I filed Chap 13 on April 30, 2010 and was discharged on May 27, 2015. At the time I filed, the house that I bought 6 years earlier for $355K was worth about $150K. I financed the purchase with an 80% first mortgage and a 20% HELOC. I was able to strip the HELOC in the Chap 13. The housing market has improved and, if you believe Zillow, my home is now worth about $460K. I don't believe Zillow, but think it is probably worth $400K to $425K. I have been anxious to refinance my adjustable rate first mortgage with a balance of $220K. The adjustable rate has been good for me up to now, but the rate is now about the same as current refinance rates. The adjustable rate on my Heloc contributed to my need to file BK, as well as the uncertainty of my adjustable first which had not yet plummeted at the time I filed BK. I am anxious to have the security of a fixed rate.
I also want to use some of the equity ($100K or less) to replace the roof, do some other repairs and perhaps a small addition to my little 845 square foot home.
People ask questions all the time about whether they can get a mortgage after BK, but we don't get a lot of reports on actual experiences. So, I thought I'd share what I am learning. I started looking at refinancing last November and have yet to refinance.
Lesson 1: FHA Mortgage Insurance Requirements Changed in 2013. I could have refinanced my mortgage the day after discharge, if I was willing to take an FHA loan. FHA used to require mortgage insurance only if your loan was for more than 78% of the value of the home. When talking to a mortgage broker in November of 2016, I learned that they changed that rule in 2013 and all 30 year FHA mortgages must now include mortgage insurance for the first 11 years of the loan. I considered refinancing in an FHA loan and then refinancing again when I could qualify for a conventional loan. The upfront FHA fee (about $4,000, I think) and other refi expenses made that not make sense.
Lesson 2: No Conventional Mortgage Until 2 Years and 1 day after discharge, Regardless of What is on Your Credit Report: I searched high and low and spoke to several mortgage brokers in November and couldn't find any conventional lender willing to lend to me. FHA was my only only option. I assumed that meant I could get a conventional loan as soon as the bankruptcy dropped off my credit reports, 7 years after filing. My reports stopped showing the BK in early April 2017, a little earlier than I expected, but some individual creditors still showed accounts as IIB. On May 1st, I checked all 3 credit reports and they contained absolutely no mention of the BK. The FICO 8 scores I can get from different credit cards were 790, 825 and 841. Great, I thought, I'm ready to refi. WRONG! I learned that even though my credit scores are excellent and my BK is not on my credit report, I still cannot get a conventional mortgage until 2 years and one day after the discharge. The creditors do check public records and will find my bankruptcy on court records. Also, they ask on the mortgage application where I would not lie. I already knew that my bankruptcy would be a public record forever, even if it doesn't show up on my credit reports. But, I didn't know lenders routinely went beyond the credit reports to independently check the public records.
Lesson 3: The FICO score the lender pulls up will not be the same as the FICO score that your credit card provides: I already knew this, but was still surprised by the differences. One lender ran my scores and they were 781, 760 and 753 (instead of 790, 824 and 841). The odd thing is that highest score (781) was from Experian which was the lowest score (790) provided by my credit cards. It's very frustrating, but for me it won't make a difference. As long as your middle score is above 740, you qualify for the best rates.
Lesson 3.1: You can Learn the FICO scores the lenders will use for Mortgages. I did a little research after typing Lesson 3. Here is a list of what score versions are used for different kinds of credit: http://www.myfico.com/credit-educati...core-versions/ You can buy a report including the commonly used scores for auto, mortgage and credit card lending. I found people who purchased those scores who said that they were exactly what lenders pulled.
Lesson 4: If your credit score is good, multiple credit inquiries will not matter, even if not close enough in time to be considered a single inquiry: When I learned that I was going to have to wait until May 28th to qualify for a conventional mortgage, I told the rep that gave me that info that I had inquiries on my credit report for mortgages in November and now on May 1st. I asked if the multiple inquiries would be a problem if I didn't refi within 30 days of the May 1 inquiry. He said that with my "excellent credit scores", the inquiries would not make any difference at all.
