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

[cltmoto]

Thanks everyone. There's a lot more to this story, but basically our neighborhood has become unlivable due to issues with the neighbors. My stress level is probably 5 times higher than when I went through the BK (and as you all know, that was pretty bad stress). Wife is very unhappy; kids don't want to even go outside; cops are no help - they don't care. Only option is to go. I don't want to rent if possible - want to have my kids settled and happy for their last few years at home before leaving for college. Raiding the 401K is a horrible idea for so many reasons, but it may be the only way to go. I checked credit scores yesterday - 2 years post BK I am at 702, 712, 715 across the 3 agencies. If I sell the house, pay at closing to get out, I still am under the debt ratio tests even with the 401K loan -FHA is happy because I paid off the loan, I can come up with a 5% downpayment on the new house and I'm out of there. Realtor told me yesterday that my neighborhood is considered to be "In Decline" - I agree - time to bail. Again - thanks to all for the advice - I'll let you know how it goes with the attorney and mortgage broker on Weds - fingers crossed - house might be going up for sale this weekend. Of course, then I have to deal with loser neighbors scaring off potential buyers. Sigh....

[cltmoto]

A quick update - I spoke to a mortgage loan officer yesterday and got some basic info. In my county, the max FHA loan amount is $271,050. Based on my current credit and income, I did pre-qualify for a loan up to that amount. I'm 25 months post-discharge and my credit is around 710. While I obviously have not gone through the whole process yet, things are looking somewhat positive. I was told that I needed to be 4 years post-discharge for a conventional loan.

Additionally, a shortsale would not be held against me by the FHA as long as my payments were current at the time of the sale. From what I've heard, no bank will give you a short sale if you are current, so that route sounds like a catch-22 to me.

Still meeting with an attorney on Weds and another mortgage broker - will report back with more details - at least it'll be out here for somebody else to reference.

[cltmoto]

Hi everyone - I had all of my meetings and figured I'd update the thread so that this info would go into the archive.

- Meeting with the real estate attorney - he said that I probably would not qualify for a short sale because A - my income is too high, B - I have assets in my 401K that could be used to cover the difference in what I owe versus what it's worth, and C - since it was an FHA loan and has PMI, Chase will get their money either way (whether I let it foreclose, short sale or sell it and cover the difference). He said that when you go down the short sale route, the financial disclosure required is 100% - they will see the situation and tell me to hit the road - no deal.

- Meeting with the mortgage officer last night went very well - we did some basic calculations and she said that I'm good to go on a new FHA loan (up to $271,050) based on my rebuilt credit, current income and downpayment amount. She said that if I short sale or foreclose, the clock will reset and I'm looking at waiting a few years before being able to get a loan again. She also mentioned that a 401K loan is not counted against me as debt when I apply for a new loan.

So - my decision is to list my house, get whatever I can for it, take a 401K loan to pay off the difference and then move on to a new place. I had to focus on what was the end goal - to get out of my crappy neighborhood and into a newer place that we will be happy in. While a 401K loan is not a good financial move, it meets this end goal and the problem will be solved.

I hope this information helps others - this is a great forum and by everybody being so open and sharing, I know it's helped me a ton!

[JackBondLove]

I don't see a problem with taking a 401K LOAN, as it is not a distribution. It sounds like the OP is ready to eat the $30K rather than walk away so that he can easily move into another home rather than default, and have to move into a rental for a few years until he could get another loan. IOW, the $30K is the price for convenience. There is also the timing issue, and the OP might be able to get a house at a low price that may be higher in the future (of course, it could also go lower!) In the grand scheme of things, $30K for convenience may well be worth it.

[ugghh]

I know this is an old thread but I would love to hear an update...

[keepsmiling]

Not nearly as old as some of the others that have been dredged up lately.
Possibly some good info here vis a vis the credit repair.
I too am curious as to how OP is faring.

[cltmoto]

I'd be happy to update everybody. I ended up putting my house up for sale by owner - this was the Weds before Labor Day. I priced it to move - almost what I had paid for it 13 years earlier. On Labor Day (5 days later) I got a cash offer - Foreign investor that wanted to rent it out (which if you read my original post is quite the irony - more renters in the neighborhood). We found a place that we loved and decided to build. The plan was to rent for 6 months and then move in. The builder was motivated to close the house in 2011 and did just that - finished it up and we closed on 12/22. I took an FHA loan at 4% with the minimum amount down and we moved in on Christmas Eve. We are so very happy - all of the negative influences from the old neighborhood are gone - we took this as an opportunity to purge our lives of much of the baggage that had dragged us down. A far more simple life in this house so far with a lower mortgage payment (saved $400 per month by moving) and life is good. I had to sell a car to make it all happen and take a substantial 401K loan to get out of the old house but - it's the best money I've ever spent. From a credit perspective I didn't have any issues - I am 2.5 years out of BK and my credit score came in at 702 - no issues getting the loan, etc. Post close I opened up a line of credit with Ashley Furniture (need a family room couch and want to build credit) - no issues there either. I hope this helps somebody some day - if you ever have questions, just shoot me a message.

[keepsmiling]

Excellent news !

[oregonpilot]

I am so happy for you moto....sounds like life is pretty awesome.

[ugghh]

Very nice.... Congrats and thanks for the update!

[JackBondLove]

You should consider yourself in a Chapter 13 situation, such that you put all your available disposable income to paying back that 401K loan.

Basically what you did is overpay for your new house by the amount you had to dump into your old house to get rid of it. Only you can determine if it was a good move. Peace of mind and stability are certainly worth something.

It seems that there is a natural minimum value of a home based on its value as an investment to a landlord. I bought my home at the level that landlords were paying for homes like mine (i.e., $39K.) My hope is that when I ready, I will be able to unload it quickly to a landlord wishing to expand his empire.

[cltmoto]

Only you can determine if it was a good move. Peace of mind and stability are certainly worth something.

Well - I guess I should put it this way - while everything sounds great there was also additional motivation. I ended up in the hospital once and was sick for nearly 3 months - everything from my jaw not being able to close, severe impaction (excessive constipation), what at the time we thought was a urinary tract infection - in the end it was all diagnosed as stress. So - to respond to your quote - it was worth every dime of it. We had already learned to live differently since the BK and well under our means. Having to pay back that loan, while painful, is the best money I've ever spent. Thanks again everyone!

[researchnerd]

Yay! I love a happy ending. Congrats on doing what was right for you and your family, and having everything work out. Enjoy ~