Does your bk affect the amount of the mortgage loan you get approved for?

[graciemae]

We will be finished in 3 months (yahoo!) and will start banking that money. We will also be selling our home and getting a profit from that. Here's where we'll be (roughly)...

20k from selling of house
15-20k in savings ( by next spring)
100k gross salary
only debt will be our current mortgage which is @ $900/month and student loan payment of @ $700/month

Our DTI will be good, and we will have enough for a down payment but will they base the amount on our DTI or will it be slashed because of the BK? We are looking to buy a home for around 250-280K.

Thanks,
N~~

[Flamingo]

Congrats on coming down the stretch to the finish line! A bit of reality from one who has been through a 13, discharged and the months/years following...It will take 2 to 3 months after your last payment for you to be discharged. You will hear from your attorney and trustee as to specifics regarding that. Clean up your credit reports about 2 months after discharge to ensure all is showing correctly. Find a good broker who has worked successfully with discharged BK folks - your attorney is a good place to start. Don't bank on selling your home immediately for what you want and getting the equity you plan. While I know you want to jump in and handle this all right away, it is going to take you longer than expected due to the economy and also due to your BK. You will probably have to go with a FHA loan which means that even if you have 20% equity in a new purchased residence, you still may have to pay five years of PMI due to the risk involved with the BK. We went through all that and even though we had more than 50% equity in our house when we refinanced, we have to pay five years of PMI due to the BK. We investigated it; it is correct. You probably will not be able to get a conventional mortgage at a decent rate and without high fees due to your BK. That is why I suggest getting a broker who has worked successfully with discharged BK folks; our attorney suggested an excellent broker for us who steered us away (thankfully) from the predatory stuff abounding in early 2006 and got us a fixed rate 6.5% FHA loan (standard going rate in early 2006). Shop around, take your time, and don't bank on funds you do not yet have in hand.

[StartingOver08]

To answer your question, the BK does not affect the amount of money you can borrow. The underwriting still works on the basis of debt to income, both front and back end ratios. As you probably know, the front end ratio is the cost of your new home (PI, taxes, insurance, MI, and maintenance fee) and the back end ratio is your total debt.

Your current home's monthly payment is not a factor unless you are planning to keep it to rent (and from your post you are not).

The BK affects your approval from a credit standpoint, not an income or debt standpoint. Congratulations on finishing your BK!

[Logan]

Graciemae,

I'm in the market myself and I've had nothing but great experiences applying for a loan. I have been approved for a loan and just got a call the other day from my realtors loan guy. I ran my scenario by him--just 2 years out of BK, Good income, reserves, reestablished credit--and they guy wants my business bad. My loan is a no brainer and the BK really means nothing.

The rate is NO DIFFERENT than if you had not declared BK if you go FHA. If anyone tells you different they are wrong!!!!

Most loan officers really don't know how to close a loan unless it is an A paper loan so find a loan officer that welcomes your BK.

Good Luck,

Logan

[StartingOver08]

[QUOTE=Logan;295134]Graciemae,

The rate is NO DIFFERENT than if you had not declared BK if you go FHA. If anyone tells you different they are wrong!!!!

This is absolutely true. But make sure you get a GFE (Good Faith Estimate)from the broker to check the costs - I have seen brokers add an extra point or beef up the fees (whether you have a BK or not!) just to add to their bottom line. Compare the costs of the loan and the best way to do that is with the GFE in hand.

[Logan]

[QUOTE=StartingOver08;295138]

Graciemae,

The rate is NO DIFFERENT than if you had not declared BK if you go FHA. If anyone tells you different they are wrong!!!!

This is absolutely true. But make sure you get a GFE (Good Faith Estimate)from the broker to check the costs - I have seen brokers add an extra point or beef up the fees (whether you have a BK or not!) just to add to their bottom line. Compare the costs of the loan and the best way to do that is with the GFE in hand.

A buddy of mine with a FICO over 800 with lots of money in the bank and very good income is buying a property and may go FHA so he can put down 3.5% and his fees and rate are identical to mine and I'm just 2 years out of BK with a 684 FICO.

A loan officer may try to take advantage of you because the majority of loan officers don't know how to get a loan for someone with credit issues and the ones that do know this.

Example---When I was in the loan business I had a client with a 545 FICO and I got him a loan that was a variable rate loan that started at 6.7%. It would go up a bit and today it's probably in the 5's or lower. Anyways, he decided to shop me because his sister new someone in the business and this guy quoted him a loan that was fixed for 2 years at 10.45%.

I knew how to get the loan done that was best for my client but the other guy didn't. I could have charged the guy max points from the beginning because I knew the odds of him finding anyone else who could get him a better loan were about 0. On top of that I gave this guy another loan 2 years later on another home that he was purchasing.

A good loan officer is very important!!!!

Logan

[graciemae]

We already assumed we'd have to go FHA, and also assumed we'd pay PMI......even if we had 20% to put down we don't want to deplete our savings. We are looking at putting about 10% down and keeping the rest in the bank for emergencies, repairs, closing costs, etc..... We could potentially make up to 30K off the house but we are banking on less because of today's market, it is what it is......it sucks but that's how it goes. I figure what we lose in the sale of our home we gain in the buying of a bigger home at a good price, right? I appreciate the advice, I will definetly ask our attorney if they can recommend a good broker. Oh, Flamingo, don't worry......we are not counting our chickens before they hatch! We know all too well that things don't always go as planned and the figures I gave you are on the lower end of our expectations. I'd rather assume the worst and hope for the best, right? We do know there are a couple of mistakes on our credit reports, my husband has already fixed a couple on his. We are waiting for the discharge to fix the rest. Our midscores as of a few months ago were in the high 600's so hopefully that will help.

Thanks again!
N~~