What to do....

[Walnut]

We were discharged last May and have been renting a house for three years from a military family stationed in Japan. Their intentions were to let us continue to rent another year (into March 2009) and then we would try and buy the house. Now we are hearing they have been reassigned to the States in June/July and will need to buy a house wherever it is they are going (they aren't coming back here). So, we may end up having to buy this place as soon as June. The area's home market is slow with homes generally going for much less than listed in 3-6 months. Since the Ch 7, we have two auto loans and I have three Mastercards (Orchard, Cap One, and Hooters) all with kind of low limits and wife has Orchard and Target Red Card. We also have a small installment loan from Conn's. All payments have been on time and much more than minimums. So - I see that the prospects of the new FHA loans will be out in about April with 0-1.5% down. I have no idea if they changed the debt/income ratios. Should I try and go conventional? Scores are about 590 for me and no idea what DW's is. All credit has been fixed but still need to pay off a State Tax Lien before getting a mortgage (making payments). We have enough for a small downpayment and I can tap 401K if need be (plus our $2100 gift upcoming from the IRS). What kind of terms should I expect???

[Flamingo]

It's a tough market right now for anyone trying to get a mortgage, even with excellent credit. You probably will have to go with a FHA mortgage due to your Chapter 7 filing (note that tax lien is going to hurt you also). I would suggest finding a broker and try to get a fixed rate through a FHA mortgage (you may not be able to go conventional). With low scores as you have now, mortgagors prefer scores in the higher 600's so you will need to watch the rates and type of mortgage you may be offerred.

[jal1129]

To go conventional it has to be at least 2 years since filing bk. Also the new guidelines (as of about a week or 2 ago) say you have to have scores of at least 660 to be able to get pmi thru conventional. So even if you could go that route you would have to put at least 20% down.

[krielly]

To go conventional it has to be at least 2 years since filing bk. Also the new guidelines (as of about a week or 2 ago) say you have to have scores of at least 660 to be able to get pmi thru conventional. So even if you could go that route you would have to put at least 20% down.

I'm confused by this statement "....to be able to get pmi thru conventional. So even if you could go that route you would have to put at least 20% down."

....... If you have the 20% down, you don't need PMI.......... You only pay PMI if your downpayment is less that 20%. Am I missing something here?

Thanks
K

[HHM]

I'm confused by this statement "....to be able to get pmi thru conventional. So even if you could go that route you would have to put at least 20% down."

....... If you have the 20% down, you don't need PMI.......... You only pay PMI if your downpayment is less that 20%. Am I missing something here?

Thanks
K

I think what she is trying to say is, based on the info provided, you probably can't get a conventional loan.

[jal1129]

Exactly, thanks hhm. The original poster asked about going conventional with scores under 600 and enough for a small downpayment. I was stating that with scores under 660, and conventional, he would have to put 20% down, otherwise he would'nt qualify.

[Walnut]

We got a lucky break. The homeowners have extended our lease another year, so we have time to continue the rebuilding and be 2 years out from discharge prior to closing next May. So, now we pay off the tax lien using Uncle Sam's generous rebate and save for a downpayment.

[CindyLou]

Just to chime in here.....FHA requires any outstanding debts/liens/judgements to be paid prior to approving the loan (the only exception is medical bills)

[krielly]

Walnut,
GREAT NEWS!!!!!!!!!!!!!!!!!!!
Nice to get a "break" now and then!!!!!!!!!!!!

Congrats!
K

[JeepMom]

We got a subprime 6 months out of discharge at 10.3% zero down.

Once we got past the 2 yr mark, we refi'd and we are now at 6.0%