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Qualifying for Home Loan after Bankruptcy & Short Sale

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nemoryer
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Qualifying for Home Loan after Bankruptcy & Short Sale  Reply with quote  

My niece filed for BK Chapter 11 in California 2 years ago.

She tried to re-modify her loan (house severely underwater) but Wells Fargo Bank refused to help them out.

She stopped paying mortgage in October of 2011 and had just gotten notice from the bank that short sale is in place and further notice will be given as to when they should move out.

She is contemplating buying a smaller home but wants to know if she can even qualify for a loan. The townhouse they are looking at is at market price of $149,000. Far cry from the house they are giving up which was purchased 3 years ago at something like $450,000.

Should she stop dreaming that she will ever again become a homeowner?

With the BK and shortsale, does this mean they are doomed?

Thank you.
Post Mon Jan 30, 2012 11:52 pm
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oldguy
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What happened between 3 yrs ago and 2 years ago that caused the BK? A job loss ?

And do they both have good jobs now? If so, how long have they had them?

The new HARP 2 provides a refi no matter how far they are underwater, and it now covers private loans as well as Freddie & Fannie. So at this point she could probably get a refi on the house (if she still wanted it).
Post Tue Jan 31, 2012 12:28 am
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nemoryer
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Hello.

2 years ago, she owed $68k (approx) on credit cards so she filed for BK and is paying through the Trustee for 5 years. This year will finish her 2nd year.

Far as staying in the current house, I think they all just want to move out. They've had it with Wells Fargo Bank whom they contend "had screwed them over more times than 1" but sorry, I do not know all the details.

So this year, 2012, her house is in short sale. So in essence, within 2 years, she'd had a BK and a Short Sale.

She is grappling with the fact that she may have to rent and she does not want to rent, she still wants to own, only this time, a more modest, smaller house that they can truly afford.

Problem is, will they qualify for a loan to buy another home is the question. Thank you.
Post Tue Jan 31, 2012 12:36 am
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nemoryer
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Qualifying for home loan  Reply with quote  

PS -- YES they are both still employed with same employers for over 20 years.
Post Tue Jan 31, 2012 12:44 am
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oldguy
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Sounds like they will need to rent for 5 yrs or so - I doubt that any lender would want lend money to them. A lender is in the business of finding the best qualified people to loan their money to (1) get steady returns on their money, and (2) be certain of gfetting their principal back. I'm guessing that if 1000 applicants show up for loans, your neice would be about 1001, LOL - ie, the lender can find 1000's of better risks, they don't need to take the high risks.

The reason I say that is that they have held steady jobs for 20 years and still they totally mismanaged that steady income stream. That's far worse for them than if they had experienced an understandable tragedy (such as prolonged job losses.) A $68,000 cc loan doesn't just happen.

A finanace course at a local community college might help - learn about cash flow, investing, etc - they might enjoy it. And learn about "intellectual honesty", (it's pretty unlikely that WF 'screwed them over', they must own up to their mistakes or they will happen again)
Post Tue Jan 31, 2012 1:49 am
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nemoryer
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So true! "Mismanaged" is the key word for them. They've made good salaries but spend like there's no tomorrow. The credit card loans were from years and years ago that they've managed to cover up with a bandage, suddenly, they couldn't anymore.


They are both in their 50's going on 20. Sorry to say that, but I will pass on your sage advice. THANK YOU EVER SO MUCH for your kind and truthful comments.
Post Tue Jan 31, 2012 2:31 am
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littleroc02us
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I would say it's time to get your own house in order, pardon the pun. Smile The fact of the matter is there is a reason that she got into this problem, either she lost her job or she racked up debt on credit cards buying things she couldn't afford or she mismanaged her money. Getting into a new home currently would be the worst thing she could do right now. I would hope the banks wouldn't be dumb enough to make the loan. I would suggest she rent a cheap apartment for the next 5 years, pay off all of her debt and prove that she can budget well. Then maybe she can buy another house someday.

Ronald Reagan once noted the basic difference between Democrats and Republicans. “Republicans believe every day is the Fourth of July,” he said. “Democrats believe every day is April 15th.”
Post Tue Jan 31, 2012 3:08 pm
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