Townhouse Mortgage after BK7

[Outtadebt4good]

First - Thanks to Everybody for what I've learned on this board to help get my finances straightened out - it's a whole new life. So, my BK7 will be discharged 24 months next July. I have found a townhouse in a new development that I want to buy for $100K. My FICOs run 680 to 700, I have no lates, $10K I can put down, CLs totaling $30K, with no balances. No loans, basically $0 debt to a $55K income.

I am sure my FICOs will only get better by next July, I'm getting a raise, and I should by then have at least $20K to put down.

So, should I wait until my 24 months after discharge is up to apply for a mortgage loan, and should I do FHA with just 3 or 3.5 percent down, or put down $20K. If I should wait until July, when should I start the process of trying to get preapproved - and what should I be doing in the meantime before I start trying to get preapproved? It's not like there's a rush as far as the townhouse itself is concerned, they're building alot of them....

Thanks Again!

[Denita]

You are doing the right thing by saving for a large down payment. Underwriting requirements are different for people with BK's. It used to be 2 yrs after you could get a mortgage, I am now seeing a 4 yr requirement. There may be a difference if you put down more money (just like you are planning to anyway). However, I am a RE agent, not a mortgage bkr. I am sure Charles or Morrow or one of the other mtg brokers can respond to the new requirements after BK.

[Fizzle1979]

I would do some research on the the "townhouse" itself. Even though it maybe on the market as a townhouse it really could be a condo as far as the lender is concerned. I've am having an EXTREMELY hard time finding a lender for a condo right now. They usually will require a certain percentage of the units be sold before they will lend on it. The owner occupancy rate of the complex must be at least 51% some are now requiring 70% and no one person can own more than 10% of the units. Meaning one person owning several units.

[Denita]

Also, just to add to Fizzle's information, you need to check the condo documents for First Right of Refusal. If the condo docs have First Right of Refusal, then most of the lenders will not loan on the property unless there is an exception for lenders in the case of foreclosure (has to be written in the documents). Or you can get a lender that has portfolio loans - few and far between these days.

The only way you can tell if it is a Townhouse or condo is by reviewing the documents to see how the association is set up - you can not tell by looking at the property.

[Outtadebt4good]

Thanks for the info - very interesting!

[morrow]

I would do some research on the the "townhouse" itself. Even though it maybe on the market as a townhouse it really could be a condo as far as the lender is concerned. I've am having an EXTREMELY hard time finding a lender for a condo right now. They usually will require a certain percentage of the units be sold before they will lend on it. The owner occupancy rate of the complex must be at least 51% some are now requiring 70% and no one person can own more than 10% of the units. Meaning one person owning several units.

VERY true. Here is a good site to check the list of approved condos https://entp.hud.gov/idapp/html/condlook.cfm

Its pretty touchy in the sense that I was looking for a specific approved condo and typed in the name and it wasnt showing up. I then typed in just the zip or something simple like that and there it was. I recently had a deal fall through because although the condo was listed as "approved", it was approved a few years ago and the lender wanted to go through the entire condo certification process to get it updated. That, and an uncooperative condo association made for a dead loan. It was really frustrating for everyone involved. It could potentially take weeks to get the approval and there is alot involved.

FHA is definitley the way to go. I am finding that unless you are FHA approved, your market is limited. Pratically 99% of the loans that I have done are FHA. One of the biggest selling points (that I use anyway) is the fact that if and when rates do drop, you can do whats called a "Streamline Refinance", meaning rolling your current FHA loan into a lower rate one with less to do, including no appraisal and little documentation.

After a Ch. 7 it is 2 years before lenders are willing to do anything. I cannot stress the importance of having an IMMACULATE credit report after a BK though. Lates after a BK are pretty much the kiss of death and I have yet to find a lender that will willingly do these.

I would definitly save for the down payment. Thats probably the best thing you can do.

Good luck with everything! Keep us posted!

