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Mortgage Blog

In a tough economy borrowers worry about foreclosure and bankruptcy, and the effects such issues can have on the ability to borrow. One big topic these days regarding FHA loans involves the required waiting period for new FHA home loans after filing bankruptcy or foreclosure.

A good example of a frequently asked question in this area: "When does the waiting period began per FHA Guidelines? If you included a conventional loan in a Chapter 7 bankruptcy, does the waiting period began at the discharge date? Or does the waiting period began at the trustee sale?"

After Chapter 7 bankruptcy, (not to be confused with Chapter 13 bankruptcy rules) the borrower must wait out the FHA's minimum "seasoning" period. At the time of this writng, that period is two years plus any additional amount required by the lender. Some banks will require that a borrower wait a total of three years before applying for a new home loan.

Other lenders may be willing to work with qualified borrowers after the FHA two-year minimum for Chapter 7, but it is important to note that the required waiting period begins from the time the bankruptcy is discharged--NOT the time the bankruptcy is filed.

Here is some additional information on waiting periods and other requirements for both Chapter 13 and Chapter 7 bankruptcy:

CHAPTER 13 BANKRUPTCY WAITING PERIODS

FHA rules allow a lender to consider approving an FHA loan application from a borrower who is still paying on a Chapter 13 Bankruptcy-but only if those payments have been made and verified for a period of at least one year.

The borrower isn't automatically able to apply for a new FHA loan if they meet this requirement--the court trustee's written approval is a condition of the policy. Additionally, the borrower must write a detailed explanation of the bankruptcy and submit it with the loan application. The borrower must have good credit, a satisfactory employment history and other financial qualifications.

CHAPTER 7 BANKRUPTCY WAITING PERIODS

As mentioned above, all borrowers must wait least two years after the discharge date of a Chapter 7 Bankruptcy. The discharge date should not be confused with the date bankruptcy was filed.

As with Chapter 13 bankruptcy, FHA regulations demand a full explanation to be submitted with the FHA home loan application. To get a new FHA insured mortgage loan after Chapter 7, the borrower must qualify financially, establish a history of good credit in the wake of the filing of the Chapter 7, and meet other FHA requirements.


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Foreclsoure
Posted by Jill Kohler on October 28th, 2016 9:33 PM


mortgage payoff balance
When people look at their mortgage statement they think that is their payoff balance.  This however is not the case. Your mortgage payment is paid in arrears. For example, your July payment is paying June’s interest. Remember when you bought or refinanced your home and the loan originator stated “you’re going to skip one month’s payment” or “you won’t have another payment due until the following month after closing”? Well this is where that payment essentially catches up with you. (Technically, it’s not “that” payment, you’re just always paying the previous month’s interest).


The escrow company will order the payoff from your mortgage company. The interest is prorated to the day of funding/closing. There may be additional fees included in your payoff that the lender will charge, such as:

  • pay off transmission fees
  • unpaid late fees
  • prepayment penalties (you may want to consider delaying a refinance if possible until the prepay period is over if you have a prepayment penalty)

Often times, the escrow company will request the payoff with a few additional days factored in to act as a cushion. The escrow company may (should) order an updated payoff closer to the signing date in order to provide the most accurate figures possible. The lender being refinanced will refund any difference in your favor. In addition, if you have an escrow reserve account for taxes and insurance, you will receive a refund from the lender in approximately 6-8 weeks after closing.

At your signing appointment, ask to receive a copy of your payoff statement. Check to see how recently it was requested. If it was ordered at the beginning of the transaction and you have since made a mortgage payment, you can ask the closer to order an updated statement prior to closing (with a refinance, there is a three day right of rescission that takes place, so there should be enough time for this to take place with most lenders).


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Posted by Jill Kohler on October 18th, 2016 2:51 PM

FHA Loan

FHA loans are the new most popular mortgage loan. During the housing boom, subprime mortgages were all the rage. But as the housing market fell apart, lending standards tightened and the benefits of FHA mortgages are more prevalent.  FHA is a good alternative to for first time buyers to be able to qualify and become a homeowner even though they don't have a large amount of cash to put down.

You can borrow 96.5% of the value of the home. You only need to come up with a 3.50% downpayment. Minimum credit scores are typically lower, as well as you won’t be disqualified if you have a bankruptcy or foreclosure. With FHA loans, you can also refinance with them. You need to be current on your payments, but you may not need to get your home appraised. And typically there is a lot less paperwork involved. FHA currently allows sellers to contribute up to 6% towards the buyers closing costs. Lastly, FHA loans come with fixed rates. Many reasons homeowners got into trouble was their mortgages were adjustable rates and their monthly payments became very unstable.

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Posted by Jill Kohler on October 17th, 2016 4:26 PM

Credit Tips


One of the most important factors today in getting a Pennsylvania mortgage is knowing your credit score and history.  Your credit is going to determine a lot of things, whether you can get a mortgage, how much you'll have to put down and what your interest rate will be.

If you've had a blemish or two on your credit report (and who hasn't these days) here are a few tips toward improving your scores. 

  • Keep your bill payment history on time for 24 months.
  • Open several new accounts and use them by making the minimum payment for a number of months.
  • Open a secured credit card (Orchard Bank has a good one)
  • Don't keep running your credit report. Wait 6 months
  • Talk to a qualified professional about your situation
Posted by Jill Kohler on October 14th, 2016 4:08 PM

401k for home purchase
Many people consider this option since they don't have money set aside in their savings account. By withdrawing money from your 401k you will have to pay early withdraw fees as well as taxes on the money you take out. On the other hand, it may be worth it if you found the right house.

As a first time homebuyer you can often avoid the penalties, but you will have to pay taxes on the money. However, you can usually take the money out of your 401k without a penalty if you basically take out a loan on the money,( if your employer permits loans.)

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Also, unless you are putting at least 20% down on the home purchase, you will more than likely have pmi insurance. Since there isn’t going to be a huge difference in the monthly payment on the insurance itself, it may be in your better interest to consider not borrowing from the 401k unless you have enough to put the entire 20% down to avoid the insurance all together.

If you have an accountant I would suggest you sit down with them and see what this impact would have on each situation in relation to your taxes.  It is unique to every individual.

Posted by Jill Kohler on October 13th, 2016 11:05 AM
This is one of the most common questions we hear from potential home buyers and borrowers. The simple answer is a minimum of 3.5 to 5% in cash of the amount of the property you're planning on purchasing. This assumes decent credit (above 620 mid score) 2 years continuous employment, documented income (current paystubs, w-2's) with the total payment (including property/school taxes and insurance) or PITI no more than about 31% of gross monthly income for monthly housing expense. Bear in mind this is a minimum set of criteria. We fund loans through many different wholesale banks and each of those lenders has their own set of underwriting guidelines (and some can be downright picky) If you are planning on applying for a purchase mortgage anytime soon, you may want to speak with a qualified mortgage professional to review your credit, financials, accounts and ratio's to prepare in advance before entering the market and falling in love with your dream home. 

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Posted by Jill Kohler on October 11th, 2016 11:17 AM

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