House purchase in Ch. 13 - Hope for all!!

[iwillriseabove]

I just wanted to share our story with anyone here that has the feeling of hopelessness while in their plan...

We filed Ch. 13 about 4.5 years ago after job loss and pending divorce. We owned our own home at the time, and due to the divorce, were forced to sell. We then RECONCILED and remarried about mid-way through the plan (a blessing) and began to rebuild our credit and lives. We had always hoped that once our case was discharged (summer 2012), we would immediately purchase a house. HOWEVER, we found out that while it is possible to get a mortgage while in active ch. 13, once your case is discharged, it's at least 2 years wait according to FHA and 3 years for conventional. We decided in November to "just see" if our scores were good enough to qualify now, and they were! We found a house, went through the process, gained trustee approval, and are now the owners of a new house with an FHA loan at market interest rate - 3.75%!! We have 4 more months left in our plan and are better now than we have ever been. It has been a LONG 4.5 years, but we've done it!

Anyway, I just wanted to post that for those of you just starting out, thinking, "How in the world will I ever make it 5 years?" - YOU CAN DO IT!!

[nuffsaid]

That is awesome..i wish my trustee would hurry up already!??

[Mayo]

So you got an FHA loan while in an active 13, but if you had waited on the discharge you would have waited another 2 years to qualify for an fha loan.

[Guest123]

Good job.

There have been quite a few people to buy a home while in an active Ch.13 and right after discharged. The key is finding a willing lender.

We have a few years to go but plan on looking right after discharged.

[getback]

who was the lender?

[iwillriseabove]

Our lender was Guild Mortgage. They were fantastic to work with. Several years ago, as long as your scores were good, you could get a mortgage right after discharge. However, the lending rules have changed so much that now, once you are discharged, it's a 2 year wait for FHA. Conventional is looking to make it even longer. We were very fortunate. It was a process starte a year ago, so it wasn't overnight at all. We had to get a secured card to raise our scores, and boy did it work. We got a $200 secured card and spent about $50 on it. Paid half the first month, then charged maybe $10 the next month and paid half of it. We never paid the balance, as this is what the lender recommended. She said that managing revolving accounts whose balances were kept low raised scores quicker. Our scores were up nearly 100 pts in a year!

[getback]

I believe the part about waiting 2 yrs after discharge is not true.. I believe that it is about your payment history...

[ineedinfo]

What is the process for buying the home while in an active 13? Do you have your attorney file a petition for new debt, etc. first and the court sets the amount allowed? Or do you find a lender and home first and then see if the court approves? Do you have to resubmit all the debt/income information again?

Just curious because a mortgage (even at a higher interest rate) would likely be less than or equal to my current rent.

[nuffsaid]

For me it was finding a lender first ...getting approved for the loan...signing the contract on the house...ans then submitting to the court for approval ...I used my VA so was able to get a good rate and have a payment 350 less than what I am paying for in rent

[ineedinfo]

How long did the process take from start to finish for you? My lease ends in July, so I'm not sure how long to allow for the process so I can time it for close to when my lease is up.

I think a mortgage payment for me would be within $50 either side of what I'm paying in rent (for a very small apartment).

The only thing I'm afraid of, is that a big downpayment would be required. I qualify for some of the USDA rural no downpayment loans, I think; but that probably wouldn't be feasible to have to drive further for work.

[nuffsaid]

Well for my wife and I we started in looking in December ...found a lender two days after using my VA and put an offer in on JAN 26...we will know thia week...so finding a lender is probably the hardest part..u can do fha and only have a 3.5 down payment ...if your household income is not over 77000 you can qualify for down payment assistance

[iwillriseabove]

Re: getback - My husband is actually in the mortgage industry, but I checked with 3 different lenders regarding the discharge/2 year waiting period and they all confirmed this for me. Rules have changed due to the mortgage and foreclosure crisis. Three years ago, there were lenders that could lend immediately following a BK discharge, but it just isn't so anymore. It has NOTHING to do with our payment history. We are 4 payments from our completion of our 60 month plan - exactly 60 months from when we started. We paid every month with wage garnishments. We GOT our mortgage while still in chapter 13, so clearly our payment history wasn't a problem. Read below - this was cut and pasted from an FHA lender's website.

Chapter 13: The waiting period for a Chapter 13 bankruptcy (debt repayment plan) depends on whether the bankruptcy was discharged (completed) or dismissed (not completed). If your Chapter 13 was discharged, your waiting period is two years. If it was dismissed, the wait will be four years. Fannie Mae guidelines allow for a reduction of the waiting period for dismissals to two years if significant extenuating circumstances beyond your control led to the bankruptcy and can be documented. There is no waiting period reduction for discharges.

[iwillriseabove]

Regarding the timeframe and process, we filled out an application with a lender to see if we could even qualify based on income and credit scores. Once we found out we could, we were told to look for a house! This was at the end of November, and we began our hunt immediately, looking for several weekends. I called our attorney and told them what we were doing and they told me that when we found one, we needed to get the contract faxed to them, and then they would submit a motion to incur debt on our behalf. This was $400 for them to submit. We found a house after about 3 weeks, and once the contract was finalized, I submitted. They said that the docket needed to be 21 days in advance, so it was set for January 13. In the 21 days, we put earnest money down and conducted the inspection. We received notification that our motion was approved on the 13th. We closed on the 31st of January. So, I'd realistically give yourselves 2-3 months from the time you begin looking to the time you expect to move. Here are a couple of things to note: 12 month history of BK payments must show payments made on time, no lates on credit report since BK other than medical. Down payment - 3.5% for FHA. We saved for that. And we were able to put it down.

[getback]

I spoke with a lender. You have wait two years if you file chapt 7. Chapt 13 needs 12 monthsof clean payments and a letter from court.