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looking to cash out refinance to pay off active chapter 13 bankruptcy


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Is there a lender/loan for me?

 

I have an approved court order motion to incur additional debt to pay off my Chapter 13 bankruptcy early and without penalty wiht proceeds from a home refinance.    The chapter 13 payoff amount is about $61,000 to be paid to my trustee.

 

The bankruptcy has been active 2 years 10 months with all payments on time.

 

My first and second mortgages total about $31,000.  

 

Income is $58,000 salary plus $30,000 annual retirement pension.

 

Savings are $10,000 checking and $160,000 in retirement savings.

 

When the bankruptcy is paid my only debt will be the new mortgage.  approx $476 for monthly payment for 30 years at 4%. borrowing $100,000.

 

zillow estimate  of house is $206,000.  

 

My median credit score is 688.  I don't have any late payments.  Just me on the loan.

 

thanks,

 

 

 

 

 

 

 

  

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The most lenient loan program I am aware of is FHA, and they require a wait of 2 years after discharge. 

 

... or 1 year if you can demonstrate "extenuating circumstances." 

 

Given how low the bar is for FHA requirements in general, I would imagine that this wouldn't be difficult to show.

 

But that still leaves you with one year after discharge, a milestone you have not yet reached.

 

Wait for other input before proceeding.  My understanding is better than superficial, but this is certainly not my area of expertise.

 

Good luck. 

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So out of curiosity and unaware that paying off my chapter 13 without making my creditors whole again was even a possibility I asked my trustee what my payoff amount is.  In the payoff letter it mentioned that if I wanted to use proceeds from a refinance from my house I could do so with court approval.  The payoff roughly being the amount of my remaining payments seems like a good option if I can find someone to refinance my house.  

 

I asked an online lender who didn't right off say no to a refinance to pay off an active chapter 13.  I applied for the loan,  a couple of weeks went by and they still didn't say no.  I then asked my bankruptcy attorney to file a motion to incur debt for the purpose of paying off my chapter 13 from proceeds of refinancing my house (the motion is very specific to a refinance).  Letters were sent to my creditors and with no objections the motion was approved by the court.    

 

Now I am legally allowed to refinance my home.  I have sent the court document to the lender where I have applied  and they seem to be stalling or maybe just slow I don't know.  I am trying to find another option if they don't come through.  

 

I had  read somewhere that an FHA loan could be done in as little as one day after a Chapter 13.  I guess in this case I am still asking for it pay an active chapter 13.  Are there no 'un conventional' loans that don't care  about chapter 13 if I qualify in every other way?  Where exactly do the Chapter 13 wait restrictions come from?

 

Selling the house now I don't really want to do.  I also don't have court approval do so although I don't know why they wouldn't since they have allowed me to refinance.

 

I am close to 3 years in a 7 year chapter 13.  Covid allowed me to extend my chapter 13 by an additional 2 years (something I wish I hadn't done).

 

thanks,

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I have found a couple of web sources that say what I want can be done if I qualify with a lender that can do FHA loan manual underwriting.  Any idea who does that? thanks,

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17 hours ago, jde said:

I have found a couple of web sources that say what I want can be done if I qualify with a lender that can do FHA loan manual underwriting.  Any idea who does that? thanks,

 

If this is truly a possibility, the underwriting costs for the lender are probably significant, and therefore places that do this may not advertise it.

 

I would call some local banks.  There may be some who do this as part of their CRA requirements.

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I called a few local banks.  One local bank said no but  referred me to a mortgage broker with an FHA underwriter on staff.  I called them and found someone with experience doing FHA loans in active bankruptcies, usually for purchase.  I submitted all of my documentation and things are moving along.  I signed disclosures and paid for an appraisal.    3.25% 30 years fixed, closing costs look really expensive but will be worth it to me. What could go wrong.

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  • 1 month later...
22 hours ago, jde said:

Hit Man, thanks on the above suggestion to call local banks.  That put me on the good track.  I closed on an FHA refinance today that is paying off  my active chapter 13.  

 

Really happy to hear that.  Thanks for posting the outcome!  :)  

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On 8/6/2021 at 5:41 PM, jde said:

My median credit score is 688.  I don't have any late payments.  Just me on the loan.

 

My comment here is absolutely secondary to the excellent feedback from @cv91915.

 

I just want to make sure you're referring to your mortgage scores, and not another score such as FICO 8 or Vantage, which are frequently offered by some credit card sites or other "educational" credit sites.

 

The pertinent scores are FICO 2/FICO 3/FICO 5 (each one pertains to a specific CRA) and are most readily attained by purchasing a 3-bureau report from myFICO.com. (disclosed in the "Additional Scores" section of your report.)  These can vary considerably from FICO 8 scores.

 

Just as an example, my median FICO 8 is approx 840; my median FICO 2/3/5 is approx 760.

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 The scores were given to me from  loan originators when I talked to them on the phone, first Amerisave after I gave him permission and then later Stockton Mortgage after I gave  permisson.  I do know my credit reports now show 2 inquiries and I received letters in the mail from both lenders saying they had made credit inquiries and the letters included the scores.  I didn't really look to see where the scores came from or what they were called.  I think the three scores were 610, 688 and 690.

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