We are looking at purchasing a house in the summer of 2013. However, back in 2008 when DW's business went under, we filed for chapter 7 and did not reaffirm our mortgage. Since then, we have moved out of the house and have been renting a home. We have also been leasing our included in bankruptcy (IIB) house for two years and have tenants who just signed another lease and want to be long-term tenants. We have been claiming the rental income on our taxes and have converted it from a primary residence to investment propertty. We also have $0 credit card debt, myfico scores right at 700, and only one car note which is being paid down quickly. we have been working hard and sacrificing a lot to get our scores back up.
However, we are quite a bit upside down on our IIB house and do not forsee the market turning around anytime soon. I am contemplating trying to settle the second mortgage on the house, but all the info I read says you need to stop payments on the second mortgage to be able to negotiate. But, if I were to do that, I fear that when the time comes to get a new mortgage, the underwriter would request payments on both the 80% and the 20% and if I have not settled it yet, we would not qualify. On our credit reports, both mortgages are showing IIB and not showing any payments. So, I am looking for a timeline to possibly try this and still be able to make the mortgage current when the time comes.
So, to anyone that has obtained a new mortgage with a current IIB mortgage, what does the underwriting require? Is it six months or a year's worth of current payments? What is typical?
12 months mortgage history
Thank you, that is what I assumed. In that case, I will continue to keep everything current as there isn't any time to work out a deal.