My post-bk dream turning into a nightmare - any thoughts are appreciated

[cltmoto]

Hi all - it's been a while since I've been on here. We were discharged in Ch 7 in July 2009. We did not reaffirm the loan on our home with Chase and have been faithfully paying all along.

Recent issues in our neighborhood have caused us to decide to leave. I won't get into it, but disputes with the neighbors, harrassment, police that don't care to help out, etc - this has made the decision for us. You know the saying - "Happy Wife, Happy Life" - well, my wife is very unhappy and it's time to go.

We have a FHA loan on the house now via Chase. I'm approximately 30K upside down on the loan due to the real estate crash. Financially I can afford to stay, but there's no point in being unhappy.

What are my options? I know from my lawyer that I can walk away at any time. I'm guessing that if I just stop the payments, the foreclosure process will start (I'm in Charlotte, NC), but how long do you think I'll have before I have to get out?

Obviously, I can go and rent - I have a good income, my credit score is back up to 712 - that's one way. I should add that I have two kids, so staying in the same school district is important.

Can I attempt to buy? If I let the house go now, I'm assuming that's going to ding my credit (although I did read on here that I should immediately dispute Chase still reporting my loan to the 3 agencies). I thought I read that the timer restarts on my ability to get a loan if I let the house foreclose now?

Do you think it's smart to try to buy through a new home builder? Maybe they've got a better incentive to get me into a property?

Thanks in advance for any advice - I had forgotten what a great place this was for information!

[jeep75]

If you didn't re-affirm your mortgage, Chase cannot put anything regarding it on your credit report, you have no obligation to it whatsoever.

I've heard that FHA rules are two years after discharge you can get a mortgage with them at a prime rate too.

I'm not sure the best way to handle the current house though, others will.

[justbroke]

North Carolina is a non-judicial foreclosure state. That means "power of sale". These are much much much more quicker than the traditional judicial foreclosure. I would expect the foreclosure to take 90-120 days.

The current home may affect your ability to get a loan, even though you're now current. You may be able to get approved, but it may require the sale of the existing home. This would complicate things for sure. I know that several other members will chime in and relate some of their experiences.

I'm in a similar Catch-22. I have a discharged mortgage on a "slightly" underwater home (< 10%). I want to buy a new home next year (at the 2-year discharge mark). However, I just don't know how to make this work!

[BobMango]

Can you rent out the place for anywhere near your mortgage payment? I was fortunate in that I could rent out my house for more than the mortgage so when a job opportunity came up that required relocation we jumped at it. We rented out the place and got a rental in our new town. Since the renters are paying the mortgage I really don't care about it being underwater. We didn't reaffirm so we can always walk away if conditions change. Our plan is to look at purchasing another home, maybe..., in another year or two if the market improves. We have a long record as landlords and this house will have been rented for close to 3 years by that time so it shouldn't hold us back.

[cltmoto]

My current loan is an FHA and I'm guessing that to purchase a another home I'll need to go FHA (I just don't have a deposit right now, especially 20% - maybe I can come up with 10%). I don't think I can have two FHA loans right now - I wonder if I rented it out if I could then get a new loan (non-FHA)? I'm meeting with a mortgage broker next week - I'll be 100% honest and see what they have to say - no harm in asking.

[tobee43]

cltmoto, i'm very interesting in how you make out, my daughter and her husband are trying to get a mortgage where you are. they don't even have a bk. she has an upper managment position and he's a teacher...two brokers so far said because her husband is off in the summer with no pay they do not qualify to get much at all!!!! i have never heard such a thing. then she calls chase whom she had her old mortgage with and she said her husband doesn't have a 2 year work history at one place!!! (even though he's worked) they perfect credit and they own another property rented out for over 1 year which has equity and they seem to be running into problems in NC. by the way in NC they are counting her rental property on the "asset" or plus side, that's the broker she's been working with, however, chase didn't. so apparently, it going depend who you go to for your loan if you decide to rent out your place, whether it's going to count or not??

please let me know if you find anyone that will work with you!! and best of luck!

[dspii]

Because your an FHA right now.....best advice is to sell maybe even short sale. I think that if you have an FHA loan, you can't rent your current residence and get another FHA loan, not real sure but I am sure that someone will chime in if I'm wrong. FHA has an insurance policy on your loan and they won't soon forget if you walk away....I think the CAIRS system blackballs you. The penalty is 2-3 years after the claim is paid. Look for lease options or something that allows you 2-5 years to heal, if you need it. Hopefully, with all the BS going on in the housing market, rules may change for certain cases.....like ours I hope.

