Home Purchase With Prior Bankruptcy And Foreclosure

This BLOG On Home Purchase With Prior Bankruptcy And Foreclosure Was UPDATED On June 7th, 2019

How To Qualify For Home Purchase With Prior Bankruptcy And Foreclosure:

For those folks who want to purchase a new home with an FHA Loan,  but had filed a prior bankruptcy, there is a mandatory waiting period of 2 years from the discharge date of the bankruptcy.

• For those who have had a foreclosure, there is a mandatory waiting period of three years from the date of the sheriff’s sale or the date their name was transferred out of the deed of the home to qualify for FHA Loans
• For those who have had a short sale, they can qualify for a conventional mortgage loan after 4 years if they can put 5% down payment
• For those who have had a deed in lieu of foreclosure, they can qualify for conventional loans in four years if they can put 5% down payment
• Putting an offer on a home before foreclosure or bankruptcy waiting period is over can be risky

In this blog, we will discuss mortgage guidelines on Home Purchase With Prior Bankruptcy And Foreclosure.

Purchase Contract On Home Purchase With Prior Bankruptcy And Foreclosure

Putting an offer on a home before foreclosure or bankruptcy waiting period is over is very common but I would strongly advise against it.

• Many people who have had a prior bankruptcy and/or foreclosure often reestablish themselves quickly and are ready to purchase a home
• However, there are federal mandatory guidelines and restrictions on when they can apply for a mortgage loan
• Two years after a bankruptcy and three years after a foreclosure with FHA Loans
• There is a three-year waiting period after Chapter 7 Bankruptcy, foreclosure, deed in lieu of foreclosure, short sale to qualify for USDA Loans
• There is a two-year waiting period after bankruptcy, foreclosure, deed in lieu of foreclosure, short sale to qualify for VA Loans
• Borrowers in Chapter 13 Bankruptcy can qualify for FHA and VA Loans one year into their repayment plan with manual underwriting and Trustee Approval
• Chapter 13 Bankruptcy does not have to be discharged
• There is no waiting period to qualify for FHA Loans after Chapter 13 Bankruptcy discharge date
• Any Chapter 13 Bankruptcy discharge that has been seasoned for two years or less needs to be a manual underwrite
• There is a four-year waiting period to qualify for conventional loans after a short sale and/or deed in lieu of foreclosure
• There is a seven-year waiting period to qualify for conventional loans after a foreclosure

No Waiting Period Requirements After Bankruptcy And Housing Event With Non-QM Mortgage Loans

Non-QM Loans does not have a waiting period after bankruptcy, foreclosure, deed in lieu of foreclosure, short sale.

• However, 10% to 20% down payment is required on Non-QM Loans
• The down payment requirement depends on the borrower’s credit scores and the longevity on the bankruptcy and/or housing event seasoning
• There is no private mortgage insurance on Non-QM Loans
• There are no maximum loan limits on Non-QM Mortgages

Gustan Cho Associates are experts in the origination and funding of Non-QM Mortgages. We also offer 12-month bank statement mortgage loans for self-employed borrowers with no income tax returns required.

Home Purchase With Prior Bankruptcy And Foreclosure Waiting Period Requirements

In the event, if a home buyer offers to purchase a home six months before their waiting period is over, the mortgage loan process cannot officially start after the mandated waiting period is over

• This holds true whether it is a bankruptcy or foreclosure
• I strongly recommend that a home buyer should consult a mortgage loan officer to see what he or she qualifies for and get their credit profile ready
• But they should not officially sign a real estate purchase contract with a set closing date

A real estate contract with a date prior to the end of the waiting period will not be honored by the mortgage lender.  A new contract needs to be signed with a date after the waiting period.