Home Loan After Bankruptcy and Foreclosure Guidelines

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n this article, we will discuss qualifying for a home loan after bankruptcy and foreclosure. The great news for home buyers is that they can now qualify for a home loan after bankruptcy and foreclosure with no waiting period requirements with our new NON-QM Loans.

There are waiting period requirements in qualifying for FHA, VA, USDA, and Conventional loans.

Homebuyers can use NON-QM Loans as bridge loans until they have met their waiting period requirements for traditional conforming home loans. The impact of the real estate and banking collapse of 2008 has devastated tens of millions of Americans.

Buying A Home After Bankruptcy and Foreclosure

Millions of hard-working folks have lost everything they have worked so hard for, especially their homes. Those fortunate enough to recover from the severe housing and credit crash of 2008 often ask me if they qualify to purchase a loan. Many of our clients have filed for bankruptcy or had a foreclosure since 2008 and have been starting their lives again.

Borrowers can qualify for a mortgage after bankruptcy with government and conventional loans after meeting the minimum waiting period requirements. Non-QM loans do not have a minimum waiting period after bankruptcy but require a 20% to 30% down payment.

Given the severe impact of the housing crumble, many have filed for bankruptcy, foreclosures, completed a short sale or issued a deed-in-lieu of foreclosure. As people rebuild their credit, a major concern is when they can be homeowners again. When can they be homeowners again?  That is such a great practical, common-sense question that is difficult to answer. Even though the government may have set certain waiting period guidelines, each lender might have stricter criteria, often called overlays.

Waiting Periods To Qualify For Home Loan After Bankruptcy and Foreclosure

Federal Housing Administration (FHA) Insured Loan

Foreclosure –

• Three years from the recorded date of foreclosure or sheriff’s sale

Deed-in Lieu –

• Three years from the recorded date of foreclosure or date of sheriff’s sale

Short Sale –

• The waiting period to qualify for FHA loan after a short sale is three years from the short sale date, which is reflected on the HUD-1 Settlement Statement.

Bankruptcy (Chapter 7) –

• Two years from the Chapter 7 Bankruptcy discharge of Chapter 7.

Bankruptcy (Chapter 13) –

• No waiting period from the discharge date of the Chapter 13 Bankruptcy discharge date with a manual underwriting
• Two years from the Chapter 13 Bankruptcy dismissal date for automatic approval

Borrowers can qualify for FHA loan 1 year into the Chapter 13 Bankruptcy

• after 12 bankruptcy payments made
• all payments were made on time as agreed
• trustee approves the borrower’s new mortgage loan

VA Home Loan After Bankruptcy and Foreclosure

Veterans Administration (VA) Guaranteed Loan

Foreclosure –

• Two years after the recorded date of the foreclosure

Deed-in Lieu –

• Two years after the recorded date of the deed-in-lieu of foreclosure

Short Sale –

• Two years after the date of the short sale reflected on the Closing Disclosure (CD)

Bankruptcy (Chapter 7 or 11) –

• Two years from bankruptcy discharge (can be reduced to 1 year if there are “extenuating circumstances” and credit has been re-established)

Bankruptcy (Chapter 13) –

• 2 years from bankruptcy discharge for automatic approval
• But can be as low as 1 year after the first bankruptcy payments made
• Chapter 13 does not have to be discharged

If the borrower makes all payments on time as agreed and receives permission from the bankruptcy court, borrowers can qualify for VA or FHA Loans during the Chapter 13 Repayment Plan.

Conventional Home Loan After Bankruptcy And Foreclosure

Conventional Conforming Mortgage Loan

Foreclosure –

• Conventional Loans require a 7-year waiting period from the date of the foreclosure

Deed-In-Lieu Of Foreclosure:

• Four year waiting period from the recorded date of the deed in lieu

Short Sale –

• Four year waiting period from the date of the short sale reflected on HUD-1 Settlement Statement

Bankruptcy (Chapter 7 or 11) –

• 4-year waiting period from the discharge date of the Chapter 7 Bankruptcy

Bankruptcy (Chapter 13) –

• Two years waiting period from the discharge date of Chapter 13

Jumbo Home Loan After Bankruptcy and Foreclosure

Gustan Cho Associates Mortgage Group has non-QM jumbo mortgages with no waiting period after housing events or bankruptcy. We also have 95% Loan To Value Jumbo Mortgages With No Private Mortgage Insurance. We have non-QM jumbo loan programs with credit scores down to 500 FICO. We offer bank statement Jumbo loans for self-employed borrowers with no mortgage insurance.

Traditional Jumbo Mortgages

Foreclosure – 7 years.

Deed-in-Lieu – 4 Years

Short Sale – 4 Years

Bankruptcy – 4 Years

Home Loan After Bankruptcy and Foreclosure with Mortgage Part of Bankruptcy

Many consumers have their homes included in their Chapter 7 Bankruptcy—the good news for Conventional loan borrowers. For borrowers who had a mortgage or mortgages part of Chapter 7 Bankruptcy, the waiting period to qualify for Conventional Loans is four years from the discharge date of Chapter 7. The foreclosure can be recorded after the discharge date of Chapter 7. It does not matter with Fannie Mae and Freddie Mac. With FHA Loans, the three-year waiting period clock starts from the recorded foreclosure date after the Chapter 7 Bankruptcy.

Qualifying For a Mortgage After Bankruptcy And Foreclosure

There is life after foreclosure and bankruptcy. I recommend that you consult a direct lender instead of a mortgage broker. Gustan Cho Associates is a mortgage company licensed in multiple states and correspondent lenders with multiple investors. We can take your particular credit profile to different sources we have correspondent lending agreements with. A banker or mortgage banker only represents their lending institution. If your credit profile does not meet their underwriting criteria, you are shot down and need to start again with another loan officer from a different lender. Gustan Cho Associates has multiple direct correspondent lending relationships.

 

UPDATED Fannie Mae and Freddie Mac Guidelines on Home Loan After Bankruptcy And Foreclosure on Conventional Loans

There have been many changes with qualifying for a conventional home loan after bankruptcy and foreclosure since this mortgage blog article post was first written on Gustan Cho Associates.

The 20% down payment conventional loan program after two years after a deed-in-lieu of foreclosure or short sale is no longer in effect. To qualify for a conventional loan after a deed-in-lieu of foreclosure or short sale, the new waiting period is four years with a 5% down payment.

Another positive change that came into effect with a conventional home loan after bankruptcy and foreclosure is those conventional homebuyers can now qualify for a conventional loan if they had a mortgage part of bankruptcy four years from the discharge date of the Chapter 7 Bankruptcy even though the foreclosure was recorded at a later date.  The waiting period to qualify for a conventional loan after the recorded foreclosure date remains a 7-year waiting period.

Non-QM Mortgages One Day Out Of Bankruptcy and Foreclosure

Gustan Cho Associates can also help homebuyers who recently went through bankruptcy and foreclosure with the all-new NON-QM Loans: There is no waiting period after bankruptcy and foreclosure. However, a 10% to 30% down payment is required, and the mortgage rates are slightly higher than conforming loans.

NON-QM loans are a great loan program for people with recent bankruptcy and foreclosure to become homeowners again, where they do not have to meet the mandatory waiting periods.

Please contact us at 800-900-8569 or text us for a faster response. Or email us at gcho@gustancho.com. Homebuyers can also email us at gcho@gustancho.com. Gustan Cho Associates is available seven days a week, evenings, weekends, and holidays.