I have heard that once you have a mortgage discharged in a Chapter 7 BK that if the property is lost via a DIL that you could get an FHA loan on the basis of waiting two years from the discharge date as opposed to the DIL deed transfer date.
This is what LoanSafe's mortgage expert, Erik Sandstrom had said:
How do different programs view bankruptcy & foreclosure on the same borrower?
FHA - FHA still considers bankruptcy & foreclosure 2 separate events, meaning if the foreclosure occurred after the bankruptcy or you included a home in bankruptcy that has yet to foreclose you're unable to obtain financing until the foreclosure seasoning periods have been met (3 years after foreclosure, short sale, DIL). It would not go by the bankruptcy seasoning periods if a property ultimately is lost or about to be lost.
Conventional - Recently Fannie Mae (not Freddie Mac) has come out with a rule that allows you to go by the bankruptcy seasoning periods (4 years past chapter 7, 2 years past discharge on chapter 13) if you included your property in BK and can provide proof through the bankruptcy discharge paperwork and schedules. This has honestly been a hit or miss for me recently, the reason why is because you MUST pass automated underwriting in order to be approved. If you receive negative feedback through that system it's an automatic denial. From my experience so far it's been about a 50% chance of obtaining approvals through this direction. Conventional programs start at 3% down now, I've heard of a borrower obtaining an approval with that - I've only worked on ones that are putting 5% down or more.
VA - VA is very similar to conventional where if you include the property in BK you can now go by BK seasoning periods. This would mean that you would only have to wait 2 years after the economic event occurred before you can obtain financing.
Hopefully this helps you understand what programs might work best for you and ultimately it depends on credit score, down payment and the above factors.
But what I had heard from a number of sources is that if you have the mortgage under the Chapter 7 then that is the clock use even if the property is lost after the chapter 7. I talked to one underwriter but nobody can find it in writing.
Just to jump into this thread because this is my expertise - FHA still to this day considers BK and FC/DIL two separate events. Meaning once the property does end up with the disposition of DIL those waiting periods would begin. Conventional would be the route to take in the situation you're mentioning. Conventional loans start as low at 620 FICO and start at 3% down.