Anonymous
Anonymous asked in Business & FinanceRenting & Real Estate · 1 year ago

Two bankruptcies or one for purposes of new mortgage?

I had a chapter 13 bankruptcy converted to a chapter 7, which was discharged three years ago. My house was included in the bankruptcy, but the house sold at foreclosure a few months after the bankruptcy and the deed did not transfer until a year later (two years ago). I'm in a much better financial position and can afford a new house, but my credit union says they consider this two bankruptcies and I have to wait 5 years to apply. Other places, FHA, say I have to wait another year (so 3 years from the deed transfer). Will FHA also consider this scenario as two bankruptcies, thus extending even further the time I have to wait to apply for a new mortgage?

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  • 1 year ago
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    It doesn't really matter if they count it as one or two, you just need to shop around for an independent broker who works with people with less than perfect credit histories, and let them work to find you a loan.

    I had a similar story: I owned a house before the last crash and fell behind on payments when I lost my job. I owed $95,000 more than the current value of my house. Eventually after several failed attempts at loan modifications or forbearance, the bank offered a deed-in-lieu of foreclosure, meaning I'd sign over the house and they would write off the remaining balance of my loan. I took the deal and then spent 4 years in a rental and repairing my credit. When I approached my credit union about a loan they didn't know the difference between the DIL deal and a foreclosure, they told me it was all the same and I would have to wait until 7 years when the transaction dropped off my credit history. But I worked with an independent loan broker, who found me a mortgage at a great rate, and I closed on another house 2 years ago, just over 4 years after the DIL.

    I think that most credit unions in general don't like to work with people with less than perfect credit. Their employees aren't trained or experienced in dealing with situations like yours or mine, so they just turn away any situation they don't understand or don't want to deal with. So I wouldn't put too much stock in what the credit union told you. They might not loan you a penny for 7+ years, but that doesn't mean you can't get a loan with competitive rates & terms elsewhere.

    I love credit unions for everyday banking, but they're not a great source for loans of any kind if you have less than ideal credit history.

    Bottom line = shop around.

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  • 1 year ago

    You DO have two bankruptcies on your record. Chapter 13, the payment plan, which you were not able to comply with, and Chapter 7 liquidation.

    When lenders and credit reporting agencies decide to drop something is entirely up to them. They may have whatever waiting periods they want.

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  • 1 year ago

    We are not psychic. It will be AT LEAST 5 years. Could be more.

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  • 1 year ago

    It WAS two bankruptcies. You filed for Ch. 13 and then you went through a Ch. 7.

    Source(s): Certified Paralegal, with 25+ years' experience.
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  • 1 year ago

    Yes.

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  • 1 year ago

    I'm a mortgage lender. It's 3 years after Deed Transfer. Considered 1 bankruptcy since you converted rather than had the 13 dismissed. In the mean time you will need to re-establish credit. NO lates or collections after the bankruptcy! No more than 3 tradelines & if using credit card keep your balance under 30% of your credit limit. If paying rent keep cancelled checks since we don't accept handwritten receipts from landlords. We will ask for 1 years worth of proof of rent. FHA is your only option since conventional requires 5 years out of bk & a much higher score than FHA. I would also recomend you run your credit & make sure the credit bureau has updated all the accounts that were included in bk as such! Good luck!

    Source(s): Mortgage lender 33 years.
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