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help with a mortgage and bankruptcy

ok here we go, filed bankruptcy on house #1 3 years ago, in the since then we bought house #2 land contract. bank gave us house #1 back free and clear (clear deed ) they released the note. house #1 is worth around 70k and house #2 is going in our name soon its worth is about 50k, both in Cleveland Ohio. my question is it possible to take a mortgage out on house #1 for around 35k and use it for a down payment. both houses are now rentals. I make 70k a year now and she makes around 15k. we want to buy a new house in the burbs for kids schooling and stuff. my middle credit score is around 680 hers is over 700. I do have some blips on my report that are older and 1 state of ohio tax thing that is still being worked on. please someone help me. [Email removed by Zillow moderator. Please see our Good Neighbor Policy for information.]
  • September 07 2013 - North Olmsted
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Answers (2)

Best Answer

Hi Dominic, 

House #1 - you've met the BK waiting periods however, you haven't exceeded the foreclosure waiting period. If you included a mortgage in the bankruptcy it's treated the same as a foreclosure. Your waiting period begins after title transferred out of your name. Conventional requires a seven years wait for financial mismanagement (and/or especially if you're not financing an owner occupied property and it's not a purchase or rate/term refinance transaction they require 7 yr wait). 

On the other hand, trying to purchase a new primary residence: if you consider FHA financing, you may meet their requirements. What to watch to know if your three years is truly up, look online at the county auditor's site, see when the property transferred out of your name, that's your start date. However, you spoke of wanting cash out from #1 to use as down payment for house #3. I'm not sure what amount of liquid assets you have in the bank but what would be needed would be 6 mo mtg payments in the bank for each property. So, house #1 is free and clear, 6 mo of taxes and insurance would be required. House #2, you'd need to show copies of the land contract to prove payment plus proof of taxes and insurance so we can make sure you have 6 months principal/interest/taxes & insurance in the bank somewhere. That's 6 mo of each property. 

When we speak of reserves, that's cash left in the bank after closing.

Of course that's not all that's needed to consider financing for a third property but that's a start.

If you find you have add'l questions, I'd be happy to answer.

Best wishes, 
Kim Lawson
Ohio Licensed Mortgage Loan Originator
Contact and licensing information is located on my profile.
  • September 10 2013
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We suggest that you consult with a loan officer at two local banks.
  • September 10 2013
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