Buying a home before 2 years...

[jwsmartin]

Does anyone have any history, good or bad, with the following scenario...

* Discharge date - 8/08
* Included home in BK, and credit report states "Included in Chapter 7 BK" Makes no mention of foreclosure.
* Reason for BK was medical expenses. We did have a lot of debt, but the medical bills threw us over the hump so we had to file. We included home because of a job transfer in 07 and we were unable to sell.
* Contacted a banker and he spoke directly to the underwriter regarding our situation. We have 50 pages of medical bills to back up our reason, and her exact words were "I would do that loan" assuming everything we said was true of course. I know with FHA you can get approved if you had good reason outside your control for the bankruptcy.
* Current credit scores are between 625 and 680 depending where you look.
* Our Income this year will be 104k
* Home we have offer on is 280k (3.5 % down for FHA leaves 270k financed)
* We have saved plenty for the down payment, and we have a very solid work history (my same job for 16 years, my wife's been a teacher for 8 with 2 being at current employer)
* Current bills are around $1000 (school loans, one car, one credit card)

With all that said, I can't help but worry that the underwriter will change her mind or request something we can't come up with. Most of our medical debt we paid with credit cards. The debt came from the premature birth of our twins and extensive ICU care. We found most bills, but we are still worried.

We are also concerned that because we included our home we may have to wait 3 years. I've been told that is only for a foreclosure and that the credit report would say "foreclosure" if that was the case. Ours doesn't.

Just curious if anyone has been down this road in a similar situation and come up short or had success. We have a lease that ends in December and we don't want to put notice in here and not be able to get the house.

Thanks in advance!

[sammyt74dp]

Check to see if the bank put a foreclosure on your public record. I'm curious to know. Did you just let the bank do the foreclosure process or did you do a Deed in Lieu? Also who was your lender?

Thanks,

Sam

[jwsmartin]

The foreclosure process had began, but we filed before the public auction. I do not believe we did a deed in lieu or anything. There is nothing on my credit report except that it shows it was included in the bankruptcy. Haven't checked my public record. Would that be in my credit report? If so, it only shows the BK and nothing else.

Thanks for the reply!

[sammyt74dp]

So you just vacated the house and let them do their thing it sounds like? I'm at the same cross roads right now. Already filed though. Trying to decide if it's worth trying to short sell or save the home. Would rather rent for a couple of years and then buy a different less expensive home. Who was your lender?

[jwsmartin]

Yea, we are trying for the FHA exception because we have plenty of income and really no debt. The BK was strictly due to extra expenses from medical.

We are working with First Capital Mortgage. I'll let you know how it goes. I'm thinking they have a manual underwriter in house or something. Our lender said he personally sat down and talked to the underwriter and showed her our case, and that she verbally told him yes, and he said 95% sure thing.

[hereforinfo]

You still have to answer yes on the loan application when it asks if you've had a foreclosure because even though the house was IIB and may not be on the credit report, a foreclosure still legally occurred at some point. The bank still goes through the foreclosure process even after bankruptcy. Just make sure you answer that honestly or it could come back to bite you. It's generally 3 years after a foreclosure to qualify for a new FHA mortgage, but hopefully they will make an exception for your extenuating circumstances. Good luck and keep us posted.

[oldhack]

Yea, we are trying for the FHA exception because we have plenty of income and really no debt. The BK was strictly due to extra expenses from medical...

You might be interested in this info:
http://www.myfha.net/FHAguidelines/credit.html
Just to make sure you consider all bases -- because your income and lack of current debt isn't going to be the deciding factor here -- please note:

• "...the reason can not be debt caused by uneducated choices..."

In an earlier post, you claim: "...We did have a lot of debt, but the medical bills threw us over the hump so we had to file..."
How much was that 'other' debt? Did it equal the medical debt, or was the medical debt far greater than other debt? In other words, might FHA deem that your 'other' debt was the cause of your bankruptcy and the result of "uneducated choices"?
I don't know the answer to these questions, and perhaps you don't either. I'd ask the loan officer, if it were me.
Best of luck.

