My husband and I lost our home to foreclosure about 12 months ago because the bank wouldn't work with us. Now, can my dad co-sign loan? We make

Asked by Dmh, Caballo, NM Sat Mar 19, 2011

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John Walin, Agent, Libertyville, IL
Sun Mar 20, 2011
Lenders answering...
Is there any risk of someone who has 20% down for a new mortgage getting in trouble with the foreclosed lender after the fact? For example, the seller plays poor to get out from under a house and now finds the money to buy another house? I would think that the foreclosing bank and judicial settlement had to have all assets accounted for and falsifying one's assets to get out from under a house they don't want looks like fraud and the bank/judge would have recourse to reopen the foreclosure. Any thoughts?
1 vote
, ,
Sun Mar 20, 2011
Arthur,

You are only partially right about the foreclosure waiting period. You needed to clarify that you were speaking of conventional financing. The waiting period for foreclosure use to be five years. As of June 30, 2010, it was increased to sevenyears. However, the waiting period for FHA and VA is still three years. The down payment is 3.5% of purchase price for FHA and zero down for VA. However, Fannie Mae has updated their previous rules to the following where pre-foreclosures and short sales are concerned:

"Previously, a borrower was required to wait four years before getting a new mortgage, or two years if their home sold in a short sale. Under the new guidelines, a borrower that previously completed a deed-in-lieu of foreclosure transaction can get a new mortgage in two years, provided the borrower has a 20% down payment." "If the borrower has a 10% down payment, the wait period is still four years."

I hope that this clarifies when you will be eligible to purchase a home. Be sure to get your mortgage information from a mortgage professional.

Sincerely,

Dianne Y. Ayala Steffey, MBA, CLU, ChFC, NMLS#267658
Your Personal Mortgage Consultant for Life!
Sterling Mortgage Services NMLS#373771
2929 Mossrock, Ste 222
San Antonio, TX 78230
210.349.2102
210.349.1544 fax
210.831.8749 cell http://www.sterlingloans.biz
1 vote
, ,
Sun Mar 20, 2011
Dmh,

I empathize your situation. However, you will have to wait for a period of three years from the date of foreclosure before you are eligible to buy another home. Before you have your father co-sign for you to purchase another home, analyze the reasons for the foreclosure that occurred 12-month's ago. What were the extenuating circumstances that put you in that situation? Has it been resolved? What are the assurances that it wlll never happen again? Are you living on two incomes? Are you able to set aside one income into an emergency fund? Are your debts manageable and/or have you paid them all down?

There are number of questions that you need to ask yourself. Give yourself some time to restore your financial foundation before buying another home. Once you have good job stability, good reserves, low debt-to-income ratios, then you will be in a position to buy a home. You only have two more years to wait, which will give you enough time to work on your financial strength.

Personally, I would not involve your father. This is your life and you should be able to manage this on your own. I would hate for anything to impair your father's credit in the event this were to happen again.

All the best to you!

Sincerely,

Dianne Y. Ayala Steffey, MBA, CLU, ChFC, NMLS#267658
Your Personal Mortgage Consultant for Life!
Sterling Mortgage Services NMLS#373771
2929 Mossrock, Ste 222
San Antonio, TX 78230
210.349.2102
210.349.1544 fax
210.831.8749 cell
http://www.sterlingloans.biz
1 vote
Marki Lemons…, , Chicago, IL
Sun Mar 20, 2011
Dmh,

As I stated below you can purchase a home in as little as three years after a foreclosure with FHA financing.Below are the FHA guidelines. FHA sets the minimum guidelines and individual lenders do have the right to increase the requirements. Arthur is correct if you were looking to obtain a Fannie Mae or Freddie Mac backed loan.

FORECLOSURE
"FHA insured mortgages are generally not available to borrowers whose property was foreclosed on or given a deed-in-lieu of foreclosure within the previous three years. However, if the foreclosure of the borrower's main residence was the result of extenuating circumstances, an exception may be granted if they have since established good credit. This does not include the inability to sell a home when transferring from one area to another."
Web Reference:  http://about.me/markilemons
1 vote
Patricia Mon…, Agent, Chicago, IL
Sat Mar 19, 2011
These answers are actually not correct. Because you have foreclosed on your property, you cannot finance a new purchase for 5 up to 7 years. There are also additional conditions. First is that your minimum down payment will have to be 10% and representative FICO credit score minimum 680. This is why you should avoid a foreclosure and try to do a short sale! Short sale is a much better choice for anybody who faces a foreclosure. Unfortunately it is too late for you. But there is a chance for anybody contemplating abandoning their house or letting it go through a foreclosure. Do a short sale! In your case, if your dad has enough income and reserves, he could finance this new purchase as an investment property. After the closing, you can add you and your husband to the title of the property, but your dad has to stay on it as well, as long as he holds the loan. Otherwise the bank can ask you to repay the whole loan immediately if the property changes ownership. There are also other things to consider. If you don't pay on time, you will ruin your dad's credit as well, so there is a lot of risk involved. It will require a lot of financial discipline form you. My suggestion would be to take this bump on your road as an opportunity to rebuild your financial future. Maybe the best scenario in your situation is to rent a smaller property for a while and build some cash reserves. Take some time to save as much cash as possible and rebuild your credit. This will help you to gain more financial confidence and responsibility. It is just a bump on the road, not the end of journey! Keep your dad out of the equation, even if he is willing to help you! Always seek an advice from your attorney before you decide to do anything of this importance! Good luck!
1 vote
Marki Lemons…, , Chicago, IL
Sat Mar 19, 2011
Co-signing a loan for a house is not like co-signing a loan for a car. They will need to take his debt to income into consideration in addition you will need to identify a lender who will allow for a non-occupant co-borrower.

