This post is a further review of credit issues and dealing with a bankruptcy (BK) or foreclosure when looking to purchase or refinance a home.
The best program available dealing with these two issues is currently the FHA and here are their guidelines. You will still be required to qualify based on the usual standards of income, assets, employment etc.
The best program available dealing with these two issues is currently the FHA and here are their guidelines. You will still be required to qualify based on the usual standards of income, assets, employment etc.
1. Chapter 13- If you have had a chapter 13 BK and have made your payments on time for one year from the date of the filing, you will qualify for a purchase mortgage. You must also have re-established good credit.
2. Chapter 7- The BK must be at least 2 years ago and re-established good credit. Unlike the Chap 13 this is based on the DISCHARGE date not the filing date. The discharge is typically a few months after the filing date.
3. Foreclosure or Deed in Lieu of Foreclosure- After 3 years borrower can be approved. If the foreclosure was the borrower's primary residence AND the foreclosure was due to extenuating circumstances (medical, or spouse died etc) AND the borrower has since re-established good credit, exceptions can be made. Poor money management is not a qualifying factor for the exception.
Credit letters will usually be required explaining the reason the BK or foreclosure and what plan will avoid a similar result.
Most lenders now are requiring a minimum Credit Score of 620 for FHA loans. On a "hard" pull credit report or tri merge which is required by the lenders, a borrower receives a credit score from the three credit repositories, Transunion, Equifax and Experian.
They each have their own software that calculates your score. The high and low scores are throw out and your middle credit score will be the determining factor. Often I will have a customer who has had a credit report from some free site on the Internet. These usually only provide one score and it is almost always higher than a tri-merge report. I would not put a lot of weight on these free reports as they cannot be used in a mortgage application.
2. Chapter 7- The BK must be at least 2 years ago and re-established good credit. Unlike the Chap 13 this is based on the DISCHARGE date not the filing date. The discharge is typically a few months after the filing date.
3. Foreclosure or Deed in Lieu of Foreclosure- After 3 years borrower can be approved. If the foreclosure was the borrower's primary residence AND the foreclosure was due to extenuating circumstances (medical, or spouse died etc) AND the borrower has since re-established good credit, exceptions can be made. Poor money management is not a qualifying factor for the exception.
Credit letters will usually be required explaining the reason the BK or foreclosure and what plan will avoid a similar result.
Most lenders now are requiring a minimum Credit Score of 620 for FHA loans. On a "hard" pull credit report or tri merge which is required by the lenders, a borrower receives a credit score from the three credit repositories, Transunion, Equifax and Experian.
They each have their own software that calculates your score. The high and low scores are throw out and your middle credit score will be the determining factor. Often I will have a customer who has had a credit report from some free site on the Internet. These usually only provide one score and it is almost always higher than a tri-merge report. I would not put a lot of weight on these free reports as they cannot be used in a mortgage application.
If you find there are inaccuracies on your report and you have supporting documentation I may be able to increase your credit score with letters to the credit agencies.
For more serious issues there are legitimate credit repair companies out there who can raise your score in several months and they can be a useful tool. I can put you in contact with such a company.
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3 comments:
Although a loan does not start out as income to the borrower, it becomes income to the borrower if the borrower is discharged of indebtedness.
Although a loan does not start out as income to the borrower, it becomes income to the borrower if the borrower is discharged of indebtedness.
Just recently I have had an incident where that did come up in a short sale of a home. I believe the deficiency between what was owed and what the property eventually sold for was considered taxable income. You stated a loan and by that I assume you are addressing mortgage debt.
Thanks for the input
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