I am a long time lurker on these forums, but have to share my recent success in getting a USDA guaranteed mortgage.
A little background: My wife and I filed ch 7 BK on 9/03/08, discharged 12/03/08, closed 12/23/08, no asset, discharged $135,000 in unsecured debt, mortgage with Wells Fargo and HELOC with Chase IIB not reaffirmed. Never late on either payment. The reason for BK was significantly reduced income due to several layoffs and inability to find a new job even close to my previous salary. We rebuilt our credit with the purchase of a used car about 3 weeks after discharge at a 15% interest rate and applied for and received a Capitol One CC about the same time. Our payment history has been perfect since the discharge.
We had equity in the house that was IIB and sold it in 10/09 for about a $10,000 profit. The listing, sale and closing process went along as if we had never filed BK. Since we were doing a ride through on both the mortgage and the HELOC, we were very careful to keep all of our payment records as they were no longer reported to the credit agencies. This proved to be a very important step later on.
About one month after the second anniversary of our discharge, we spoke with the VP of a local bank that was an approved USDA lender and explained our situation. They contacted their underwriter and confirmed that we met all of the basic guidelines for a USDA loan. We then chose a specific house we were interested in and formally applied for the loan. My middle FICO score for a mortgage application was 647. Along with the standard loan application documentation, I included a detailed 3 page explanation of the reasons for the BK and several layoffs. This explanation was critical to the approval process.
We didn't hear anything for about a week, and then my wife got a call from the bank VP. The underwriter was "on the fence" about approving us. My wife then made a passionate plea to the VP and explained that the job difficulties were not my making, but a symptom of the lousy economy. She explained that I was very happy in my current position and planned on staying there for may years. Whatever else she said must have had an impact because the VP then convinced the underwriter to submit the package to the automated underwriting process and we received our preliminary approval.
The next day (early Feb.) we signed a contract on the house. This started the long process of getting the "package" prepared for USDA approval and manual underwriting. We were buying a new home that was near completion. The builder had to do most of the work during this time providing documentation of inspections, warranties, construction details, certified architectural plans, etc. The bank ordered the appraisal and survey.
For a USDA loan, every piece of documentation has to be included in the package before it is sent to the USDA office. Finally about a week and a half into March, the package was complete and sent the the USDA. At this point, they were telling the bank it would be 14 to 25 business days before the final approval would be completed, so we were not able to start making any specific plans for the move. After only six days, the approval came through in record time and the bank wanted to close in 1 1/2 days! We closed 2 days ago and are once again homeowners.
The terms of our loan were; $0 down, $5000 total closing costs including property taxes and insurance for escrow, no PMI, and 5.25 interest rate for 30 years.
I know there are many people who believe that now is a bad time to buy a house. In our area (Texas), housing prices only dropped about 10% from the peak. We have very few foreclosures and prices have been stable for over a year. Also, renting a comparable house would cost about $350 a month more than the mortgage payment including taxes and insurance.
For those who are unfamiliar with USDA loans, keep in mind they only work for properties in rural areas, specifically towns with a population less than 10,000.
I hope this story provides comfort to others who have experienced the heartache of going through BK. There is life after BK!!
A little background: My wife and I filed ch 7 BK on 9/03/08, discharged 12/03/08, closed 12/23/08, no asset, discharged $135,000 in unsecured debt, mortgage with Wells Fargo and HELOC with Chase IIB not reaffirmed. Never late on either payment. The reason for BK was significantly reduced income due to several layoffs and inability to find a new job even close to my previous salary. We rebuilt our credit with the purchase of a used car about 3 weeks after discharge at a 15% interest rate and applied for and received a Capitol One CC about the same time. Our payment history has been perfect since the discharge.
We had equity in the house that was IIB and sold it in 10/09 for about a $10,000 profit. The listing, sale and closing process went along as if we had never filed BK. Since we were doing a ride through on both the mortgage and the HELOC, we were very careful to keep all of our payment records as they were no longer reported to the credit agencies. This proved to be a very important step later on.
About one month after the second anniversary of our discharge, we spoke with the VP of a local bank that was an approved USDA lender and explained our situation. They contacted their underwriter and confirmed that we met all of the basic guidelines for a USDA loan. We then chose a specific house we were interested in and formally applied for the loan. My middle FICO score for a mortgage application was 647. Along with the standard loan application documentation, I included a detailed 3 page explanation of the reasons for the BK and several layoffs. This explanation was critical to the approval process.
We didn't hear anything for about a week, and then my wife got a call from the bank VP. The underwriter was "on the fence" about approving us. My wife then made a passionate plea to the VP and explained that the job difficulties were not my making, but a symptom of the lousy economy. She explained that I was very happy in my current position and planned on staying there for may years. Whatever else she said must have had an impact because the VP then convinced the underwriter to submit the package to the automated underwriting process and we received our preliminary approval.
The next day (early Feb.) we signed a contract on the house. This started the long process of getting the "package" prepared for USDA approval and manual underwriting. We were buying a new home that was near completion. The builder had to do most of the work during this time providing documentation of inspections, warranties, construction details, certified architectural plans, etc. The bank ordered the appraisal and survey.
For a USDA loan, every piece of documentation has to be included in the package before it is sent to the USDA office. Finally about a week and a half into March, the package was complete and sent the the USDA. At this point, they were telling the bank it would be 14 to 25 business days before the final approval would be completed, so we were not able to start making any specific plans for the move. After only six days, the approval came through in record time and the bank wanted to close in 1 1/2 days! We closed 2 days ago and are once again homeowners.
The terms of our loan were; $0 down, $5000 total closing costs including property taxes and insurance for escrow, no PMI, and 5.25 interest rate for 30 years.
I know there are many people who believe that now is a bad time to buy a house. In our area (Texas), housing prices only dropped about 10% from the peak. We have very few foreclosures and prices have been stable for over a year. Also, renting a comparable house would cost about $350 a month more than the mortgage payment including taxes and insurance.
For those who are unfamiliar with USDA loans, keep in mind they only work for properties in rural areas, specifically towns with a population less than 10,000.
I hope this story provides comfort to others who have experienced the heartache of going through BK. There is life after BK!!
Discharged Ch 7 9/10/08
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