[Flamingo]

Your foreclosure information is easily obtained from your former lender and you can bet the new prospective lender will check on that. They are not stupid since it is on your credit report as being included in BK but you are now renting and not in the house. Since a foreclosure did occur, the information is probably on the public records and may turn up during the necessary searches done for settlement so if you don't disclose that you previously foreclosed, you might have a big issue.

Your circumstances migiht work for you but there is no guarantee and you are still considered a high risk. If you get the mortgage loan be prepared to pay PMI for the first five years; that will all be disclosed to you.

[jwsmartin]

I'm not sure how much underwriters vary in how they look at things. Just today, my lender called me and said he was finishing up getting us approved and we are signing the disclosure papers tomorrow.

The only thing he said to take care of were the disputes on my credit report, which is in process now.

He has filled out all the papers and just tells us to sign. He says not to worry, so I am trying not to.

As for the debt, it's probably 50/50. Problem is, we paid so many hospital bills with credit cards that we do not have the receipts from so long ago. The time frame is perfect and our reports show the card balances rising during the months of the medical issues.

I guess all we can do it sit back and wait. Maybe this is meant to be, maybe it isn't. The lender is the Managing Partner and apparently the underwriter is in the same building, so maybe they are leniant, who knows.

[jwsmartin]

Update!

We have gotten all disputes taken care of and the lender has now said we are 99% good to go and that the only reason he wouldn't say 100% is because anything could happen, meaning if he said 100% and we didn't come up with the down payment or one of us lost our jobs, we wouldn't be able to do it.

So, now I'm at a crossroad... We need to put in a 45 day notice to our lessee. I have to decide if I completely trust the lender or if I want to wait for the underwriting to finish. The longer I wait, the more money I lose.

Lender says he isn't worried but that I need to decide on my own... of course! Any thoughts out there?

I have to believe that the worst case scenario would be that the underwriter changes her mind, denies the loan, and we have to wait 9 months to get it. Lender says no way. She already said yes, just needs to verify the income and such. His exact words were "you will be in that house ONE WAY OR ANOTHER".

Can you tell I'm nervous!

Also thinking that if the underwriter says no maybe the builder would finance us or at least rent until the two years is up. After that we are home free for FHA, to my knowledge...

[imoverit]

Good Luck Good Luck Good Luck!!! You are the guinea pig for all of us! Please keep us posted on how it goes!! If you can get it closed in 13 months post discharge there is HOPE!!!

To answer your question...Could you put in the notice to your landlord and let them know that you are waiting to find out for sure??? Or are they going to rent the place with you still in it? If that was the case...I would honestly put the notice in and plan to be out no matter what..."with great risks come great rewards!" HAHAHAHA

[Mi Bankruptcy]

Good Luck.. I would love to move.. Hope it works for you.

[jwsmartin]

Thanks! Decided to put in notice and take the risk. If it doesn't work out, we can try to rescind, and if they rented already, we will figure something out.

When I hear, I will be posting. Hopefully sooner rather than later. Playing the waiting game just isn't my cup of tea, but you have to do what you have to do.

[jwsmartin]

Looks like a hitch is coming into play... our first home that we included in bankruptcy was an FHA loan and the lender called this morning to tell me that because of that we could not get another FHA loan for 3 years. He said it originally didn't show up when he preapproved us, but it is now.

Sounds like he is working out another type of scenario, so I will keep you posted. Maybe conventional loan or something.

Finger crossed...

[sammyt74dp]

Looks like a hitch is coming into play... our first home that we included in bankruptcy was an FHA loan and the lender called this morning to tell me that because of that we could not get another FHA loan for 3 years. He said it originally didn't show up when he preapproved us, but it is now.

Sounds like he is working out another type of scenario, so I will keep you posted. Maybe conventional loan or something.

Finger crossed...

You will probably have to wait the 3 years. Conventional Mortgages are 4-5 years now. Your lender should of checked this up front and not last minute. Whether your previous home was FHA or not doesn't matter, but FHA is currently a shorter waiting period than conventional.

Keep us posted!