2 years after filing a successful Chapter 7 can I buy a new house?????

[kleinkp]

I filed a successful Chapter 7 which included giving up my old home and some other debts. We stayed current on all bills right up to filing which allowed us to keep our credit scores in the mid 600s and now we have close to if not 700 credit scores ( my wife and I). I have saved up nearly $30,000 in cash for a down payment if necessary, I'd like to buy a modest home ($200,000 max) on only my income $65,000+ a year with jobs held for 7 years. My questions are what kind of interest rate will I be qualified for and is there FHA home backing available for people who have filed C7?

[SPalin]

From what I heard and seen on this forum, for a FHA backed loan you need 3 years after completion of the foreclosure. Most people believe its 2 years after your BK discharge, but that is incorrect if you have a foreclosure. If you go with a conventional loan its only 2 years after your discharge. I was quoted 5.5% for a 15 year fixed, with a FICO 697. Checked my FICO this morning and its up to 706, so it is moving in the right direction. The mortgage broker stated if I get my middle score over 740 I should be able to get 4.5% or less rate (I hope interest rates stay flat for the next 6-9 months). I'm tired of paying rent without the ability to paint or make changes to the house I'm renting.

[sguerra923]

From what I heard and seen on this forum, for a FHA backed loan you need 3 years after completion of the foreclosure. Most people believe its 2 years after your BK discharge, but that is incorrect if you have a foreclosure. If you go with a conventional loan its only 2 years after your discharge. I was quoted 5.5% for a 15 year fixed, with a FICO 697. Checked my FICO this morning and its up to 706, so it is moving in the right direction. The mortgage broker stated if I get my middle score over 740 I should be able to get 4.5% or less rate (I hope interest rates stay flat for the next 6-9 months). I'm tired of paying rent without the ability to paint or make changes to the house I'm renting.

Sounds good you're moving in the right direction.. If I may ask how much do you make a year.. I'm planning to refinance my parents home under my name and the loan balance is around 180k. I trying to gauge where my income needs to be at.. Thanks!

[SPalin]

Sounds good you're moving in the right direction.. If I may ask how much do you make a year.. I'm planning to refinance my parents home under my name and the loan balance is around 180k. I trying to gauge where my income needs to be at.. Thanks!

I make around $85,000 with no dependents. To gage if your income can support your $180,000 mortgage you want to stay under 36% (34% is perferred) utilization for all payments: loans (student, car, personal and/or mortgage), and credit card(s). There are some good calculators on BankRate, too!

[Flamingo]

What you need to do is find a broker who has worked with folks in or out of BK. The attorney who handled our Chapter 13 referred us to one to refinance so your former attorney is a good place to possibly start for a reference. Remember you have a BK on your credit record for 10 years from the day of filing. It will work against you during that time and hurt you when you least expect it and there are some creditors that will blacklist you forever just for including them in your filing. We are five years past discharge of our Chapter 13 and recently went through that as to a new car purchase. And my credit score was 836, now 809 after taking on a new vehicle with another lender for a great deal and very low rate.

If you go with a FHA mortgage you will be considered higher risk and will more than likely be subject to five years of PMI payments no matter what your down payment or how much equity you will have in the house at signing. Do your homework and work with a broker because the additional fees and costs will surprise you as you will still be considered high risk for a while.

Best of luck to you...

[sguerra923]

I make around $85,000 with no dependents. To gage if your income can support your $180,000 mortgage you want to stay under 36% (34% is perferred) utilization for all payments: loans (student, car, personal and/or mortgage), and credit card(s). There are some good calculators on BankRate, too!

Sounds good! Thanks for your help!

[Logan]

FHA will only require PMI if you put less than 20% down. Also, interest rates are competitive if you've rebuilt credit. Do not think you have to pay a higher rate although there are costs associated with FHA loans.

[Flamingo]

FHA will only require PMI if you put less than 20% down. Also, interest rates are competitive if you've rebuilt credit. Do not think you have to pay a higher rate although there are costs associated with FHA loans.

That is not what was explained to us as to PMI nor what I found out researching on line at the time....we refinanced (FHA) for $116,000; house valued at $215,000. We had all that equity - didn't matter - we were still subject to five years of PMI payments at about $45 per month - they were just removed June of 2011 and we refinanced 4/06. All due to the BK. If going with FHA get a good broker, research, research and research and double check all paperwork as to costs and fees. We had no idea as to the high risk PMI charge until we reviewed paperwork prior to signing. $45 is a good chunk per month for five years on only $116,000....would be way higher on a larger purchase.

[Logan]

Flamingo, not sure why we have different experiences with PMI. I'm in the market for a house and if I put 20% down there is no PMI. If I get a 15 year loan I can put down a bit less.
Definitely make some calls. For an online mortgage company Amerisave is good.
For myself, I'm actually thinking about waiting to buy after September since I'll be 5 years out so I have more options. I'd like to get a 7 or 10 year interest only Arm and FHA won't allow that.
Logan

[Flamingo]

Unless the PMI rules/regulations changed since we refinanced in April 2006 and the refinancing was FHA, we were told it was the BK/bad credit risk that overroad our high excess equity and PMI was required for the first five years. That info was from our broker, on paperwork given to us and also confirmed via an online search and phone calls at the time. I thoroughly checked it because of the amount of the large amount of equity we had. So if one has a BK on their credit reports, unless things have changed as to FHA PMI during the past five years, one may run into that also. We did not want that extra $45+ included in our monthly payment but if we wanted the loan, we had to pay it.

Again, to anyone looking to purchase a house via FHA with BK on your records, research, research, research, get a good broker and ask questions and also check with the attorney who may handle the closing.

[HHM]

Regarding PMI, I seem to recall the same thing Logan is relating, if you put so much down, you do not need to pay PMI.

HOWEVER, I believe there are 2 parts to FHA-PMI. There is a PMI you pay as part of closing, as I understand it, EVERYONE pays that regardless of down payment (that closing PMI is why FHA loans cost a lot up front). Then there is the recurring PMI which is usually in place for 5 years or until equity hits 20%. That recurring PMI is generally subject to the 20% down rule.

However, Flamingo is probably correct, FHA can require PMI if the borrower is high credit risk.

[IBroke]

Regarding PMI, I seem to recall the same thing Logan is relating, if you put so much down, you do not need to pay PMI.

I don't know if FHA-loans are any different, but for regular loans, I can verify that putting 20% down usually eliminates the need for a PMI. This, BTW, is the primary reason why many mortgages where split in a first and second mortgage when the buyer didn't want to make a down-payment (wow, those were the days..). The first was carrying 80% LTV and the second 20% (the famous 80/20 model).

[Logan]

Flamingo, it could be because you refinanced versus purchased. I'm on the road for another week but when I get home I can sight some sources.

[Logan]

Flamingo, it could be because you refinanced versus purchased. I'm on the road for another week but when I get home I can sight some sources.

I'm home and have been reading parts of the FHA handbook and cannot find any requirements to pay mortgage insurance if you put at least 20% down for a 30 year loan regardless of your credit. It's 10% if you get a 15 year loan and to get it removed you must get the loan down to 78% and if I recall you still have to have it for 5 years regardless of how fast you pay it down to 78%.