mortgage and my car loan, and I'm actively working to get them paid off ASAP.
I look on available credit as insurance, just like my car insurance. I don't plan to crash my car, or have it stolen, but it's nice to know that someone has my back if this happens.
And unlike insurance, it doesn't cost me a penny to have good credit. I just pay my bills on time, recoup my rewards from my CC's, and move on.
Anyway, 'grats once again on your new life and your new home.
--oh, and there's no such thing as a FICO score of 0, despite what Dave Ramsey says. You'll just have no FICO score, not a score of 0. And even that won't happen until 10 years after your last credit account (CC, mortgage, etc.) is closed, because as long as something is on your reports, you'll have a score. But again, if that's important to you, that's cool, and best wishes on your quest to achieve this. It can certainly be done. Yay for personal financial responsibility, something that most of us here also practice!
Split off to create a new thread.
FYI ... it does seem to depend on how the FHA lenders interpret the 3 year rule and which dates to use. I got my Chpt 7 BK discharged in 03/2008 and included in it was my previous home which wasn't foreclosed on until 06/2011 (sheriff sale date). I finally found a lender that is able to consider the 3 years from the discharged charge (since the property was included in the BK). Here's link to his related article/site:
[Link removed-Marinevietvet, myFICO moderator]
Hope this helps out anyone with a similar situation.
I know this is old and was all talked about awhile ago, but I am in this situation, the BK 2 years, FK 3 years, and am in the middle of buying a home and the financing has fallen through. We have about 5 days to either find new financing or we will lose the house. CashIsBetter , can you email me your lenders name and number? I need someone who will consider the FK as part of the BK and give us the loan based on the discharge date instead of the foreclosure date. Sounds like you found someone that could do this for you, I could really use your help!! [Edited] If anyone else has someone that can do this, let me know!
Edited to remove personal information which is not allowed to be posted in the public forums. You are welcome to exchange such things via PM.
Thanks for your understanding.
Marinevietvet, myFICO moderator
If you are getting an FHA loan, you will have to wait 3 years from the foreclosure date on your credit file. This date might be the date the foreclosed property was resold. My lender was Willow Bend Mortgage located in Plano, Texas. [Edited] was my loan officer. Although she was located a good distance away, I submitted most documents by email and a few by mail. The process was easy and quick. You can learn a lot if you will check into [Edited]
Edited to remove personal information. This same admonition has been posted several other times within this thread.
Marinevietvet, myFICO moderator