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Company Loan Type APR Est. Pmt.

FHA loan after Chapter 13 dismissal

Posted on: 13th Nov, 2007 02:46 pm
hello, i was a home owner for 11 years, and like others, ran into some financial problems. i decided to enter a chapter 13 bankruptcy. about 2 years into that plan, i decided to dismiss the chapter 13, sell my house, rent for a year, then try to re-purchase another home.
my question is, on a fha mortgage, is there a waiting time, to get approval?
any help would be great. thanks
ask the broker.....it matters what his credit report states.

i would still get the documents from the loss/mitigation department.
(this make take a few days)

a DE Underwriter will need to make a decision on your loan.

1. No lates in the last 12months
2. BK 13 needs to have been dismissed/discharged 12months ago.
3. collections that are over 24months MAY not have to be paid.
4. all judgments need to be paid.
5. Foreclosure started but not processed will need to be approved by the DE U/W.
You will need to find out which company is reporting foreclosure was started.....sometimes it's only 2 companies. You can call the credit bureaus directly to find this out.....and dispute over the phone.
Posted on: 04th Dec, 2007 08:40 am
(would still get the documents from the loss/mitigation department.
(this make take a few days) )
What do you mean by this? What company? what documents?
Posted on: 04th Dec, 2007 10:10 am
the mortgage company that you were late with or the one that is reporting the foreclosure was started.

ask them for a document stating that you never foreclosed.

make sure which credit bureau is reporting this.
if XPN -experian is showing mtg 01 then you wont need to dispute with them
if transunion or equifax is reporting foreclosure then you need to dispute it with them.


i had a customer that had the same thing reporting on the credit report....and the U/W stating they wanted to know what happened to the foreclosure proceedings. they wanted to make sure they didnt foreclose....
Posted on: 04th Dec, 2007 11:08 am
can someone tell me what the difference is between MTG01 and MTG 08?
I was reported as 01, but now it shows 08?
which is better?
Posted on: 23rd Jan, 2008 07:23 pm
Hi Fozman,

MTG01 might stand for the mortgage which is perhaps under foreclosure (from your first post) . Have you gone through a foreclosure recently?

I think it will be better for you to talk to the bureau who has prepared your credit report.

Thanks
Posted on: 24th Jan, 2008 12:51 am
an fha rate at 9% is ridiculous - you need to consult with another lender. as far as using your minimum down payment, that is fine as long as you don't mind having a lack of equity for a while. remember, any money down will reduce your mortgage amount, which reduces your payment, which...and on and on...

as for paying off the old debts...yes, you need to pay them all in full in order to meet fha requirements.

you are working in the right direction, but i have to seriously question any lender who would tell you the fha rate is even remotely close to 9%. that makes no sense.
Posted on: 25th Jan, 2008 10:57 am
Well, this post certainly is filled with mixed opinions!

Let's revert to direct exerts from the 4155-1 rev.5

"D. Previous Mortgage Foreclosure. A borrower whose previous principal residence or other real property was foreclosed or has given a deed-in-lieu of foreclosure within the previous three years is generally not eligible for a new FHA-insured mortgage. However, if the foreclosure was the result of documented extenuating circumstances that were beyond the control of the borrower and the borrower has re-established good credit since the foreclosure, the lender may grant an exception to the three-year requirement. Extenuating circumstances include serious illness or death of a wage earner, but do not include the inability to sell the house because of a job transfer or relocation to another area."

So 3 years. But, I have closed one loan with less than 3 years out due to a documentable extenuating circumstance.


"E. Bankruptcy. A Chapter 7 bankruptcy (liquidation) does not disqualify a borrower from obtaining an FHA-insured mortgage if at least two years have elapsed since the date of the discharge of the bankruptcy. Additionally, the borrower must have re-established good credit or chosen not to incur new credit obligations. The borrower also must have demonstrated a documented ability to responsibly manage his or her financial affairs. An elapsed period of less than two years, but not less than 12 months, may be acceptable if the borrower can show that the bankruptcy was caused by extenuating circumstances beyond his or her control and has since exhibited a documented ability to manage his or her financial affairs in a responsible manner. Additionally, the lender must document that the borrower's current situation indicates that the events that led to the bankruptcy are not likely to recur.

A Chapter 13 bankruptcy does not disqualify a borrower from obtaining an FHA-insured mortgage provided the lender documents that one year of the payout period under the bankruptcy has elapsed and the borrower's payment performance has been satisfactory (i.e., all required payments made on time). In addition, the borrower must receive permission from the court to enter into the mortgage transaction."

This guideline is not crystal clear for your specific situation. However, an argument could be made that if you paid 12 months as agreed on your Chapter 13 re-payment plan, then dismissed the bankruptcy, then you should not be disqualified solely for the bankruptcy.


