Home Buying in 32828>Question Details

Jay, Home Seller in 32828

Can I obtain a FHA loan with a foreclosure that was caused by a chapter 7 bankruptcy 2 years after discharge?

Asked by Jay, 32828 Tue Aug 24, 2010

We are 2 years out of a chapter 7 bk. We previously owned 5 homes. We included 4 in bk and re-affirm our current. We have re-established our credit since. All 4 properties on our credit reports state that it was a bk. We would like to keep our current home (note of 155k, con) plus get another (300k, FHA). Due to the backlog of foreclosures by our lender and our county, 2 of our homes have a "Judgment of Foreclosure" in the last year. Even though they were part of the bk, they still proceed to foreclosure to obtain the titles. I have been told by many loan officers/brokers that I should qualify base off our household income, but I have gotten different answers when the foreclosure is considered. My question is, Does the bk supersede the foreclosure because it was part of the bk? I contact the FHA resource center, they told me 2 years out of chapter 7 bk and 3 years out of foreclosure. They said that it was up to the lender’s underwriters, but doesn’t lenders approve/deny base off FHA?

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I had a buyer that wanted to buy a home in Arizona, but he had a Chapter 7 bankruptcy 7 months ago. After researching the web I found a loan program at http://www.cfsflex.com, they allow a mortgage after a foreclosure, short sale, or bankruptcy. There is only a six month waiting period. Good to see lending options coming back.
0 votes Thank Flag Link Sun Jul 7, 2013
This is an old post but I just came across it so I'll add some up-to- the minute information.

Due to the massive backlog in foreclosure proceedings, there are many properties out there that have been abandoned for years and many rolled into a bankruptcy, others the buyer walked away from but the bank is just now getting around to foreclosing on the property and taking legal ownership of the property. MANY lenders consider the starting date of the foreclosure window the date the bank takes ownership of the property/sheriff's sale. There have been many documented cases of borrowers not being able to purchase years later due to their thre year exclusionary window just now starting.

Anyone in the know will immediately respond to this post thinking the FHA rules trump everything but the reality is that FHA provides guidelines, it's the lender who actually is held liable for defaults and lenders will make the determination of where those time frames start. If you're in a situation where you're looking to give up your home or assumed you can buy three years after your bankruptcy and rolled your mortgage into the Chapter 7, you may be in for a rude awakening.

VA technically allows a borrower to purchase a home soon after a chapter 7 but most lenders will add the same overlay they use on FHA which is three years.

I hope this helps someone be better prepared for what may wait in their future.

Best of luck.
Web Reference: http://RobWeber.com
0 votes Thank Flag Link Wed May 2, 2012
Your best bet is to speak with a mortgage broker that works with FHA's. They can give you the most accurate information and potentially even get you approved.
0 votes Thank Flag Link Tue Aug 24, 2010
Jay, I just sent you an email regarding this.
0 votes Thank Flag Link Tue Aug 24, 2010
Unfortunately, most lenders will have specific guidelines set in place in regards to multiple foreclosures, especially given the added red flag of the Chapter 7. The best advice I think anyone can give you would be to enter into a lease purchase agreement (rent with the option to buy), put down the $10,500 you would've on the loan and reevaluate your situation after you have met the 3 year requirement. This seems to be the best solution given the circumstances because in most instances a portion of your rent (ex. $1,000 of your $2,500 monthly rent) will go towards your "down payment" or purchase price reduction. There are many homeowners currently that are very open to the idea of a lease option agreement. I would suggest dealing with a Realtor that has experience specifically with those forms of transactions. We wish you the best of luck. You know what they say...Life Happens. I am glad you were able to keep your primary and are in the process of rebuilding, a great sign for our future economy.
Web Reference: http://www.LendingFL.com
0 votes Thank Flag Link Tue Aug 24, 2010
Fha center is right- 2 years out of bankruptcy ( I'm closing a loan on a lady whose bankruptcy is barely 2 years old) and 3 years out of foreclosure. Some lenders have an overlay that can raise these limits.

Elena Ollick
Amerivest Realty
Faith Home Loans
239-206-4500
800-801-6080
eo@oceanhomesrealty.com
skype: napleshomes
http://www.andrewollick.com/realestateblog
Get Pre-Approved: http://www.faithhomeloans.com/express.html
0 votes Thank Flag Link Tue Aug 24, 2010
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