Here's the situation...
We owned a home with a 1st and 2nd mortgage. The 2nd had a variable interest rate that kept increasing so we refinanced it. Then, a few years later (after 10 mos of unemployment) we were foreclosed on and obviously, since it was refinanced, the 2nd mortgage did not just 'go away' with the foreclosure. However, BOFA did stop taking auto-payments on the loan and removed our access to the account so we couldn't make payments. Suddenly we were expected to pay them the entire 22k (or thereabouts). We couldn't afford to pay even a quarter of that so we just let it go and did not thing about it.
Now, the account shows as a charge off on our credit but we've heard nothing from BOFA since.
However... now that we are closing in on 3 years past our foreclosure, we are entertaining the idea of purchasing another home.
My question is... is it possible to acquire a new home loan while the unpaid 2nd mortgage still exists on my credit report or do I have to figure out a way to settle this debt first? I certainly cannot afford the 85% that I keep hearing BOFA accepts. They'll be lucky to see 25% from me... if I am lucky enough to get them to agree to that.
I would really prefer to be putting my money towards paying down the balance on my one credit card debt left... or saving for down payment/closing costs on a new home. But, if I will only be rejected in the end because of this mortgage, I will do what I can to settle that first.
Thanks for any input you may have!