Profile picture for str8stang036

FHA loan and extenuating circumstances

Hello, My wife and I are interested in purchasing a single-family home via an FHA loan this year. At the present moment we have $20,000 saved for the purchase of this home. The home we are looking to buy is between 130K-140K, if not then less. We are looking for your sincere help because we have a bankruptcy in our history which was discharged more than 2 1/2 years ago. I only, have a foreclosure, which I believe finalized in October of 2011. The reasons for the bankruptcy and foreclosure are extenuating. In February of 2009, I lost my job because the company closed, that same month my daughter was born on the 21st. Soon after the birth, my wife developed post partum depression and had to stay at home to oversee her treatment and the care of my daughter. A couple of month later, my wife eventually lost her job because of the depression and increasing anxiety. These extenuating circumstances caused our past situation. Since then, we have both re-established our credit to good standing, have stable jobs and are ready to purchase a home with a low down payment and low interest rate. I read the rules about foreclosures and eligibility for an FHA loan and it allows rooms "extenuating circumstances" as long as they are proven and documented. If you have experience with approving individuals with "extenuating circumstances", please share your experience. We are located in Miami, fl. Thank you, Jose Diaz
  • September 01 2012 - Miami
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Answers (13)

Profile picture for My2cent$
I would say your research was not very objective. Banks do not profit from foreclosed loans regardless of pmi.
  • January 07
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Profile picture for hurmic
We went through foreclosure about 1.5 yrs ago due to loss of income, rising taxes, and providers who did not know how to interpret poorly written guidelines about the HARP or other Obama "rescue plans" that were in their infancy at the time.(I spent a year researching and applying for help trying to weed out all the scam artists who were on the lamb as well. No one seemed to know how they worked). We had a Fanny-Mae backed loan and paid over $90 month to PMI. We owed $70k on a $76k loan that we paid on for over 6 years, and our mortgage company paid over $86000 to "buy back the loan" which was then sold at sheriff's auction for only $44k. It took me this long to realize that the mortgage company actually PROFITED $16000+ on the transaction AFTER we had $6000 in equity because what is PMI for??? Insurance that pays back the mortgage company if the owners renege. So they "bought it back"at a jacked market price to get their money from PMI. Since they were already reimbursed from PMI it didn't matter how much it went for on auction. Now we are left with the aftermath. A rental that we love/is affordable that the landlord wants to sell, but we are not far enough out of foreclosure to qualify for a mortgage that would be $150 under what we pay for rent even though we have a qualifying credit score and down payment! BTW... our current rental was also managed the same way. PMI priced for a $19k profit! Spread the word that this is how these predators work! Please enlighten me if I have interpreted this incorrectly!   Michelle from Iowa
  • January 07
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Profile picture for Go Huskers
"Thank you for the response Jeff. Earlier this year we did get pre-approved, however were eventually denied because of the foreclosure not bankruptcy. "

Ummm, you were never "pre-approved". If you eventually were denied because of a foreclosure a pre-approval was never properly done. A foreclosure is a pretty big thing to overlook in the pre-approval process. 

As for when you can buy; there are those that will waste your time telling you that FHA allows financing sooner than the 3 years with extenuating circumstances. While that is true, what you describe is not "extenuating enough." Technically, anything is an extenuating circumstance. "I was too high to pay my mortgage" is an extenuating circumstance, it's just not a very good one.

Wait 3 years from foreclosure and reapply.
  • September 05 2012
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You are out of foreclosure less than 12 months.  When establishing non traditional credit the borrower must provide a 12 month history with no delinquencies for non traditional credit to be considered satisfactory.  Has enough time elapsed from your foreclosure to re-establish a credit history? 

  • September 05 2012
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Profile picture for str8stang036
Who is willing to lend us their expertise?
  • September 05 2012
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Profile picture for str8stang036
Thank you Norm. We have documentation of everything that occurred and we are willing to divulge what is needed in order to get us 100% approved.

Can anyone recommend someone that is familiar with getting individuals like us approved in my area?
  • September 04 2012
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Part of getting past exxtenuating circumstances is documenting how you resolved the issue and why it's unlikely to reoccur.

Lenders will not be able to question you about the medical problems because of HIPAA which means you will have to volunteer everything you can think of without any coaxing from the lender.

the employment piece might not be considered. You live in Miami, an urban area with many job opportunities; I've only seen it considered in small secluded towns where an employer closing puts a large segment of the local populace out of work. 
  • September 04 2012
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Profile picture for str8stang036
3 years is a general answer. I have read about getting FHA financing with a foreclosure after only 12 months, with extenuating circumstances. I am looking for professionals that can point me in the right direction and frankly, get me approved now. Thank you all, for your feedback.
  • September 04 2012
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Profile picture for BrutallyHonest
3 years for foreclosure for FHA financing.
  • September 03 2012
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Profile picture for str8stang036
Thank you for the response Jeff. Earlier this year we did get pre-approved, however were eventually denied because of the foreclosure not bankruptcy. This was before I read about extenuating circumstances.
  • September 03 2012
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Hi Mr. Diaz,

I am so sorry that you've had to go through all of that.  I'm glad to see things are turned around for your whole family and wish you the best in the coming years~

I will save you a lot of time and hassle by recommending your first step be to seek out a pre-approval from a local lender at a bank or mortgage brokerage firm.  Because of the past issues, a real estate broker should be your 2nd step.  First, you have to make sure you can qualify for a specific loan product, then you can seek out a RE Broker to find you a home.

I recently had a customer here in FL who tried to get pre-approved with a bankrupty but because there was a mortgage involved in the bankruptcy they were told 3 years minimum before they could qualify.  Every situation is different so ask the lender all of your questions.  Sometimes they can narrow it down to the exact month you will be able to qualify.  They will do a pre-approval for free so do this first and you will have all the answers you need to proceed.

Good luck to you and your family~

Jeff Metcalf, REALTOR(R)
Watson Realty Corp.
  • September 02 2012
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Profile picture for str8stang036
How much more time may be needed? I need a good broker to me through this process.
  • September 02 2012
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I know your situation felt extenuating. A job loss is not going to meet most underwriters definition of extenuating. The foreclosure is less than a year behind you. You will need more time to elapse (in my personal opinion) to obtain FHA or conventional financing.
  • September 01 2012
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