[arcangel747]

I filed chapter 7 in May of 05 and was discharged in July of 05. I have been pre approved for a 171,000.00 house. I am trying to get a FHA loan with no money down and 100% financing. I haven't met with the mortgage folks yet but my question is will my chapter 7 prohibit me from getting this house. My credit score average is 652, which is good considering my recent filing. But I have read you need to wait at least 1 or 2 years after filing a chapter 7 before purchasing a house, but since my credit score is good am I an exception to the rule. Any insight would be greatly appreciated.

[CaptainForest]

You don't have to wait.

Although will a company loan you money when you are financing the entire thing? Who knows. But there is no reason you can't try. They might.

[Fr_Chuck]

First are you sure you can afford this much house??

I see so many people get discharged, and then jump right in and in 2 or 3 years not learning from the bankruptcy.

If you don't have any down payment is not some voice saying, hey I don't know if I should be doing this.

I would say that most likely you will not get a standard FHA loan. And I would wonder why or how you can have a good score wth a bankruptcy on file.

But each lender and lend as they want, so anything is possible. Normally why most want to wait a year or two, is to see if the person has leaned their lesson or not, if NOT, then within one or two years they will be right back in debt. Those that have keep clear and did not get into a lot of new debts, they have learned and are normally a better risk.

My guess, is that they will come back and want from 5 to 15 percent down but that is just my guess. All I can say is that I wish you all the luck.

[CaptainForest]

Fr Chuck does bring up some good points.

After the whole bankruptcy thing, is it smart to go getting yourself into this huge debt? Why not rent for a bit?

[Dr D]

You will probably not get an FHA loan until "at least two years have elapsed since the date of the discharge of the bankruptcy." "An elapsed period of less than two years, but not less than twelve months, may be acceptable if the borrower can show that the bankruptcy was caused by EXTENUATING circumstances beyond his or her control and has since exhibited a documented ability to manage his or her financial affairs in a responsible manner." If a foreclosure was involved, the waiting period is three years.

FHA does not offer 100% financing for a purchase. In states with average closing costs, the Loan To Value is 98.75% for properties with value/sales price <$50,000; 97.65% for <$125,000; 97.15% for >$125,000. Also FHA requires the borrower,s investment to be at least 3% of the sales price, consisting of down payment + closing costs. It is possible to secure this minimum from a "Down Payment Assistance " program.

If you are able to secure some type of sub-prime 100% financing, I guarantee thet it will be of the "Benjamin Dover" variety; with high closing costs, high rates and prepayment penalties. This may not be what you wish to hear, but I believe it to be accurate information.

[slym34]

With a 652 you can easily get 100% financing 1 day out of bk... You will have to go through a subprime lender, but your rates will not automatically be outrageous, probably 7's minimum on the first loan.
Again, you do want to be sure you can take on this debt, but assuming you can, the financing is available.

[arcangel747]

Thank you all for the comments. The latest information I have is that I was given 2 options that were both 3 year fixed ARM. The first option was an 80/20 with the 80 being 6.5% and the 20 being 11% for 30 years with 100% financing . The second option was 7.75% for 40 years with 100% financing.
My plan is to go with one of these options and refinance in July of '07 when my bankruptcy has been discharged for 2 years. Any suggestions on which option I should go with? Which is the easiest option to refinance in July '07?

[Fr_Chuck]

Of course my opinion is not to do this at all, but to put that payment money away till you can put it on a better down payment and get a overall better loan in 2 to 3 years.

But if I had to choice, even though the one has a lower interest rate for the first two years, what if, you can't get a better interest rate in 2 years because of un-foreseen bills and credit issues, or rate is way up in 2 years.

I would go with the fixed, that way no matter what you will not be paying 11 percent in 2 years

[Dr D]

The two options are very similar. With the 100% loan for 40 years the P&I is $1157.02. With the 80/20, the p&I is $864.67 + $325.69= $1190.36. The blended rate on the 80/20 works out to 7.40%, a bit lower than the fixed rate. If I had to choose, I would probably go with the fixed rate, because you avoid the risk of rates going to hell in a handbasket down the road. Be sure to check for the Prepayment Penalty which is usually two or three years and runs about 6 months worth of interest ($6300 - $6600). I would be surprised if it doesn't have one. Good luck.