In addition your foreclosure will need to be seasoned anywhere from 3-7 years before a lender will allow you to purchase a home because of the foreclosure. In two years you can check to see if you qualify for an FHA mortgage.
Web Reference:  http://about.me/markilemons
1 vote
Robert Pratt, Agent, Chicago, IL
Mon Mar 21, 2011
Your best bet is to contact a trusted mortgage broker to assist you in finding out what the most effective strategy for you and your husband to find a new home may be – whether now, or in the future.

If you would like assistance with this, please give us a call at 312.242.1000.

Good luck to you!
Web Reference:  http://www.dreamtown.com
0 votes
David Cooper, Agent, Los Angeles, CA
Sun Mar 20, 2011
Look for a houses with equity and see if the owner will finance. There are sellers out there with equity and no mortgages. If you offer the owner a good downpayment and interest rate better than he can get at the banks, you might find a deal. Have your real estate agent look for houses for sale that have little or no mortgages




David Cooper Las Vegas Foreclosure Houses! FReee List +1-7024997037
0 votes
, ,
Sun Mar 20, 2011
Dmh,

Unfortunately, your story is the norm on modifications and short sales. Early on in the loan modification business, I noticed that these "professionals" were advising distressed Borrowers to be 90-days late on their mortgages even if their credit was excellent! This was the only way that the modification could be approved. This was nuts! Furthermore, these poor people were paying thousands of dollars to get their loans modified only to find out nothing was ever done. And, they lost their money in the process.

Hopefully, there is a task force working to ferret out these people, and to put them where they belong - behind bars.

Dmh, I know that you've gone through a lot. The positive note is that real estate and mortgages are cyclical. I truly believe that our economy and country will get back to better times. It will take time, but our economy will bounce back. As the result of the mortgage meltdown, we in the mortgage industry have a number of lessons learned, especially in the subprime loans area. No longer will underwriting be laxed or cavalier and not everyone that can breathe will be able to get a loan. Everything now is scrutinized and for good reason. We need to protect you the consumer from ever having the type of meltdown that we have experienced in the last four years. It has been difficult for everyone.

Again, my advice is to wait two more years. Pay down your debt, save your money and you will be stronger financially. You will feel better about yourself for doing it right this time. Borrow using the best of terms that you and your family can afford. Strongly consider the fixed rate products versus the interest only, which has the negative amortization.

Call me if you would like to further discuss. I'm not licensed in New Mexico, but I will be happy to help you with financial advice.

All the best!

Sincerely,

Dianne Y. Ayala Steffey, MBA, CLU, ChFC, NMLS#267658
Your Personal Mortgage Consultant for Life!
Sterling Mortgage Services NMLS#373771
2929 Mossrock, Ste 222
San Antonio, TX 78230
210.349.2102
210.349.1544 fax
210.831.8749 cell http://www.sterlingloans.biz
0 votes
Scott Hulen, , 64068
Sun Mar 20, 2011
There may be one other way to go about this. Contact small local banks ( that have less then 100 employees is my example of small ) they may have inventory on the books that they might consider letting you purchase. They may require 10-30% down, will give you at the most a 5 yr ARM with a higher than market interest rate . They will carry the note in house. I have been involved in this type of deal with small local banks in our area. After 3-5 years and all is good you may be able to use the standard market again. Hope this helps Scott
ps the more cash you offer as a down payment the better your chances of getting the deal done
0 votes
Dmh, Home Buyer, Caballo, NM
Sun Mar 20, 2011
For the record, we had an attorney on the case for 18 months and nothing happened. backed by the BBB, and highly recommended. Wells Fargo didn't do a damn thing to assist, not why would it?

Google 60 minutes 'the big short" segment.

The banks makes more money on a homeowner foreclosing than short selling that's why less than 20% complete.
0 votes
Dmh, Home Buyer, Caballo, NM
Sun Mar 20, 2011
Thanks for the input.

We were making good money and was able to easily afford our home, until my husband lost his job. THEN, Wells Fargo wouldn't assist us in a modification. We hired an attorney and 18 months later, nadda. We tried 4 short sales, and they all fell through for a variety of reasons.

In short, our house lost over 60%! And our interest only 7 yr loan started in 2005 could not get modified.

We decided to look at this decision more financial then ethical so to speak. You buy yahoo stock at $50/share and it's now trading at $10/share, what do you do? Wait for it to come back? or dump it?