Sorry about the Happy Wife thing....it's not going to be easy

[cltmoto]

I'm starting to think the best thing to do is sell the existing house at a loss. I know this may be nuts, but if I sell it, take out a 401K loan to cover the difference, and then go to a new home, I solve the following - no foreclosure on the current FHA loan - they are happy and will give me another loan (which is a must - can't come up with a bigger downpayment). Yes - raiding 401K is a bad move, but it is the only place I can get the cash to get out of this house. I think if I shortsell the house it'll show up on the FHA radar and they'll be mad anyway, right?

[tobee43]

but you need the banks permission to sell the house for less that what is owned???? how else can you clear title if the bank doesn't go along with the purchase?

i remember when we attempted to sell by short selling. we had to work with a broker who works with the bank and then if and that's only IF you get an offer, it has to go to the bank for approval before you can sell it. that's were the problem is, the banks sits on those contracts for a year and a day and most short sells don't go through, at least not here.

i hope you have better luck!!!

[dspii]

Get a lawyer........I heard it helps the short sale and foreclosure process. The legaleze probably gets you paperwork to the top of the stack.

[LadyInTheRed]

I'm starting to think the best thing to do is sell the existing house at a loss. I know this may be nuts, but if I sell it, take out a 401K loan to cover the difference, and then go to a new home, I solve the following - no foreclosure on the current FHA loan - they are happy and will give me another loan (which is a must - can't come up with a bigger downpayment).

That's a terrible idea. Don't use your 401k to pay a deficiency you are not legally obligated to pay. Let the lender foreclose and rent for a couple of years until you can qualify for another mortgage. If you are going to use the 401k for anything, use it for a down payment. But, I don't recommend that either.

[PushRestart]

As a realtor, I like your idea of buying a new home very much, because the neighborhoods tend to be nicer/newer and you can get so much great, new home for your money. New home builders in my state (Washington) are offering fixed rate, 30-year loans for as little as 3.25-3.75% interest, which is really very attractive. Big cozy new homes (not townhomes or condos) around here can be had for as little $200K, with a total payment under $1,500/mth and I know that your dollar goes farther in NC. Buy a non-new/resale home and the prices go even lower and rates for those are typically 4.25-4.5%, still very fair. Key piece to solving your puzzle is a very sharp loan person to run a credit check and work up your debt to income ratio to see if you can qualify for a new FHA loan. Another option is to consider buying a fixer and using the ultra-cool FHA 203K rehab loan to make your old home like new again. If you qualify for a regular FHA loan (aka an FHA 203B loan) you automatically qualify for an FHA rehab loan (203K).

It may be that the BK on your credit report will hamper your efforts, in which case I would use a credit repair service to remove the BK from your credit report, which is one hell of a nifty trick that might be the last item missing from your new loan plan.... Best wishes with it, home ownership still rocks in my book!

[LadyInTheRed]

It may be that the BK on your credit report will hamper your efforts, in which case I would use a credit repair service to remove the BK from your credit report, which is one hell of a nifty trick that might be the last item missing from your new loan plan....

A credit repair service cannot remove a BK from your credit report. Only time will do that.

[PushRestart]

A credit repair service cannot remove a BK from your credit report. Only time will do that.

I beg to differ, I have seen it done with one of my clients less than 4 months ago. He came to me with an unloanable credit score and a BK on his credit report. Less than 45 days later, his BK was removed, his score jumped and he bacame FHA loanable. It could be that this is an area-specific thing though. Removing it is based on the credit report being challenged by asking the credit reporting service to show the $20 archived document retrieval receipt from the local county courthouse. It works like so in the biggest county in Washington state: after 18 months, local BK records are archived in the county courthouse archives. At that point, the report can be challenged and if the credit reporting agency cannot provide proof that they paid the $20 archive retrieval fee, poof, the BK can then be removed from your credit report. I did not believe this was possible until I saw it with my own eyes. The credit repair service that did it is now helping many of my pals become loanable, although it cannot work miracles overnight. From their website:

Repair – We aggressively petition the credit bureaus, collection companies,
and creditors to remove questionable negative items from credit reports.
We demand validation and verification of derogatory information using
state and federal laws that have been established to protect consumer’s
credit reports. If the creditors and collection companies cannot validate their
claims, the negative items must be removed!

Again, I would not have believed this if I had not seen it myself, but that client now has an FHA home loan and is moved into his new place.

[chicagoannie]

Chiming in my 2 cents here...a new home would be lovely but watch the taxes. In my area, everyone is $150K underwater on their 3-4 year old homes, yet the property taxes are still at the rates when housing was booming. (There is a wonderful little house I would love to purchase in my area, short selling for only $119K....but the taxes are $6200 - more than the mortgage payment would be!) Also...I would never ever touch my 401K plan again, if I ever get it built up to a respectable amount, for any reason.