Ask Me Anything About Buying After Bankruptcy

Buying after bankruptcy is a topic that we have become experts at.

We get readers from all over the Country that are either doing research in an attempt to get started, or doing research in an attempt to figure out what went wrong with their current lender.

There is an interesting thing that happens when you call a lender and apply for a home loan.  They seem to always say YES at first, and many times will come back later and say NO.

Why does that happen?  Well, there are a lot of reasons.  The most common reason being that many loan officers are sales people.  Sales people like to think of people as “numbers”….as in “I’ve gotta hit my numbers”.

Well, nobody likes to be a number, and when you close your eyes and swing at every pitch that comes at you, you’re going to miss a lot.  And many sales people miss a lot!

The reason we started this site was to give folks a voice, and an opportunity to get expert advice with no motivation for answering questions other than to help.  I don’t know you, I don’t know where you live, I just answer your questions as they roll in.

Why would we do this?  Because it’s the right thing to do!  Listen, we get plenty of business from families trying to buy or refinance in my home State of California, so it’s not like I’m doing this and getting nothing in return.

I also have a large network of experienced lender friends that I know and trust that I introduce people to all the time.  The average years of experience among this group has got to be close to 20 years.  Some more, some less.  All trustworthy, and willing to help.

I wanted to share examples of some of the most common types of questions I get every day.  If you find yourself in a similar situation, you can always ask your question here if I haven’t already answered it for you.

Lenders That Have Their Own Guidelines

Here is a typical example of a lender that chooses to be more conservative, and not follow certain guidelines regarding bankruptcy and foreclosure.

Hi Scott,

Reading through your blog and see questions/answers similar to mine… but not exactly, so I’m hoping you can guide me?

We had a Chapter 7 discharge on 9/9/09 followed by a vacant property foreclosure in WI (sheriff sale date of 7/7/10). We bought a new property in October 2013 and have a FHA loan that we’re paying PMI on.

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I called Wells Fargo to ask about a refinance and they’re saying we can’t qualify for Conventional financing until after 7/7/10. Is that accurate, or is that only because it’s through Wells Fargo?

Any Advice?

Carrie

So this is more common than you would think.  Wells Fargo has overlays that are more strict than the Fannie Mae Guidelines.  My answer to Carrie was that this is NOT accurate.

Because the mortgage was included in a bankruptcy, using conventional financing, you can go by the bankruptcy discharge date and can ignore the subsequent foreclosure.

Carrie is also eligible for FHA financing, 3 years from the foreclosure.

Lenders That Say YES, Then Later Say NO

I get way more of these kinds of stories than I would like to admit.  The worst of these are people that I know I can help, but they want to “stick it out” and see if their lender can figure it out.

Whether it’s an inexperienced loan officer, or a misinformed underwriter, or a company policy to take a more conservative route than the underwriting guidelines allow for, the end result is the same.

Hello Scott,

I had emailed you a few months ago about a situation I have.

I had a vacation home that I had included in my bankruptcy.  The bankruptcy was discharged sometime in January or February of 2013.  My bankruptcy lawyer told me NOT to reaffirm with Wells Fargo (the lender) so I didn’t.

However, I had continued to make the monthly payment because I thought I had to.  When I called Wells Fargo in May 2015 telling them I couldn’t afford to continue the payments, they told me it wasn’t a problem because it had been included in the bankruptcy and I could simply “walk away”.

They didn’t end up foreclosing on the house and getting sold until October 2016.

You had told me that because it had been in the bankruptcy and I never reaffirmed, and it had been sold last year (no longer in my name), that there wasn’t any reason why I couldn’t get a conventional loan to buy another primary residence.  You said you knew someone I could go to for the loan if the lender I was working with turned me down.

Well, they told me it wasn’t going to be a problem, so I told you I wouldn’t need the name of the lender.

However, I just received a phone call about an hour ago from the lender, and he says the underwriter said I can’t get the loan because the house didn’t foreclose and get sold until last year.  He states it doesn’t matter that it was included in the bankruptcy.

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That the problem is because I continued to pay on it.  I told him I gave him all that information up front and asked him to check with his underwriter before I even started looking for a house.  He said he is going to try and see what he can do, but he doesn’t think he will be able to do anything.

The devastating part of this whole thing is, I put a bid on a house and was supposed to close on March 29^th, and now I’m being told I can’t get the loan.

If there is anything at all that you can do to help, I would be extremely grateful, because I don’t want to lose this house.

Laura

I know, tragic, right?  Well, you don’t have to worry about Laura.  I introduced her to the same person I sent her too the first time she contacted me, and Laura is going to be able to close on-time and get her home.

Need an Expert Opinion?

So there you have it.  There’s two of the hundreds of questions we get on a monthly basis.  If you find this article, or this site, and you have a question, please feel free to ask.

I have nothing to gain by answering your question, so you’re only going to get my experience, or an introduction to an experienced friend of mine, not a sales pitch.