New Mortgage Before Foreclosure?

[Michaelh]

First and foremost, I want to say thanks to each and everyone of you. Reading your posts really helped me through the c7 process.

A little background... I was discharged yesterday. I did not reaffirm my home and I have always been current. My post BK credit score is a 641. I applied to two unsecured credit cards (to rebuild credit, not to use) yesterday and was instantly approved. I also reaffirmed a 0% car loan so that I would have three positive trade lines (i heard this is what lenders want to see post bk).

My plan is to save and have 60% to 70% to put down on a cheap home in a few years. My concern is that if I can't sell my house for what it is worth when I am ready to move, the bank will foreclose (or I will do deed in lui). My first question is will that foreclosure hit my credit report as a new item even though the debt was discharged? From what I've read here, the answer is "yes".

So my next question is... can I apply for the new loan (would only be 30% of the home value) while keeping my discharged mortgage current so that there is not a foreclosure on my record? Then once I move, give my old house back to the bank. It will affect my credit, but my new mortgage is already in place. OR will the lender say, "I see you have a mortgage included in bankruptcy, what are you intentions with that property?"

If this was confusing or you need me to provide mre details inorder to answer, let me know.

Thanks in advance for you help!

[Ugh07]

They are going to want to know your intentions with your current property. That being said with that much down you could do a hard money loan and they probably wont care.

[gmanmike]

I am in a similar situation myself and wondering the same thing. I was discharged in Jan 10 from my chapter 7. I put a home I had in FL into the bk. I also own a home in NV that I did not reaffirm but continue to pay and keep current. So the FL home that is discharged has not been foreclosed and credit report says included in bk $0 balance. My NV home also says included in bk $0 balance but I "pay to stay". So how will the FL home credit report change when foreclosed, it is already $0 balance IIB? Do they add a note saying foreclosed on top of that?

The NV home is also upside down now and seems to be dropping daily. Since it is already discharged in bk the thought of saving down money and getting a new house sounds good. I guess the bank statements the lender will require will show current payments on the NV home and they will know that I kept the property.

[mrslick]

congrats on getting the discharged. the problem you'll have when applying for that loan is most banks required 3yrs post bk for your application to be consider. if you do find a bank that will give you the loan now then go for it. if they see a foreclosured on top of bk then you can forget getting a loan in the near future.

[Stilltheone]

I am in a similar situation.

We are currently about $60K underwater in our current home. My husband should be getting a promotion here within the next 12 months. We plan on building a bigger home.

When we go for the mortgage, we just plan on telling them we want to rent our house out or keep it. Either way, we'll have the income to support 2 mortgages. Once we get our new mortgage, BOA can have this house back!

[Ugh07]

Many lenders have caught on to the "we're going to rent it out" ploy. Many lenders have guidelines that do not allow a purchase of a new home when the current residence is underwater. So keep in mind you might have to look at a few different lenders.

Also keep in mind that saying you are going to rent it out when actually you intend on letting it go back to the bank is fraud. Best bet would be to actually rent it out for a year or so.

[Stilltheone]

Many lenders have caught on to the "we're going to rent it out" ploy. Many lenders have guidelines that do not allow a purchase of a new home when the current residence is underwater. So keep in mind you might have to look at a few different lenders.

Also keep in mind that saying you are going to rent it out when actually you intend on letting it go back to the bank is fraud. Best bet would be to actually rent it out for a year or so.

In all honesty, I can just tell them that we plan on keeping the home. If our income supports the 2 mortgages, will it honestly matter?

[Ugh07]

Although it seems odd, they do care. If they think you are going to do a "buy and bail" they will not approve you for the new loan even if your income supports both houses. Disposition of current home is one of the things underwriters scrutinize very heavily nowadays.

[Stilltheone]

Although it seems odd, they do care. If they think you are going to do a "buy and bail" they will not approve you for the new loan even if your income supports both houses. Disposition of current home is one of the things underwriters scrutinize very heavily nowadays.

Well, we won't be giving them any reason to think we're going to do a buy and bail. If we have to, we'll rent it out for a year and then ditch it. No biggie!

[Ugh07]

Just go into it knowing you may get turned down a few times. Different lenders have different guideline overlays, some may not allow you to keep the current house at all, no matter what. Keep looking around and you will find a lender.

[denisec]

No that's incorrect. It's 2 years after BK discharge with FHA, and 3 years after foreclosure with FHA. And, depending on what you have as a down and rebuilt credit you can probably squeeze in somewhere sooner.