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My brother really wants to purchase a home but has a situation that looks like will prevent him from doing so for a couple of years or so. However, I wanted to run his scenario past experience orignators to see if there is something out there for him.
He currently does not own a home but is in Chapter 13 BK. He is getting ready to pay the last of it off. His mid-score is around 660 with no derogs except for the BK and he makes $35K a year.
The only debt he has is deferred student loans.
He doesnt have any active traditional trade lines but would have some alt trade lines using his childcare provider, gas service, and auto insurance.
The big hang up is that his BK trustee payments havent been timely. He has been paying a month and then not paying and then paying two months. He has been told that even though he is going to be out of BK soon, underwriters will still pull the payment history.
Is there any options available for him? He has reserves. He said he has like $7K in checking and another $5k in retirement. He also has another $3K coming to him soon for a reimbursement from his employer.
So far he has been told that he needs to pay off his BK and get some trade lines with 12 months 0x30 and then he should qualify for FHA without an issue. It really sucks that that one thing is holding him back because there is some great values in homes where he wants to buy.
I use to be a broker but have been out for 3.5 years and the rules have all changed. The people I have ran his situation by are all seasoned originators but it seems like there is always someone out there that might know other options.
Any information that can be provided would be helpful.
We see similar issues w/ CCCS (lenders regard that as a 13 that just didn't go through the courts), and then CCCS didn't pay the bills on time. If your brother has 1 x 30 (or more) showing on his report, along w/ a 13 BK, he's at least one year out. The credit bureau would be the primary piece of documentation. Right now, it comes down to what is on that credit report. If he is reporting in income by W2, we would deduct any expenses declared on his return (and even salary folks have uneimbursed business expenses - a lot lately).
Child care is a good alternate credit reference source, as is auto insurance (as long as it's monthly). If they do not report to the bureaus, he should be sure to set himself up for proof of payment and write checks . Not sure what you mean by gas service - if you mean a gas card, like an Exxon card, that should be fine.
Coming out of a 13 BK with late payments......at least 1 year, if a decent credit score can be pulled. A full manual underwrite (no scores or scores too low for a DU), indicates very rough road ahead, and he should look into obtaining a secured credit card for one year.
I looked at his credit report and the BK trustee payments do not appear. It shows an account with them and the amount and establish date but no record of payments. I told him to have his lawyer contact the trustee for payment history to see what they show.
By gas service I mean gas utility for his home.
By expenses do you mean work expenses or all deductions?
Do either of you know if deferred payments with the trustee will count as late? I am not exactly sure what they means but he told me last night that he had deferred his payments a couple of times over the last year or so.
A Chapter 13 bankruptcy does not disqualify a borrower from obtaining an FHA-insured mortgage, provided that the lender documents that
one year of the payout period under the bankruptcy has elapsed, and
the borrower's payment performance has been satisfactory and all required payments have been made on time.
The borrower must receive written permission from the court to enter into the mortgage transaction.
Since a deferred payment is not a required payment, then not making a deferred payment would not prevent him from qualifying for an FHA mortgage.
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