home loan after BK....who is BK friendly?

[Flatbroke1]

Has anyone had any experience with BK friendly lenders for a home mortgage loan after BK? Can you give me a few company names/websites?

[Logan]

Once you have 2 years anyone who does FHA should be able to help you out if you've reestablished credit and have income and reserves.
Under 2 years can be tough if not impossible.

Logan

[Flatbroke1]

We found a 3BR 1Bath house on .74 acres of land that we like for $35k. We are pre-qualified with Wells Fargo (FHA). The down is $1300, closing $3500 and first year escrow is $1500 (estimated), for a total of $6300, which we have. I told the representative about our chapter 7 filed 13 months ago, and discharge in May 2010. She understood and pulled our credit report, and said our median FICO is 692. The interest was quoted as 5.25 fixed rate for 30 years. We are seriously thinking of doing this, although we have the $6300 this would take every penny. But the house and land is a very good deal. We were really just "window shopping", but were pleasantly surprised when we did actually pre-qualify. The rep said the next step is to undergo a review by an underwriter, but she said this would mainly be asking for documentation verifying what I told her. I am interested in knowing what everyone thinks, suggestions, potential problems, etc.

[justbroke]

Well, flatbroke, your credit must have been decent before filing. My median score is now 629 (I just looked) and that's 6 months out of Chapter 7.

I would like to make a comment and observation. Coming out of bankruptcy, you should be well aware that cash reserves can make or break you. I would not commit all my cash reserves to a purchase and have nothing left. I'm hoping to build up 6 months of cash reserves again to a respectable level (approximately 6 month's income). By 7/31 I should have about $20K reserved, but there always seems to be some sort of emergency spending going on. Wish I could just print money like some other people. (Gratuitous poke at U.S. federal government.)

However, it does seem to be a very good deal.

The key to underwriting after directly coming out of bankruptcy -- for FHA -- is whether you went in to bankruptcy through no fault of your own (medical, job loss, divorce) and that your credit was reasonable before the bankruptcy! It appears that your credit must have been near flawless to be at a median score close to 700 in 6 months out of bankruptcy!

[Flatbroke1]

Yes, I had great credit before bankruptcy. One of the "pre-approval" questions was "why did we file?" I told the rep upfront that this was due to poor financial management. So they know I made mistakes, but we still passed the "pre-approval". I am really thinking hard about using all my resources. I could build up a reserve again in a reasonable time frame. Another consideration is that we have been window shopping for a home for sometime now, and this is a "once in a lifetime" deal, that is why it is such a tough decision.....take a great deal now and use all our resources (which I know is taking a risk) , or wait and miss out on a perfect home.

[justbroke]

And that, my friend, is a question I can't answer for you. The risk is the only question you need to ponder. The deal appears to be great!

[Amy26]

Just be careful... I have read many posts where people were pre approved just like you but even days before their closing date the underwriter denied their loan because of something stupid like the bankruptcy or a foreclosure or a timing thing ... or anything else. If you go for it I really wish you all the best but just be cautious and don't get sucked in with the "oh it'll be fine!" stuff.

[Flatbroke1]

Thanks Amy26, I had the thought in the back of my mind that what you mentioned was a possibility. It is not a "done deal" until it is done. At any rate, the property has already been sold. I haven't told the bank. I'll let the application proceed just to see what happens. An appraisal hasn't been done and I have paid nothing so far, so I can still window shop a little more.