You need to go on a lender hut and interview before looking. Here is why. Just because FHA says it is okay does not mean a lender will be happy to do it. So.... finding a lender may be a challenge. That lender is going to lend you money knowing you walked away last time. I am not trying to be mean or judgemental, I just want you to know that is how they are going to look at you.
For example, FHA goes all the way down to I think it is 580 credit score however, there are no lenders that I deal with will go that direction, 620... below that, they will not entertain.
So, again.... find the lender who is willing first before going forward.
You have the guidelines very correctly quoted. The extenuating circumstance clause means that an underwriter wants to see that the bankruptcy was caused by unforeseen, unavoidable events that are not likely to repeat. The UW is also going to look at your credit history before and after the bankrupcy to see if there ws a history of late or missed payments before the "event" and any further derogatory credit after the bankruptcy was discharged. A major medical situation would count as extenuating circumstance. A job lay-off that has been corrected MAY be considered, and there are several other instances that may count under this provision in the guidelines. A divorce does not count however, and is mentioned in black in white in the guides.
I have financed several of these sitautions in the past and have a good understanding of the FHA guidelines.
Keven M Brennan
One more thing.... You do not have to close by next month to get the tax credit - you just need to be under contract by April 30th. You have until June 30th to close which should make the 24 month BK guideline work for you with or without extenuating circumstances.
The key will be whether or not you have reestablished your credt standing in the past 2 years. Subsequent derogatory credit after a BK will cause issues in underwritting.
Feel free to contact me to discuss.
Keven M Brennan
Have your lender re-approve you after the 2 year mark to make certain you still have the "approval" status. You'll probably have to wait until that time because no lenders are really doing a "manual underwrite" anymore. Don't get too caught up with what FHA rules are, because each lender will have their own overlays which will "trump" the FHA guidelines.
Bottom line...the lender is going to make sure they can sell your loan. If they feel they won't be able to sell it, chances are you're not getting approved. Hopefully it goes through, good luck!
Your findings are accurate. However, thats an FHA guideline that each individual lender (who utlimately lend the money and take on the applicable risks of doing so) have the right to strictly adhere to or not. Typically, if your BK 7 was due to a divorce, death of wage earning spouse and/or co-borrower, job loss, you may have a chance. But again, that will be up to the individual lender own lending guidelines (which in some case can rightly supercede FHA's own) and the strength of your overall credit worthiness. Something that can only be determined upon you speaking to individual lenders. Just make certain your BK7 situation is the first question you ask them before you go any further. Good luck.
With a 620 credit score you can qualify for a new mortgage. Understand that this mortgage product is not the best mortgage product out there. In fact, mortgages do not even get exciting until your score is in the 720 or better.
Instead of rushing into a mortgage why not work to improve your credit rating first and get your score in good standing, repair and rebuild your credit rating first. Then you select a mortgage product that will allow you to get into a home with a payment you can afford each month. This way you set yourself up for success long term.
I realize the $8k tax credit is a nice thing to have, but understand that if you select a low quality mortgage product you are going to pay that $8k right back in monthly payments because you were only able to qualify for a low quality mortgage product.
The Credit Repair Expert