Waiting Period after CH13 BK Discharge (PMI, home loan, payment schedule, 2015)
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I'm being told that I have to wait 2 years to apply for a mortgage after my discharge in June 2015.
Is this true? I paid into the CH13 for 5 years and paid off 30k of debt and now I have to wait another 2 years to buy a house? The BK will be erased from my credit by then!
I've read the FNMA rules that state there's a 4 year waiting period after a BK7 discharge; how is it that I paid off 90% of my debt and I'm being punished more than someone who walked away from theirs?
I lost my job in 2009, at the tail-end of the meltdown in 2008 and I had just bought my house 5 months prior to being let go. Circumstances kept me from being eligible for UIB and although it only took me a month to find a job, I was making 2/3's of what I was making at the old job.
I'm slowly but surely increasing my credit scores, I've been current on all of my credit cards and everything else for the last 3 years. I erased very little debt in the BK; I filed in order to keep my home from being foreclosed on.
I'm making 70k right now and I have absolutely no debt. I'm currently starting to put money in savings for a down payment with a plan to buy a home in March or April.
Currently my scores are at EQ 654, EX 656 and TU is 624. I still have a couple of paid collections that will be deleted and zero balances on my last loan still have to report. I think I should be able to get them up to 700 by March, just not sure. The reason they're low is I had to use my credit cards to move home in June and I've slowly been paying them down since August. They are now paid off.
Any ideas about mortgages? I'm currently looking in SW Florida.
A distinction is made between Chapter 13 bankruptcies that were discharged and those that were dismissed. The waiting period required for Chapter 13 bankruptcy actions is measured as follows:
two years from the discharge date, or
four years from the dismissal date.
The shorter waiting period based on the discharge date recognizes that borrowers have already met a portion of the waiting period within the time needed for the successful completion of a Chapter 13 plan and subsequent discharge. A borrower who was unable to complete the Chapter 13 plan and received a dismissal will be held to a four-year waiting period.
Exceptions for Extenuating Circumstances
A two-year waiting period is permitted after a Chapter 13 dismissal, if extenuating circumstances can be documented. There are no exceptions permitted to the two-year waiting period after a Chapter 13 discharge.
Every type of loan has a different waiting period. I suggest talking to a lender to see what you could qualify for, and when. The rule you quoted looks like it is for a conventional loan. But FHA looks like you could get the loan during the repayment schedule as long as you paid for 12 months on time and got the bankruptcy court's approval. So definitely see a lender and find out what you can do.
I no longer need the bankruptcy court's approval, the BK has been discharged. It's just really unfair that the longest period of time someone who does a 7 has to wait is 4 years and if you're stuck in a 13 for 5 years and then add 2 more years for the waiting period, it's 7 years. Like I said, by the time that happens the BK won't even be on my credit report any more. It's scheduled for deletion in 2017. Yeah I know it's 18 months but I'm 56 and I don't have time for this crap.
I no longer need the bankruptcy court's approval, the BK has been discharged. It's just really unfair that the longest period of time someone who does a 7 has to wait is 4 years and if you're stuck in a 13 for 5 years and then add 2 more years for the waiting period, it's 7 years. Like I said, by the time that happens the BK won't even be on my credit report any more. It's scheduled for deletion in 2017. Yeah I know it's 18 months but I'm 56 and I don't have time for this crap.
Are you paying attention?? You can purchase with a FHA loan right now. And if you had qualifying Extenuating Circumstances, you could perhaps go Conventional.
Are you paying attention?? You can purchase with a FHA loan right now. And if you had qualifying Extenuating Circumstances, you could perhaps go Conventional.
I believe I had extenuating circumstances. I filed the Chapter 13 to avoid foreclosure which was successful. I lost my job 5 months after buying my home and circumstances kept me from getting unemployment.
As I said, I was able to get a job a month and a half later, but at less money. I can show perfect credit prior to losing my job and not so great credit prior to filing the 13.
Sorry I talked (emailed) with a mortgage broker who basically told me there was no way for me to qualify for a conventional, which isn't a big deal, I've always gone FHA. I just hate the thought of the up front MIP which from what I'm seeing is around 4k. I'm planning on putting down as little as possible but if I could do conventional, I could put down 5%, do a 80% first and 15% second to avoid the MIP. I've done a home loan like that before.
Well the foreclosure timeline no longer matters because the bankruptcy timetable supersedes it now. I personally feel like you do fit within acceptable EC guidelines:
Extenuating Circumstances
Extenuating circumstances are nonrecurring events that are beyond the borrower’s control that result in a sudden, significant, and prolonged reduction in income or a catastrophic increase in financial obligations.
Examples of documentation that can be used to support extenuating circumstances include documents that confirm the event, such as a copy of the notice of job loss, and documents that illustrate factors that contributed to the borrower’s inability to resolve the problems that resulted from the event, and led to the bankruptcy.
The lender must obtain a written explanation from the borrower explaining the relevance of the documentation.
Also - - second mortgage top out at 89.99% these days, so 80/15/5's are replaced by the 80/10/10.
You might check with another lender who would be more willing to be your advocate and at least take a shot at Conventional. It's not too much paperwork up front to find out: BK papers, Letter of Explanation, proof of separation from job, proof unemployment not being available. Banks are much more willing to look for ways to work with BK 13 borrowers than 7.
