Getting a mortgage after foreclosure or short sale not so simple

I talked with a loan officer from my bank a few weeks back just to explore the idea of being able to buy a place of my own again some day. The initial meeting actually went much better than I expected, but then again, most meetings with commissioned based salespeople start off well : ) I know that.

I explained my bankruptcy and the short sale and showed my income (all on the personal side) and student loans. I’ve had no late payments on anything since my bankruptcy.

I wrote a letter explaining how I got into this mess that I guess goes to the underwriters.

I really just wanted to find out if it is even possible in the next year or so to get a mortgage. There are some places now I’m seeing that are similar to where I am renting that I could purchase and actually have a lower monthly mortgage payment than my current rent payment.

No deal said the bank. Which is fine….

Short sale 2 years ago was deal breaker

What was interesting is that my loan officer said that everything was fine (even the bankruptcy just being discharged a little over a year ago)…

except for the short sale I did. That killed the whole deal. I actually thought that might have helped a bit. Rather than just walking away from the home, I at least worked out a short sale to avoid foreclosure.

It wasn’t enough.

It’s fine. It actually just makes me want to work harder. Screw a mortgage, I want to just pay cash for my next place. Plus, my girlfriend said something really nice to me this weekend, “I don’t need a house. I would live in any size apartment with you” she said. Not that we are planning on living together anytime soon, but it was nice to hear.

Actually glad I didn’t get the loan

I’m actually a little glad I didn’t get approved. It would have been a distraction to me mentally to know I could buy a place. I’d waste time looking at listings when I should be working to pay off my Mom!

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  • 8020 Financial

    I'm a big fan DebtKid, but really what were you thinking when you tried to get a mortgage anyway? Your business is doing very well at the moment, but remember we're in a major recession that could get worse, and affect you as much as it is everyone else.
    Don't repeat past mistakes.

  • DebtKid

    I don't know what I was thinking. I was just thinking that if I could lower my payment, it might be worth at least looking into. Plus, I honestly wanted to know if I could just get approved or not. It was the first real credit I've applied for in years, and I wanted to see how much I've screwed myself in that department.

    I post my mistakes here often. I don't think this is anything new : )

  • Cathy

    I'm sure you'll have a house again, debtkid. After you've paid off your existing obligations, ya? Good things come to those who wait. :)

  • Michelle

    In a way, I think it's good you went and got a "check up". And did they really tell you anything you didn't already know? Deep down, you know you aren't ready to take on that sort of debt again. All they did is confirm that for you. And you learned something to share with the rest of us….. short sales do have lasting consequences.

    I believe in perfect timing in life, and at some point in the future, it will be time to buy a home again. When all your debts are paid, when the need arises in your personal life, and when you are ready to be responsible with the investment of owning a home. Keep up the good work!

  • Jocelyn

    It's always good to know where you stand and, hopefully, with that information you can get everything in order to be 100% ready when your time is right. You're on your way. Be encouraged!

  • Jack C Johnstone

    While I agree that it's probably good you weren't approved, I would have gone with a mortgage broker rather than a loan officer at a specific bank. Assuming you would actually want to be approved and get a good deal, that is.

  • Chris

    Hi DK, I don't think that you made a mistake at all. You're renting when you could be buying with lower mortgage payments. Makes sense, even with the recession. There are always jobs out there.
    It's amazing what you're doing! Keep going!

  • David

    you can give up to $13k in 2009 w/o gift tax applying… not even sure if that would/should apply to a loan you are paying back.

    but anyways, get your head out of your rear end and pay back your mother

  • Chris G

    I think that girlfriend of yours is a keeper! My wife keeps whining that we should have a bigger place!

  • Laurie

    I thought Short Sales were a smart thing…is it because you foreclosed also? Usually Short Sales only lower your credit score about 50 points….

  • DebtKid

    I think they are viewed as better than walking away from the home, but they are stillviewedvery negatively.

  • Kenny D

    Hi DebtKid,
    With all the “mistakes” you say you’ve made, it does sound like you’re doing well and will continue in that direction. You are a fast learner so it seems. I want to ask you what you might do if in a situation like mine: with a student loan of more figures than I care to say and other dept incurred as well, what would you consider as side or other work to pay down this debt? Any advice or suggestions will be welcome.

  • CJae

    Not the right answer anymore, Jack….”mortgage brokers” as we used to know them are GONE! The “mortgage brokers” of today are running their loans through the big guys, such as Bank of America, Wells Fargo, National City, etc.. You will pay a premium by not going directly to the big banks. Loans are made, then sold in HUGE bulk directly to FNMA, FHLMC and GNMA…..unless you’re the bigs guys, you can’t sell direct. Even your local banks can’t sell direct. They are wholesale correspondent lenders that go through the big boys for their money. These days it’s even harder to get a loan through a “mortgage broker” because the big guys are being so much more cautious on those loans. The majority of Countrywide’s “bad loans” weren’t even done by Countrywide loan officers….they were done by the old “mortgage brokers”. Things aren’t the same anymore….unfortunately, it takes the public much longer to figure this out.

  • CJae

    Neither is true…..first of all, only 5% of short sales actually go through….you got lucky! It’s actually in the bank’s best interest to just foreclose. But think about it…..a short sale means you didn’t live up to your original promise…to pay back X amount of dollars and X interest rate over X term. Unless you had a Chapter 13, you can’t get a mortgage for a minimum of 2 years after bankruptcy (FHA and VA….4 years for Conventional)….4 years for a foreclosure and a short sale. I’m a 36 year mortgage banker…..