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Buying a home after bankruptcy

My family's debt was discharged in early fall 2012.  The Ch 7 only affected our credit cards, we still have our home, which isn't underwater, and has actually gone up in value since last year.  We've been in the house for many years and have never missed a payment or even been late.  Our credit scores were over 800 when the economy finally caught with us and we had to file.

We are now in a position where we have to sell our house and find a home in an area where the prices are significantly lower.  Our work history might be a concern, though.  I've been working as temporary for most of the last two years and my husband hasn't been working at all.  What are our chances of getting a home loan to make the move, and who should we be talking to?  I think we're in a position where we might be able to put at least 50% down on a lower cost home.  Again, we've never missed a mortgage payment on our house.  We also don't owe any back taxes.
  • April 05 2013 - San Jose
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Answers (7)

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  • July 28 2013
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What about Fannie Mae?  Do they have different criteria for bankruptcy.  I do not have a foreclosure. I just had credit card debt and it is has been almost 2 years now.  But, my boyfriend has a bankruptcy due to a bad divorce and a foreclosure under his belt, unfortunately.
  • June 04 2013
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Our interest rate is 6%; the current loan balance is $375,000; and the value of the home is probably between $550,000-$590,000. 

I'm not sure re-financing gets us to where we want to be financially.  We'd like to move to something much lower in cost.  We're looking at undervalued homes in another state ranging from $145,00-$170,000.
  • April 05 2013
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What is your mortgage interest rate?  Loan/Value Ratio?  Have you considered re-financing?
  • April 05 2013
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I suppose it might be worth it. But I'm 99% sure they will have the same guidelines to follow, regardless of your history with them...
  • April 05 2013
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Thank you Greg.  This is helpful, but not very encouraging.

Is it even worth talking with our current lender since we are in good standing with them?
  • April 05 2013
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Hello,

Unfortunately there aren't any attractive loan programs out there that would allow you to buy just yet. After a Chapter 7 the shortest wait period would be an FHA loan which requires a wait period of two years after Ch 7 discharge. Below I have listed the wait periods after a major credit event for all conventional and government mortgages...

Conventional

  •      2 Years after short sale, pre-foreclosure sale, or deed in liu with a 20% down payment on the new home
  •      4 Years after short sale, pre-foreclosure sale, or deed in liu with a 10% down payment on the new home
  •       7 Years after foreclosure in most other circumstances
  •      4 Years after Bankruptcy, regardless of if it is a Chapter 7 or 13 

FHA 

  •      3 Years after Foreclosure (after the actual deed transfer date)
  •      3 Years after short sale or pre-foreclosure sale
  •    1 Year into a Chapter 13 bankruptcy (there is actually no waiting period after a CH13, only that 12 on-time payments to the trustee have been made, can be verified, and the purchase is approved by the court)
  •      2 Years after Chapter 7 bankruptcy has been discharged 

VA 

  •      2 Years for all, foreclosure, short sale, or bankruptcy 

(There are a few exceptions to these rules, call me with any specific scenarios)

The only exception to all of this would be a hard money loan. A loan from a private investor that is VERY expensive and have extremely high rates and fees. They are also short term so the hard money lender would want to see that you have an "exit strategy" within a couple of years. This kind of thing is generally not something we recommend but they do exist.

Hope this information helps...

Sincerely,
Greg

Senior Mortgage Planner - 17 Years Exerience
Partners Mortgage
  • April 05 2013
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