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Can you get a new loan/home without reaffirming Ch 7 discharged mortgage(s)?

My husband & I filed Ch 7 BK (Connecticut) in 2009 after I lost my job in 2008 and our 1st & 2nd mortgages were discharged (our credit reports state as such, with no payment history since then - as expected). We did NOT REAFFIRM the debt and never planned to (why risk being liable again?) We moved out of the home and rented it out so we wouldn't lose it. The home has been tenant-occupied 100% of the time since 2009. What we make in rental income covers what we pay for both mortgages, so we're able to keep up with the payments & would prefer never to have to let it foreclose with the hopes to one day sell it and not be a short sale - we aren't expecting to make money on the deal, we just don't want to be short. In the meantime, we have awesome tenants who have over 2 years left on their lease. We moved down to SC in 2009 and are now trying to buy a new home.We are now being told (talking to Bank of America) that the underwriter will not work with us until we either reaffirm the debt or "give back the house to the bank" and therefore have to wait 3 years.So it begs the question - will every single reputable lender make this same request? Or is there a lender who will see our situation, run the numbers and trust we aren't doing the buy & ditch scenario (like I said, we have no intention of foreclosing on the existing home)?And it boggles my mind why would a lender want us to suddenly become personally liable for $164,000 of debt that we currently aren't responsible for. Give us more debt so you can grant us even more? Does that not make sense to anyone but us? And a part 2 question:If we do reaffirm so we can get a new mortgage, I found an interesting new(er - since 2008 apparently) rule that FHA has (and a conventional loan's rule is even stricter - only FHA works for us because we only have 3.5% for a down payment)... if you have 25% or less worth of equity in the existing home (true, the market turned down again so it is technically upside-down), you cannot count the rental income from that home as part of your total income to get approval for your new loan. In other words, if you're upside-down in the discharged/reaffirmed home, your income excluding rental income must be able to afford the new & existing mortgages.If this rule is for real & enforced, that's over $16,000 per year we wouldn't be able to count as income, and no way would our regular income alone afford all the mortgage payments... when in reality we CAN afford all the payments because of the rental income. I just don't want to reaffirm only to find out we don't financially qualify for a new home anyway. Thoughts? by wacreations293 from Columbia, South Carolina. Sep 17th 2014 Reply


Mick Jewell (mickjewell)
#6 ranked lender in South Carolina - 13 contributions

Are you claiming the rental income on your tax returns and is the mortgage current?

Sep 17th 2014
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Yes, the mortgage is current and we will have 12 months of on time payments as of December of this year (we weren't planning to close on a home until May or June of next year). Yes, we claim the rental income on our taxes.

Sep 17th 2014
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We also have a 5 year on time payment history for the home we've been renting.

Sep 17th 2014
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William J Acres (William_Acres)
#2 ranked lender in Arizona - 7,933 contributions

For this very reason, I always tell folks to never go to the big bank's.. FNMA guidelines will allow you to purchase 4 years after a BK, and you do not have to reaffirm the existing loans.. however, BofA can and obviously did add an additional guideline.. This is what is called in our industry an "Overlay".. Each lender can add additional overlays to the guidelines based on their own tolerance of risk.. You should be able to find a lender who will be willing to do the loan without requesting you reaffirm.. As far as the income is concerned.. it's another overlay.. FNMA does not state anywhere that you have to qualify for the new loan by adding the rental property mortgage payment without considering the rental income. For the rental income to be considered, it must be on your schedule E for past 2 years taxes.. Also, if your existing loan is an FHA loan, you wont be able to get another FHA loan until that property is paid off.. The best advice I can give you is to contact a LOCAL mortgage broker and apply with them. Based on your scenario, and assuming you meet all other eligibility requirements, you should have no problem finding a lender to do your loan.. Understand that by applying with your LOCAL Broker, you have an advantage because he's familiar with local customs and works with numerous lenders, seeking out the best loan terms for your particular scenario. ( our company is signed up with 21 different lenders) Because the broker has lower overhead, he can offer you lower rates and lower fees than most of the larger lenders.. I'm a Broker here in Scottsdale AZ and I only lend in Arizona. If you or someone you know is looking for financing options, feel free to contact me or pass along my information. William J. Acres, Lender411's number ONE lender in Arizona. 480-287-5714 WilliamAcres.com

Sep 17th 2014
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Joe Metzler (JoeMetzler)
#1 ranked lender in Minnesota - 3,524 contributions

YES... You CAN get a new loan without reaffirming. Many lenders will NOT approve you if you did not reaffirm, but that is an incorrect reading of the guidelines. Just call someone else. We do these all the time. You just have to be able to obtain from the current lender, a record and proof of the last 12 months of payments. We lend in MN, WI, and SD. www.MortgagesUnlimited.biz

Sep 17th 2014
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We actually tried going through a local lender first (movement mortgage). We had pre-approval, put in an offer on a house and were under contract. Then our lender tells us that no matter who we go through, FHA loan requires that we have 12 months of on time payments to our existing mortgages. We had made on time payments since Sep 2013, but our lender (Ocwen) refused to give us credit for those first 3 payments since we were getting a modification and that was their required "trial period".So we fell out of contract and the $400 for inspection was lost. All for something they should have known BEFOREHAND and should have not pre-approved us. This is why we started looking at national lenders and we have checking/savings with BoA which is why we started there.I guess it's back to the local lenders. Thank you.I just question the first one because A) they told us our 2nd mortgage was reported and fine (yet it was modified as well and B) that they did see payments starting since Dec2013 for our 1st mortgage when we just found out via the BoA representative that NEITHER loan has been reported to our credit reports (even though we'd already gone through the lender to get them to report it & the local lender said they did)... It just all made it seem shady... getting told one thing when it wasn't even true. We started to get the feeling they were telling us ANY reason - made up or real - to get out of loaning us the money for some reason.

Sep 17th 2014
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Todd Glassman (Todd Glassman)
#1 ranked lender in South Carolina - 111 contributions

It sounds like you would qualify to purchase your new home! We are local here in SC since 1997. Feel free to call us at 864-438-4550.

Sep 18th 2014
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