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Chances of getting a new primary residence

I commute 50 miles a day three times a week to take my kids to and from school. My current home was  purchased via an FHA loan in May 2012. My payoff is $154,000 and the value is $240,000. Monthly payment is $1,100 and estimated to earn $1,400 as a rental.

Previous home lost to foreclosure in 2010 but I had filed Ch. 7 in 2008 which included foreclosed home. No blemishes since bk, everything has been paid on time with 2 auto loans and a couple credits cards paid in full. My base salary is $75,000 per year. 4 years on job and I bonus $12,000 per year each year for the past 4 years. I pay child support of $500 each month. Monthly bills are my current mortgage $1,200 balance $154,000, Truck $225 Balance $6,900 and a Student Loan $500 Balance $10,000. I have a $8,000 federal tax return coming in February and plan to payoff my truck.  My 401K is worth $11,000 and I have stock valued at $12,000. 

The new property is a foreclosure for $275,000. Comps months show similar sales of $304,000. Home is in good condition needing paint and carpet cleaning.

Could I use equity in the foreclosure as down on new purchase? Do I need to refinance my current FHA loan and take cash out for down? Which lenders are best to work with? Or do I go to the bank that owns the foreclosure? Would a mortgage broker be better to work with?

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November 17 2013 - Phoenix
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Answers (5)

Hello,

You wouldn't be able to use the equity as a down-payment, but you can use stocks and 401(k) along with any cash in checking or savings. [self promotion deleted by Zillow moderator. Please see our good Neighbor Policy for posting guidelines]
Thanks,
Craig Bosse
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January 09
You cannot use equity in the foreclosure as a down payment. Banks/Mortgage companies will lend to the lesser of the purchase price or appraised value. You will have to qualify based off both mortgages. If you have 25% equity in your first home, as long as you have a signed lease agreement with a security deposit, you should be able to use 75% of actual rent to qualify. 

Working with the bank that currently holds the home won't help as much as you think it might. I would work with a few different lenders and determine their competency. Your situation is a tricky one, and you don't want Joe Schmo who just got licensed to try to originate this loan. It would be a disaster. 

Best of luck to you!
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November 18 2013
1. Your best bet is to sell your existing house to qualify for a new FHA loan.  A conventional loan is not going to be an option due to the foreclosure within the past 7 years. But, if you could sell your current home and payoff the existing FHA loan, you could then use the proceeds for a down payment on a new home. It sounds like you are outside of the 3 year requirement needed to qualify for a new FHA loan post foreclosure, but need the current FHA loan paid off. 

2. It is unlikely any lender is going to allow you to qualify for a 2nd FHA loan.  Relocating within the Phoenix metro area is not going to be considered adequate to meet what FHA allows since it is not an employer mandated move and you will still be living in fairly close proximity to your current house (within PHX metro area).

3. Any chance you are a military veteran?

I am licensed loan officer in Arizona and would be happy to talk with you if you have more questions want to contact me through my profile.
 

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November 18 2013
Is the 50 mile commute one way or round trip?  If it is one way, you may have a case to purchase the new home using another FHA loan.  In general, FHA only allows a borrower to have one FHA loan.  But, there are a few exceptions to that rule... one being relocation.  This would mean that your commute to and from work should exceed 50 miles each way to qualify for the exception to the rule.

Otherwise, you are looking at a 7 year waiting period from the date of your most recent foreclosure before you would be able to qualify for an Conventional mortgage, regardless of how much you put down.

You will not be able to use any of the equity in the home you want to purchase as a down payment.  A down payment is the money that you are bringing to the table.

You will need to weigh you options to find the best way to come up with the 3.5% minimum down payment for the new home purchase.  You can do a cash-out refinance on your current home, if you so choose but you will be limited to 85% loan-to-value.

There is no benifit to using the bank that currently owns the house for your new mortgage.  I would recommend you use a local direct lender vs. a broker.

Please let me know if you have any additional questions I can help you with.

Sincerely,

Julio Zapata
Mortgage Loan Officer
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November 17 2013
Have you spoken to a lender directly about this?
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November 17 2013
 
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