Most of my routine business is originating 80/10/10 loans, and on an exception basis, 80/15/5 conventional loans. The minimum score for a combo (some call it a piggy-back) on an 80/10/10 is 700 and reserves are required. We usually find this in the borrower's retirement account, if not in their liquid accounts. For me to get permission to offer an 80/15/5, I need to take a full application (without an address) and submit it upstairs to our Finance Officer, along with a credit report. While there are no guidelines, I know not to bother unless I have a 740 score, at least 12 months in reserves (retirement), and ratios well the required. I am trying to show the OP how much higher the bar had risen since the mortgage crisis, not rub her nose in what she can't have.
The industry has finally caught onto the fact they must loosen up their guidelines or else a portion of the population may never qualify to buy for years, and that is anyone that faced adversity in the past 5 years. Fortunately, the (OP) can buy now, and if you want to wear your heart on your sleeve and show extenuating circumstances, that door is open as well. Just remember, if not FHA, you still must receive PMI approval, and that can be very difficult. I recommend you go FHA, only you feel comfortable with the payment. When you have 10% equity, you should be a snap to refinance conventionally (80/10/10). Yeah, I know, it may take years to get the equity or the rates could be double what they are......that is why I said "only if the payment is comfortable."
No one I know has a working crystal ball. What I do know, many will never move because their payment has never been so manageable. The refi I am working on right now is saving $476 a month. The one scheduled for tomorrow is saving over $600. To both sets of borrowers, the affordable payment just became more affordable. If you can't get comfortable with your payment at first, there's no shame in renting. And to be honest, there are many days that go by where I wish I was still renting (sometimes more than once a day). A future refi is a bonus, but should not be the carrot, because it could be on someone's stick, always 3 feet in front.
Most of my routine business is originating 80/10/10 loans, and on an exception basis, 80/15/5 conventional loans. The minimum score for a combo (some call it a piggy-back) on an 80/10/10 is 700 and reserves are required. We usually find this in the borrower's retirement account, if not in their liquid accounts. For me to get permission to offer an 80/15/5, I need to take a full application (without an address) and submit it upstairs to our Finance Officer, along with a credit report. While there are no guidelines, I know not to bother unless I have a 740 score, at least 12 months in reserves (retirement), and ratios well the required. I am trying to show the OP how much higher the bar had risen since the mortgage crisis, not rub her nose in what she can't have.
The industry has finally caught onto the fact they must loosen up their guidelines or else a portion of the population may never qualify to buy for years, and that is anyone that faced adversity in the past 5 years. Fortunately, the (OP) can buy now, and if you want to wear your heart on your sleeve and show extenuating circumstances, that door is open as well. Just remember, if not FHA, you still must receive PMI approval, and that can be very difficult. I recommend you go FHA, only you feel comfortable with the payment. When you have 10% equity, you should be a snap to refinance conventionally (80/10/10). Yeah, I know, it may take years to get the equity or the rates could be double what they are......that is why I said "only if the payment is comfortable."
No one I know has a working crystal ball. What I do know, many will never move because their payment has never been so manageable. The refi I am working on right now is saving $476 a month. The one scheduled for tomorrow is saving over $600. To both sets of borrowers, the affordable payment just became more affordable. If you can't get comfortable with your payment at first, there's no shame in renting. And to be honest, there are many days that go by where I wish I was still renting (sometimes more than once a day). A future refi is a bonus, but should not be the carrot, because it could be on someone's stick, always 3 feet in front.
Thanks!
I currently live in Denver (but still a resident of Florida).
I don't think I have to tell you how high the rents are here - $1200 a month for a one bed, one bath apartment, which would be pretty close to the house payment for the house I'm looking at right now.
I'll probably go FHA like I did the last time. Now I just need to get over the owner occupied thing. I'm currently working in Denver (they don't have jobs like mine that pay this well in SWFL). But my schedule works that I only work 14 days a month and go to Florida a lot (it would be more if I bought a house).
I would consider the home in Florida to be my primary residence, not the apartment here. I want to seriously buy the house and just pay it off as soon as possible, within 3 - 4 years so there is no payment even if that means getting a part time job (but I make way more than that in OT covering for people).
Thanks for you help, I do appreciate it. There was no layoff notice for the position I lost, it was a contract position. As for the UIB, I was overpaid in benefits 3 years previously so even though I filed and I was eligible, all the money went to the overpayment. I had been making monthly payments on the overpayment, but it hadn't been paid off yet.
It's been almost 7 years since it happened, I'm not sure I'd be able to get any written documentation anywhere. Maybe at least from unemployment since I have a friend who works there. I'll figure it out.
I have one more bill to pay off and then I'm going to sit on the zero balances and see what happens with my credit scores. It's been slow going getting them up there, I've paid off medical debt collections, just not sure if that's made any difference or not. I think most of the scores going up are from me paying my debt down, even though I didn't have a lot of debt anyway.
How long have you been a contract employee? UIB must be considered, however, they are not considered long term and unlikely to be used as the sole source of income. The contract employee is concerning, only that you need to have a two year track record, and, income is averaged. If 1099, tax returns and net income will be used.
It does sound there are multiple challenges. Do talk to a local lender and get a road map.
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