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Profile picture for Stevesangels

Mortgage needed 1 year after Ch.7 discharge with lower LTV and good assets.

I'm looking to downsize my home. I found a house listed at $175k and appraised at $190k. I will have $50k to put down after the sale of my current home. I will be financing less than 75% of the sale price and buying it with a co-borrower (my new wife). We have over $200k in retirement accts but dont want to use those funds due to tax and penalty implications.

I know that lenders frown on bankruptcies that are less than 2yrs out of discharge, but does our equity and asset position give us a shot? Or can my wife qualify for the loan on her own with the $50k downpayment funds coming from me even if i'm not on the loan (the house being sold is in my name only)? We cannot wait another year to make this move. There has to be a lender willing to do some common sense underwriting,right!? Or is this just wishful thinking?
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October 11 2011 - US
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Profile picture for Stevesangels

Bart,

The Ch.7 was mainly filed due to my business failing (my business was adversely impacted by the housing market downturn). I wrapped up mainly business debt that was personally guarenteed and some personal debt as well. An investment property and auto loan were also included in the ch.7, but my primary residence that i still own was not. I have had the primary for 4.5 yrs and it has never been paid late. Does that sound like an extenuating circumstance worth consideration? 

Also, thanks Shane. The property we'd be purchasing is either in MD or DE. DTI shouldn't be an issue unless they would look at only my debt and not my income, which I have never heard of.

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October 13 2011
If your wife is claiming the rental income on her tax returns, and if you aren't in a community property state (so your debts won't be counted in her debt ratio) then it appears she should qualify for an FHA loan.

Even without any rental income, with $4791.67/mo of income, $1,487/mo on the rental property + $1k/mo on the new payment, that is a debt ratio of 52% and that qualifies for FHA in a lot of situations.  With let's say $500/mo of rental income to offset the $1,487/mo on the rental property, so it's brought down to $987/mo, that drops the DTI down to 41%.  FHA prefers a total debt ratio no more than 43%, but up to about 56% can qualify.

If you are in a community property state then your debts also have to be included in her debt ratio when you are using FHA financing.
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October 13 2011
What was the reason for the CH7? In some cases we are able to lend to an borrower if the BK was to due to extenuating circumstances. BUT we would need more information in order to make that determination, and you must prepared to be put through your paces with underwriting. FHA might be an option if your wife applied alone; however, she cannot utilize your income, and she would need qualify on her own.
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October 12 2011
Profile picture for Stevesangels
Thank you for your reply. My wife was not included on any of the bankruptcy, that was before her time and she is not listed on the house I am selling. She has ok credit- probably 620-640 Fico (Vantage is higher). Income of 57,500- no debt, except an investment property where the mortgage is covered 66% by a tenant, and 34% by her father who is buying the house to retire in within the next 2 years. That mortgage payment with taxes and insurance come to about $1487 (she owes abut $178k, and value is $186 according to Zillow). The new home loan payment with taxes and insurance should be under $1000. We have paid off vehicles, and she has less than $200 in credit card bills. If I am a non-purchasing spouse, can my income be included for loan purposes? (We are assuming this will be an FHA loan unless we ca do conventional). Thak you.
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October 12 2011
Profile picture for shapiroamg
You are thinking wishfully and should prepare to wait until you are at least 24 months from discharge. You mentioned your wife. Was she part of the BK? If not she may be able to qualify on her own but she will need to qualify on her own employment, income and credit. If you had a joint mortgage and it was part of the BK, then you may still have an issue.
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October 12 2011
 
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