I believe anyone who bought in 2004-2006 should walk away. The market WILL NOT come back anytime soon, nor will we EVER see this type of appreciation gains. No jobs, war, unemployment high, retail growth weak, values dipping every day, not in the next 10+ yrs will anything happen to real estate positive.

Why pay the ridiculous costs of home ownership on a lower?

Thanks everyone and we'll see what happens in 3 yrs or so.
0 votes
Matt Laricy, Agent, Chicago, IL
Sun Mar 20, 2011
No, you will need to wait a few more years. I would just rent for the time being, and continue to build up your credit.

Matt Laricy
Americorp Real Estate
Brokers Associate, e-PRO
mlaricy@americorpre.com
708-250-2696
0 votes
, ,
Sun Mar 20, 2011
John,

I would leave the legal ramifications to the attorneys. There are so many scenarios that one could think of. However, keep in mind that large deposits would have to be sourced and seasoned in order to be approved for a new Fannie Mae loan (conventional). And, in this case, we are speaking of a two-year wait under the conventional loan scenario. John, anything could happen within a two-year period: job promotion, bonuses, inheritance, 401(K) distribution, etc. You get the picture.

I personally would not see a lot of fraud in this group of people. I have met with a number of clients who have been in this same situation. For Example: house in Arizona (depressed market) relocated to San Antonio, TX for a job promotion; maintaining both the mortgage and the rent payments; excellent credit scores; great assets; given bad advice by Chase to be late for 90 days in order to do a short-sale. Been three years. All paperwork shows that all of her assets were documented and provided. Chase approved the short sale.

Granted, this may not be in every case. In every bushel are some bad apples. But, I think overall people who find themselves in this situation have no control over this situation, and are not intentionally trying to stick it to the lender. I'm of the belief that most are good people.

I hope that this helps.

All the best!

Sincerely,

Dianne Y. Ayala Steffey, MBA, CLU, ChFC, NMLS#267658
Your Personal Mortgage Consultant for Life!
Sterling Mortgage Services NMLS#373771
2929 Mossrock, Ste 222
San Antonio, TX 78230
210.349.2102
210.349.1544 fax
210.831.8749 cell http://www.sterlingloans.biz
0 votes
Michael Cline, , Chicago, IL
Sun Mar 20, 2011
Diane,

Thank you for setting the record straight, and for correcting Arthur.

Good luck,
Mike.

mcline@waterstonemortgage.com
0 votes
Diana Willia…, , Chicago, IL
Sat Mar 19, 2011
No you will need to rebuild your credit for 36-48 months before anybody will extend credit to you.
0 votes
Michael Cline, , Chicago, IL
Sat Mar 19, 2011
Short answer... NO. Neither you, nor your husband can be on the new loan for at least 3 years after the foreclosure. Your dad can buy it, and you can pay him rent. In the meantime, get your credit re-established so in 3 or 4 years you'll be able to buy it from him.

If your situation was one that was listed below, then you may have a small chance. But odds are, the underwriters will not take a chance approving you until more time has passed. Either way, good luck.

Mike.
mcline@waterstonemortgage.com
0 votes
Steven, Agent, Newport Beach, CA
Sat Mar 19, 2011
So, no your Dad couldn't cosign, until 3 years have passed, unless you met one of the exceptions. He has to buy the property himself. If he did buy it himself, you could then do a "land sales contract" or an all inclusive deed of trust, where you are then the owner. You get to write off the property tax and interest expenses. And in two years, you could refinance the loan into your own name. Hopefully values would have gone up and you could pay him back then.
0 votes
Steven, Agent, Newport Beach, CA
Sat Mar 19, 2011
Basically you have to wait 3 years to get FHA financing. Conventional financing is typically 5 years. USDA Rural financing is 5 years. There are exceptions, if there was serious illness or a death of primary wage earner. Here's FHA guidelines:

f. Previous Mortgage Foreclosure
A borrower is generally not eligible for a new FHA-insured mortgage if, during the previous three years

•his/her previous principal residence or other real property was foreclosed, or
•he/she gave a deed-in-lieu of foreclosure.

Exception: The lender may grant an exception to the three-year requirement if the foreclosure was the result of documented extenuating circumstances that were beyond the control of the borrower, such as a serious illness or death of a wage earner, and the borrower has re-established good credit since the foreclosure.


Divorce is not considered an extenuating circumstance. An exception may, however, be granted where a borrower's loan was current at the time of his/her divorce, the ex-spouse received the property, and the loan was later foreclosed.


Note: The inability to sell the property due to a job transfer or relocation to another area does not qualify as an extenuating circumstance.
Web Reference:  http://www.monumentfin.com
0 votes
Peter Kedzior, Agent, Elk Grove Village, IL
Sat Mar 19, 2011
I think it would be much easier and less painful if your dad bought this property as his second home (most likely, at least 20% down payment would be required) and then sold it to you when your foreclosure stops hurting your credit score. It may be another 1-4 years. Please contact your mortgage broker/loan officer for more details
0 votes
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