Posts Tagged “derogatory credit event”

Chapter 13 Bankruptcy FHA Home Purchase TheZerodownloan.comit’s a little known fact amongst Homebuyers, Renters, Realtors and even Loan Officers that both FHA and VA allow a Borrower to purchase a home after they’ve made 12 timely payments on a Chapter 13 BK.
Wait! What? Yes you read that right.
Why is this important? It’s important because while grappling with many unpaid collections, charge off’s and judgements, a Borrower’s credit score remains low and unable to revive. This keeps them from FHA financing.
Bringing all that unpaid debt, all the dirty laundry so to speak, under the governance of the Bankruptcy Trustee forces the credit bureaus to begin reporting each of those negative accounts as “INCLUDED IN BANKRUPTCY”.
The magic is this: When a trade/account is reported in this way, the FICO (Credit) Scoring model treats the accounts as “non-rated”.
Their negative effect is diminished!
Now a smart homebuyer would couple this with obtaining maybe 2 or 3 **secured** credit cards which are virtually guaranteed, pay on them for 12 months alongside the Bankruptcy Trustee payments and . . . voila! After 12 months of filing Chapter 13 the Borrower has a better score *AND* some re-established credit.
It’s important if using this maneuver to not leave any unpaid collection/charge off outside the BK filing.
For more details on purchasing a home while in Chapter 13 Bankruptcy, contact us at 877-332-9703 or through the links on this blog site.

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What Are FHA Rules For Buying A Home After Short Sale?

HUD that oversees FHA came out with the Mortgagee Letter in Dec 2009 which essentially gave FHA’s blessing for buyers who were forced to short sell their homes to be able to buy a home just 1 day after short sale!

Here’s the rules

Buyers are NOT eligible if

They are exploiting declining market conditions to be able to purchase a home of similar or superior size within a reasonable commuting distance. This means ‘moving up’ is not allowed.
They were behind on their mortgage at any time in the 12 months leading up to the short sale.

Buyers ARE eligible if:

They were forced to short sell their home due to some situation beyond their control such as death of a wage earner, relocation, job or income loss, onset of sickness or illness etc.
They were on time on their mortgage payments for the 12 months preceding the short sale and had only a 1 x 60-day mortgage late in the 24 months preceding the short sale.
There’s no deficiency balance resulting from the short sale. In other words the Lender settled for less than full balance.
The loan involved in the short sale cannot have been an FHA loan.

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Client called today with a not-so-unusual scenario. They had been declined by a Bank on this . .
They lost their home in foreclosure 5/29/2008, filed Bankruptcy in 10/2008 and the BK was discharged 6/4/2009.
In their Bankruptcy filing their attorney had listed the balance of the foreclosed-on mortgage. The bank denied their loan stating that the filing of the BK to include the mortgage made it to where 3 yrs had to expire from the BK discharge date.
Can they qualify for FHA financing now ?
The answer is:
The bank is wrong.
The three year time-clock to satisfy the ‘seasoning since foreclosure’ requirement of FHA, begins from the date of the Trustee sale (or in Judicial Foreclosure states such as Oklahoma, from the Court ordered sale date) -Well this client is past that 3 yr period (5/29/08).
The fact that the BK included the deficiency balance of the foreclosure (which would have prevented the Lender from trying to collect on it) doesn’t negate the 3 yr seasoning.
The BK is 2 yrs old (from Discharge date) and therefore they are eligible for FHA financing. :)

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How Long After Bankruptcy, Foreclosure, Short Sale Can I Buy a home?

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