For all situations mentioned in this post and any going forward I suggest that all loan officers understand what you are up against and try to make your fight based on the 4155-1 rev.5. Point out specific exerts and reasons you feel the borrower qualifies. Then support your claim with clear documentation. Letters of explanation accompanied by supporting documentation.


The credit codes:

CURRENT RATING:

  1. NOT RATED BY CREDITOR
  2. CURRENT, PAYING OR PAID AS AGREED
  3. 30 DAYS OR ONE PAYMENT PAST DUE
  4. 60 DAYS OR TWO PAYMENTS PAST DUE
  5. 90 DAYS OR THREE PAYMENTS PAST DUE
  6. 120 DAYS OR FOUR PAYMENTS PAST DUE
  7. 180 DAYS OR FIVE+ PAYMENTS PAST DUE
  8. CHAPTER XIII WAGE EARNER PLAN
  9. REPOSSESSION
  10. CHARGE OFF OR COLLECTION ACCOUNT


I would suggest to your loan officer that they ask their credit provider to do a credit update on the mortgage account. They may remove the pre-foreclosure comment and if the account has a rating of 1 and not 8 (based on the 2 codes in your post) you may not be considered to have had a foreclosure. If the report shows an 8 you may want to file a credit dispute and see what the outcome is.
Posted on: 29th Jan, 2008 07:22 pm
Fozman,

"can someone tell me what the difference is between MTG01 and MTG 08?
I was reported as 01, but now it shows 08?
which is better?"

Greg is correct, 01 is good, any other number is bad.
Posted on: 30th Jan, 2008 09:48 am
I am in process of getting approve for a FHA loan, But I am hearing different things. I have just paid off my bankruptcy and waiting for the Discharge letter. The last 17 payments have been on time. But, I am told that the lenders are looking for no late payments while you were in bankruptcy. I have a middle credit score of 640 and my spouse middle score is 590. My question is, will I have to wait 1 or 2 years or there is a chance that I can be financed now.
Posted on: 06th Jun, 2008 01:45 pm
Hi Oscar.

Welcome to the forum.

Sorry to say that you will have to wait at least for 2 year after you get discharged from BK to get approve for FHA insured loan. So improve your credit and save for your down payments and closing costs.

Best of luck,
Larry
Posted on: 07th Jun, 2008 05:29 am
Larry,

Is it 2yrs or just 1 yr for chapter 13 and Is it at the discretion of the bank to decide to make a person wait 1 or 2 yrs or finance him now?

This is the original question.

I am in process of getting approve for a FHA loan, But I am hearing different things. I have just paid off my bankruptcy and waiting for the Discharge letter. The last 17 payments have been on time. But, I am told that the lenders are looking for no late payments while you were in bankruptcy. I have a middle credit score of 640 and my spouse middle score is 590. My question is, will I have to wait 1 or 2 years or there is a chance that I can be financed now.
Posted on: 09th Jun, 2008 12:54 pm
Hi Leesimmons,

Welcome to the forums.

If it's a ch13 bk, then you need to wait for at least 1 year to qualify for an FHA loan. But have you ever made late payments during the plan? and moreover, if your payments for the past 17 months are not without any lates, then I don't think it will be hard enough to get an FHA loan providing that you satisfy other criteria.

Take Care
Posted on: 10th Jun, 2008 05:11 am
It is amazing how much WRONG advice is in this thread...if you are NOT a broker/lender it would be best if you didn't give your "advice". And if you don't know FOR SURE, find out first then give your advice.

A Chapter 13 is 12 months from FILE FILE FILE date, NOT discharge date. So if you made the last 17 payments and you discharged the Chapter 13, the lender will want to see the pay history over the last 12 months of the Chapter 13.

Dealing with a "good" FHA lender/broker who KNOWS the guidelines and who knows how to argue these guidelines with the Underwriter is very important. On every file WE send in for a manual underwrite WE (the loan officer) write a letter of explanation on why WE feel the file should get approved in addition to a letter of explanation from the borrower for why THE credit problem arose and what they did to fix it and why it won't happen again.

Underwriters are PEOPLE, they "buy" good (TRUE) stories on manual underwrites. If you have a family with children, reference the fact you just want the supply a nice foundation in a new home for my children...etc
Posted on: 22nd Jul, 2008 08:14 am
You need to have 12 months paid as agreed in the BK 13.
The court appointed trustee must also approve the mortgage.
It is very common to use fha to buy out the bk 13.
No other loan that I am aware of will consider this scenario.

Brian
Posted on: 22nd Jul, 2008 10:48 am
Funny how many people don't even know the rules of the agencies they work with.
As stated on the FHA site itself, the 2-year waiting period applies to Chapter 7 bankruptcy discharges. If your Chapter 13 has been discharged, they'll loan the next day, and will guarantee loans as soon as after a single year of on-time payments to the bankruptcy plan (with trustee/court approval).
Posted on: 06th Jan, 2009 08:30 pm
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