What is the rule on 2nd mortgage or equity line / loan after BK?

2 Replies

I had to file Chapter 7 2-3 years ago to prevent my lender from auctioning my house the next day. Of course, after the filing they approved my modification. I did nothing with the BK and the Court dismissed it. Still the BK is on my bureau. I owe 280k on my house, it is worth 500k. I want to pull out 100k to buy another rental. I have a few questions: My FICO is still in the 620-640 range.

1) I know Fannie Mae's guideline is that you cannot get a investment property loan for 7 years after BK, but what about an equity on your main house that you occupy? Does anyone know this specifically?

2) Does anyone know any specific lenders that might work with me on this? I have called local and national banks with little luck.

3) I own 2 properties outright. They have only been seasoned 6 months. Any lenders that will work with me on a credit line or cash out? I don't think Fannie allows this.

Thanks in advance!!!

Hi Billy,

Fannie Mae's guideline for BK seasoning is actually 4 years from the discharge or dismissal date.

I would contact more local banks or private lenders until your BK seasoning is complete for any investment properties. On your primary residence you could go FHA as long as you have 2 years seasoning from the dismissal date.

Hope this helps.

Eric Black

Originally posted by @Billy Bob :
I had to file Chapter 7 2-3 years ago to prevent my lender from auctioning my house the next day. Of course, after the filing they approved my modification. I did nothing with the BK and the Court dismissed it. Still the BK is on my bureau. I owe 280k on my house, it is worth 500k. I want to pull out 100k to buy another rental. I have a few questions: My FICO is still in the 620-640 range.

1) I know Fannie Mae's guideline is that you cannot get a investment property loan for 7 years after BK, but what about an equity on your main house that you occupy? Does anyone know this specifically?

2) Does anyone know any specific lenders that might work with me on this? I have called local and national banks with little luck.

3) I own 2 properties outright. They have only been seasoned 6 months. Any lenders that will work with me on a credit line or cash out? I don't think Fannie allows this.

Thanks in advance!!!

Conv BK CH7 is 4 years not 7, if you have multiple BK's its 5 years.

2nd TD's it depends on the bank some wont even allow a BK CH7 to even exist on the credit report while most I see are around 5 years. I would check banks in your area to ask about their guidelines on CH7.

Most lines of credit are 700 + and in some cases like US bank its 660-680 min.

Every bank is different each risk they take will most like equate to a premium that you'll pay on your end for that luxury whether it be a higher LTV or a lower score that they may allow.

Portfolio lenders locally may consider a low LTV loan on your free and clear properties especially the purely asset based lenders but that usually means rates in the 8-12% range most likely.

Albert Bui, Lender in CA (#345453), WA (#345453), TX (#345453), and TN (#345453)
949-514-5106

Join the Largest Real Estate Investing Community

Basic membership is free, forever.