Question on buying a home 2 years out of CH7 bankruptcy

[anmartin31]

We did not reaffirm our mortgage and we are still living in the home and are current on payments. Our house is 50% underwater. We are wanting to buy a cheaper house and are wondering if it would be difficult to get approved given the fact that we are still living in the house that was discharged in our bankruptcy. Are we supposed to let the house go into foreclosure and wait 2 years to apply for a mortgage or can we apply now? Also if the house goes into foreclosure, does that show on your credit report even though the house was discharged in a bankruptcy? TIA