FHA Wait post BK no foreclosure

[FeelingFree]

Hello All,

Question I have searched for and just cant seem to find a definitive answer. (Maybe there isn't one)

Does anyone know how an FHA loan application is considered if you "stay and paid" after a chapter 7 discharge without a foreclosure? Say 3-4 years after discharge.

I know the FHA wait is 2 years after a chapter 7 and also 3 years after a foreclosure. Time starts once the foreclosure is complete.

What if you completed the chapter 7, stay and paid on a discharged mortgage and then applied for a new FHA mortgage after waiting the 2 years post BK?

How would the current, unreported mortgage be dealt with at underwriting? Any ideas?

FF

[Cat Damiano]

Very interesting question, have you asked a lender that specializes in FHA loans and their eligibility criteria? Just a thought.

[FeelingFree]

I have...many times. I am still waiting for a response from several FHA lenders on this who all seem to be scratching their heads.

I am looking for anyone who has been down this road already and the outcomes? There are literally hundreds of people who have "stay and pay" situations and it would be nice to know if someday we can buy again or are we just waiting years to to start the 3 year foreclosure clock.

[Cat Damiano]

I am sorry that the FHA lenders aren't in the know it would seem I am sure there are many of the stay and pay situations, I just haven't seen any like that on LoanSafe so far, but I could be wrong. Hopefully someone experiencing the same will see this.

[FeelingFree]

So I finally spoke to two different FHA underwriters from different parts of the country this week and received this information.

As I suspected, the wait is going to be 3 years post Foreclosure, Died in Lieu or Short Sale.

Doesn't matter if the mortgage was included in BK and now shows IIB. The mortgage disposition is located by the underwriter's search process and manual underwriting will not result in an approval if the home was foreclosed, short sold or DIL after a discharge until 36 months minimum from transfer date

For those renting their property, according to FHA the home must have 25% equity and they will only count 75% of the rental income to assist in your approval. In addition, the current rental must be under a contract for at least a year or longer before a new mortgage can be granted.

The only other way to get into a new mortgage in under 3 years is by selling the house the old fashion way and receiving enough money to pay off the current obligations in full. Then your wait would only be 2 years post discharge date.

I hope this helps all those in a pay and stay position that may want to buy again someplace else in the future and don't have any equity to help them out.

FF

[Cat Damiano]

Great information FF, thank you for posting what you were able to find out.

[nagas1234]

So in other words.... If my home was "included" in my Chapter 7 bankruptcy and I DID NOT reaffirm, I will not qualify for an FHA home until after 3 years? I am still currently living in the home, have been up to date with my payments up to 2 months ago. On my credit report it shows "discharged under chapter 7 bankruptcy" with "ZERO balance." If I tried to get approved for an FHA loan after 2 years of my BK discharge (per FHA chapter 7 BK guidelines), the chances of me qualifying is rare? Though I am not obligated to pay the remaining balance due to my BK, you're saying that I would still have to try to sell the home to pay off the loan balance that I am no longer obligated to pay?
Basic info: -My home was discharged in 2010 with a "zero" balance on Credit Report
- I am still living and paying, but I've missed the last 2 months
- I DID NOT REAFFIRM

Can I still qualify for an FHA loan 2 years after BK discharge before I walk away from my current home (trying to avoid the impact of a foreclosure on my credit report before getting pre-approved)?????

[FeelingFree]

So in other words.... If my home was "included" in my Chapter 7 bankruptcy and I DID NOT reaffirm, I will not qualify for an FHA home until after 3 years? I am still currently living in the home, have been up to date with my payments up to 2 months ago. On my credit report it shows "discharged under chapter 7 bankruptcy" with "ZERO balance." If I tried to get approved for an FHA loan after 2 years of my BK discharge (per FHA chapter 7 BK guidelines), the chances of me qualifying is rare? Though I am not obligated to pay the remaining balance due to my BK, you're saying that I would still have to try to sell the home to pay off the loan balance that I am no longer obligated to pay?
Basic info: -My home was discharged in 2010 with a "zero" balance on Credit Report
- I am still living and paying, but I've missed the last 2 months
- I DID NOT REAFFIRM

Can I still qualify for an FHA loan 2 years after BK discharge before I walk away from my current home (trying to avoid the impact of a foreclosure on my credit report before getting pre-approved)?????

Hi Nagas,

In a nut shell no, you cant qualify for a new FHA mortgage until 3 years from the foreclosure, DIL or short sale date of your current house. Makes no difference if you included it in BK and it shows zero balance and IIB. (I'm in the same situation)

Your still the legal owner on record and until you transfer the house back to the bank through the legal process of foreclosure, DIL or short sale,(I'm assuming you are upside down) your clock has not even started running yet. Once the transfer is complete, you will then have to wait out the 36 months before an FHA underwriter will consider you for a new FHA mortgage. (5 to 7 years for a conventional mortgage)

Many "stay and payers" are finding this out after waiting the 2 years post BK only to be turned away.

You may be able to qualify for a new FHA mortgage 2 years after your Bk however only if you can qualify with BOTH loans included in your DTI even though it doesn't show on your CR.

Because you included your house in your BK you don't have to worry about generating a foreclosure on your credit report. What is done is done related to your mortgage so there is no further credit hits coming.

FF

[Bailey15]

I too stayed in my home after ch 7 bk and continued to pay as agreed. My current home is a conventional loan. We discharged 5/2008. I am the owner on title, but the loan shows on my credit report as discharged in 5/2008. At this point, would I be able to qualify for a FHA loan?

Hi Nagas,

In a nut shell no, you cant qualify for a new FHA mortgage until 3 years from the foreclosure, DIL or short sale date of your current house. Makes no difference if you included it in BK and it shows zero balance and IIB. (I'm in the same situation)

Your still the legal owner on record and until you transfer the house back to the bank through the legal process of foreclosure, DIL or short sale,(I'm assuming you are upside down) your clock has not even started running yet. Once the transfer is complete, you will then have to wait out the 36 months before an FHA underwriter will consider you for a new FHA mortgage. (5 to 7 years for a conventional mortgage)

Many "stay and payers" are finding this out after waiting the 2 years post BK only to be turned away.

You may be able to qualify for a new FHA mortgage 2 years after your Bk however only if you can qualify with BOTH loans included in your DTI even though it doesn't show on your CR.

Because you included your house in your BK you don't have to worry about generating a foreclosure on your credit report. What is done is done related to your mortgage so there is no further credit hits coming.

FF

[liboton21]

Most likely the BK has nothing to do with the waiting period. For the pay and stay homeowners the countdown started when the lien is transferred to the bank. I just had an experience wherein we try to buy a property but I was flat out denied by the lenders since I was still within the 2 year BK discharge countdown and I learned most lenders would not guarantee even VA loans until lien is off the homeowner.