If a mortgage has not been reaffirmed, can it be factored into your DTI?

[Diesel73L]

We are considering applying for an FHA 203K loan on a home we're interested in. The home is a foreclosure and needs work, but is very cheap, so we would be looking to finance the home plus about $120K in renovations. Our mortgage was discharged in BK two years ago but we "stayed and paid." We'd like to get the new loan and begin work on the new home while we're still living in the old home (We can roll the mortgage payments for the new home's mortgage while construction is taking place and we can't live there)-when the new home is finished, we'll move in and put the old place up for sale.

Obviously in a conventional scenario a loan officer would be looking at the ability to sustain both mortgage payments at the same time, but does that apply here? I know that they will be looking at the possibility of a "buy and bail," but I believe that the home has enough equity to break even and payoff the existing lien.

[LadyInTheRed]

My understanding is that they will want to see that you can afford to pay both mortgages, even if one is discharged. You may want to talk to an experienced mortgage broker to be sure.

[Diesel73L]

My understanding is that they will want to see that you can afford to pay both mortgages, even if one is discharged. You may want to talk to an experienced mortgage broker to be sure.

Here's another angle-Since the lender cannot (at least as far as I understand it) report late payments, how would an underwriter/loan officer know that we weren't paying? In other words, is it possible to get a new mortgage while you're in default on your current mortgage if the lender has not yet actually foreclosed if you haven't reaffirmed?

[mynameainttracy]

I just can't imagine this getting by an underwriter. We went through a 13 and let our home go through FC and we were questioned about the status of our previous mortgage accounts quite extensively when applying for a mortgage. We had to write a loe for all addresses we had after we filed and if you are still paying they will be able to see that on your bank statements.

[mynameainttracy]

Also, what type of loan was it that you discharged? If it was a govt backed loan there will be additional road blocks.

[Diesel73L]

I just can't imagine this getting by an underwriter. We went through a 13 and let our home go through FC and we were questioned about the status of our previous mortgage accounts quite extensively when applying for a mortgage. We had to write a loe for all addresses we had after we filed and if you are still paying they will be able to see that on your bank statements.

That makes sense.

Also, what type of loan was it that you discharged? If it was a govt backed loan there will be additional road blocks.

Conventional 30 year fixed rate mortgage-not government backed. There may be hope though. Apparently Fannie Mae made a rule change last summer that allows borrowers whose mortgage was discharged in BK to "start the clock" from date of discharge, instead of date of foreclosure. For us, this would mean that we're halfway through the waiting period. We can let the house go, stay here as long as we can rent free (in NJ I think we can get at least two years), and once the foreclosure is finalized and the house is out of our name we can get a Fannie Mae loan in 2017 and have a nice chunk of cash to put down.