Can bankruptcy hurt you when trying to get a loan for a house?
I filed for bankruptcy in 2003 but was discharged in October 2006. I found a house that I would like to move into. The real estate agent told me that I qualified for a FHA loan. I signed a sales agreement with the agent. I paid him an appraisal fee. After talking to the mortgage broker, I was told to gather up all of my bankruptcy statements and the last 12 months of my utility bills. The mortgage broker is telling me that she needs to update my credit report and although closing for the house is supposed to be on June 23, I have not heard anything from the real estate agent. He hasn’t told me anything about what happened in the appraisal. The mortgage broker said that she’ll get back to me in a few days about my credit report, but my credit score is fine.
Does bankruptcy have an effect on whether or not I can receive an FHA loan? Shouldn’t the agent have gotten back to me about the appraisal already? Is this the normal procedure for rent to own homes? Am I being too impatient?
I wasn’t just asked to bring in my utility bills; I was asked to bring in my W2 papers and my pay stubs.
September 4th, 2009 at 4:56 am
I used to underwrite FHA loans and you CANNOT get an FHA loan with less than 2 years out of a bankruptcy.
You know how long it takes to get an approval for an FHA loan? Takes me about 20 minutes to underwrite one…so assuming the mortgage company is busy, in 3 days they should have a CREDIT decision…this has NOTHING to do with whether the home appraises, if title is clear, etc.
Call your loan officer and tell them you want TODAY to know if the UNDERWRITER has CREDIT approved the file or not.
I would bet you a dollar he has only pulled credit and hasn’t even sent it to an underwriter yet.
FHA guidelines says you have to be 2 years out of a bankruptcy before you will even be considered and have re-established CREDIT…utility bills does not qualify for "re-established" credit.
He is getting re-established credit confused with alternative credit, which FHA will accept, but only if you don’t have a bankruptcy.
PS: If he asked you to bring in paystubs and W-2’s that means NOTHING…all that does is prove your income.
It doesn’t matter if you make $100,000 a year, FHA won’t do a loan less than 2 years out of bankruptcy…period.
Here is the proof:
http://www.fha-home-loans.com/loan_qualifying_fha_loans.htm
There are ZERO exceptions to that guideline.
September 4th, 2009 at 4:56 am
Of course it hurts. Credit requirements are getting tougher, so you may have to wait a while. Pay everything on time starting today. It’s a jungle out there.
September 4th, 2009 at 4:56 am
Duh . . . Yes.
September 4th, 2009 at 4:56 am
Mortgages can come through very last minute (I know when we closed on our house last year we were quite anxious about our mortgage as well and we don’t have a bankruptcy on our credit), but it is not impossible to get a mortgage for an FHA loan with a bankruptcy on your credit. i know conventional wisdom is that it takes two years to rebuild your credit. You’ve been discharged almost two years, so you may be good. I am not sure what to tell you, but I’m not sure what is typical for rent to own homes. I imagine if you have a substantial "down payment (ie the rent and whatever lump sum you’ve paid as earnest money)" you should be okay. But without more information there is no way to know, and you can certainly look up your credit score yourself to see what your broker is talking about (same with your credit report). It’s understandable to be nervous, and there is no way for anyone on yahoo to guarantee you will definitely get the loan.
September 4th, 2009 at 4:56 am
Because you’ve have been processed this far, I would say no. They have taken into account your past issues. As for the appraisal, I’m sure it’s fine. Most come in at or above the purchase price in a buy situation. As for your Realtor, well after all the documentation has been filed there really isn’t much for them to do. I realize it get’s quiet from all sides, but it’s because they are all working on stuff to get ready for closing. Don’t sweat it. Things are fine. It’s all normal. It’s not that you are being impatient, it’s just your excitement at having a place of your own. That’s normal too.
Best of Luck!
September 4th, 2009 at 4:56 am
When you filed bankruptcy - in essence, you said……"I have all these financial obligations. I made promises to all these people to pay them back but because I made too many promises and was not responsible - I can’t keep any of these promises so my word is worthless and I am not going to pay any of these people"
By trying to get a home loan, you are asking a lender to completely ignore that you stiffed all the other people that lent you money or provided services that you did not pay for. In essence you are saying "my word to promise to pay was no good before but, really, I’m going to actually honor it this time".
Of course, a lender is going to have very serious concerns about loaning you a large amount of money so soon after a bankruptcy.