[amortgageman]

FHA is definitley the way to go. I am finding that unless you are FHA approved, your market is limited. Pratically 99% of the loans that I have done are FHA. One of the biggest selling points (that I use anyway) is the fact that if and when rates do drop, you can do whats called a "Streamline Refinance", meaning rolling your current FHA loan into a lower rate one with less to do, including no appraisal and little documentation.

The way FHA is placing credit score "tiers" on the rates, this is defintely a big plus. That is once the loan is paid down enough to do a no out of pocket refinance or there is enough yield spread cushion to get the rate low enough.

After a Ch. 7 it is 2 years before lenders are willing to do anything. I cannot stress the importance of having an IMMACULATE credit report after a BK though. Lates after a BK are pretty much the kiss of death and I have yet to find a lender that will willingly do these.

I would definitly save for the down payment. Thats probably the best thing you can do.

Good luck with everything! Keep us posted!

You may want to PM Charles about this. It seems to be that a few weeks ago, there was a post where he closed a loan, that I though was pretty impossible. Of course, there may have been "extinuating circumstances for the post BK lates.

[amortgageman]

You may want to PM Charles about this. It seems to be that a few weeks ago, there was a post where he closed a loan, that I though was pretty impossible. Of course, there may have been "extinuating circumstances for the post BK lates.

http://debt-consolidation-credit-repair-service.com/forums/showthread.php?t=289947&page=2

[morrow]

I will PM him to find which lender he is using. While its not impossible to get a loan with lates after a BK, I have yet to find a lender that doesnt wince at it.

I completley agree with the fact that the deal has to make sense, and alot of it (if not all) is about presentation to the lender. A good LOE can do wonders.

Thank you for pointing that thread out to me. Much appreciated.

Happy Halloween!

[Outtadebt4good]

Thanks all for all of the info! Here's a bit of an update:

This is in fact a Townhouse Condominium. It is a new development - about 20, four to six unit buildings, completed out of the 100 planned. Buildings are released as 50% to 70% of the units are sold. The plan is for this place to be mostly owner occupied - the first year after closing you HAVE to live there - then you can only rent a unit out once a year for a year at a time.

This is a project of KB Homes, so they have on site Countrywide financing. They want a $2500 deposit and will pay closing costs if you use them - $5000 deposit if you use another lender. These condos are FHA approved.

So - my BK7 Discharge will be 2 years old in 10 months. Do I talk to FHA now, 10 months before I would actually want a loan? Would I approach Countrywide now, and tell them what my scenerio should be in 10 months, and find out what they figure they'll be able to do for me at that time?

I imagine I'd end up with Countrywide, since getting condo loans from other lenders sounds difficult, much less with a BK7.

[Goose123]

So, should I wait until my 24 months after discharge is up to apply for a mortgage loan, and should I do FHA with just 3 or 3.5 percent down, or put down $20K. If I should wait until July, when should I start the process of trying to get preapproved - and what should I be doing in the meantime before I start trying to get preapproved?

I have a friend that works for the KB Division of Countrywide. If you want the condo now, you should go ahead and apply. If you want to wait 10 months, wait 10 months and your situation will only improve.

3.5% down vs $20,000 down used to be a simple answer. Real estate used to be a safe place for your money. Tell that to the person that put $20k down on a condo in FL two years ago. Get your loan officer to quote you an FHA loan at 3.5% down and with $20k down. Compare the payments. Go with the one that makes the most sense for your situation. It wouldn't hurt to get the advice of a financial adviser too.

The KB loan officers often pre-qualify someone for a purchase 6-12 months down the road.

Get a quote from someone else too - just to keep them honest : ) You will probably end up with them since they already have the project approved. Another lender would have to get the project approved in order to give you a loan, but you could always use them to leverage the best rate.

Florida and California property values got hit the hardest. Hopefully you are buying at the bottom and will see your homes value increase over time.

Good Luck,