So, my mortgage shopping is on hold until May 28th.
Lesson I have yet to Learn: How many conventional lenders will automatically disqualify me because of my BK, even after the 2 year discharge period has passed?
To be continued....
I also want to use some of the equity ($100K or less) to replace the roof, do some other repairs and perhaps a small addition to my little 845 square foot home.
People ask questions all the time about whether they can get a mortgage after BK, but we don't get a lot of reports on actual experiences. So, I thought I'd share what I am learning. I started looking at refinancing last November and have yet to refinance.
Lesson 1: FHA Mortgage Insurance Requirements Changed in 2013. I could have refinanced my mortgage the day after discharge, if I was willing to take an FHA loan. FHA used to require mortgage insurance only if your loan was for more than 78% of the value of the home. When talking to a mortgage broker in November of 2016, I learned that they changed that rule in 2013 and all 30 year FHA mortgages must now include mortgage insurance for the first 11 years of the loan. I considered refinancing in an FHA loan and then refinancing again when I could qualify for a conventional loan. The upfront FHA fee (about $4,000, I think) and other refi expenses made that not make sense.
Lesson 2: No Conventional Mortgage Until 2 Years and 1 day after discharge, Regardless of What is on Your Credit Report: I searched high and low and spoke to several mortgage brokers in November and couldn't find any conventional lender willing to lend to me. FHA was my only only option. I assumed that meant I could get a conventional loan as soon as the bankruptcy dropped off my credit reports, 7 years after filing. My reports stopped showing the BK in early April 2017, a little earlier than I expected, but some individual creditors still showed accounts as IIB. On May 1st, I checked all 3 credit reports and they contained absolutely no mention of the BK. The FICO 8 scores I can get from different credit cards were 790, 825 and 841. Great, I thought, I'm ready to refi. WRONG! I learned that even though my credit scores are excellent and my BK is not on my credit report, I still cannot get a conventional mortgage until 2 years and one day after the discharge. The creditors do check public records and will find my bankruptcy on court records. Also, they ask on the mortgage application where I would not lie. I already knew that my bankruptcy would be a public record forever, even if it doesn't show up on my credit reports. But, I didn't know lenders routinely went beyond the credit reports to independently check the public records.
Lesson 3: The FICO score the lender pulls up will not be the same as the FICO score that your credit card provides: I already knew this, but was still surprised by the differences. One lender ran my scores and they were 781, 760 and 753 (instead of 790, 824 and 841). The odd thing is that highest score (781) was from Experian which was the lowest score (790) provided by my credit cards. It's very frustrating, but for me it won't make a difference. As long as your middle score is above 740, you qualify for the best rates.
Lesson 3.1: You can Learn the FICO scores the lenders will use for Mortgages. I did a little research after typing Lesson 3. Here is a list of what score versions are used for different kinds of credit: http://www.myfico.com/credit-educati...core-versions/ You can buy a report including the commonly used scores for auto, mortgage and credit card lending. I found people who purchased those scores who said that they were exactly what lenders pulled.
Lesson 4: If your credit score is good, multiple credit inquiries will not matter, even if not close enough in time to be considered a single inquiry: When I learned that I was going to have to wait until May 28th to qualify for a conventional mortgage, I told the rep that gave me that info that I had inquiries on my credit report for mortgages in November and now on May 1st. I asked if the multiple inquiries would be a problem if I didn't refi within 30 days of the May 1 inquiry. He said that with my "excellent credit scores", the inquiries would not make any difference at all.
So, my mortgage shopping is on hold until May 28th.
Lesson I have yet to Learn: How many conventional lenders will automatically disqualify me because of my BK, even after the 2 year discharge period has passed?
To be continued....
Bankruptcy Wizard
Comment