Mortgage During Chapter 13 Bankruptcy Guidelines
This blog will fully explain how to qualify for a mortgage during Chapter 13 Bankruptcy. We will review a detailed list of qualifying for a mortgage during Chapter 13 Bankruptcy. After reading this guide a few times and watching a few videos, you will understand the basics of qualifying for a mortgage during Chapter 13 Bankruptcy. You will fully understand the general agency mortgage guidelines during Chapter 13 Bankruptcy.
Are All Mortgage Lenders The Same?
We will detail how to qualify for an FHA, VA, USDA, and Conventional mortgage during Chapter 13 Bankruptcy. All lenders must follow the minimum agency guidelines of HUD, VA, USDA, Fannie Mae, and Freddie Mac on government and conventional loans. However, lenders can have mortgage guidelines above and beyond the minimum agency guidelines called lender overlays.
Buying a House While In Chapter 13 Bankruptcy
Not all lenders have the same mortgage lending guidelines during Chapter 13 Bankruptcy. Just because you cannot qualify at one lender doesn’t mean you can’t qualify at another lender with no lender overlays. Not all mortgage companies have the same mortgage lending requirements during Chapter 13 Bankruptcy. For example, one lender may follow agency guidelines while another mortgage company may require higher lending requirements above the minimum agency guidelines. These higher lending requirements are called lender overlays.
How Does Bankruptcy Affect Your Mortgage?
After reading this blog, you will have more self-confidence than anyone in our group. Enjoy the informational mortgage guides and blogs on gcamortgage.com. If you have any questions with regards to HR or Ladies’ men. This article will discuss obtaining a mortgage during Chapter 13 Bankruptcy.
One of the frequently asked questions when getting at Gustan Cho Associates is can I qualify and obtain a mortgage during Chapter 13 Bankruptcy?
If you are in a current financial situation planning on filing a Chapter 13 Bankruptcy or may have already filed for a Chapter 13 Bankruptcy, please let us know. Homebuyers can become eligible to qualify for a mortgage during Chapter 13 Bankruptcy. Many consumers and even bankruptcy lawyers do not realize you can qualify for a mortgage during Chapter 13 Bankruptcy.
How Soon Can I Qualify For a Mortgage During Chapter 13 Bankruptcy
Mortgage borrowers can be eligible to purchase or refinance a primary residence. In this blog, Gustan Cho Associates will explain the mortgage process when a Chapter 13 Bankruptcy is involved. We will also describe how to apply for a home loan with our team. We are experts in helping potential mortgage borrowers qualify for a home loan with unique scenarios.
Do Lenders Have Different Guidelines on Mortgage During Chapter 13 Bankruptcy?
Most importantly, we offer a no-mortgage overlay lending platform that allows us to help clients who may not fit your everyday qualifications. First, we should understand what the term bankruptcy means.
The term bankruptcy is a legal proceeding initiated by a person or organization that cannot pay outstanding debts and obligations.
This is a legal process carried out by federal courts. This is a generalized term for the process that helps individuals and or businesses get rid of their debts and repay their creditors. If the courts can verify your financial hard times, bankruptcy is typically formed into liquidation or reorganizations.
What Are Two Types of Bankruptcy?
For an individual filing bankruptcy, there are two main chapters: Chapter 7 and Chapter 13. This blog will surround Chapter 13 bankruptcy. A Chapter 7 Bankruptcy is frowned upon in the eyes of mortgage lending, and you need to wait two full years after your discharge date to qualify for most mortgage programs.
A Chapter 13 Bankruptcy is often referred to as a reorganization of debt. This means your creditors do get paid back. Typically, they are not paid in full, but it is an agreed-upon payment schedule between the debtor and trustee. Since you are paying your creditors back, chapter 13 bankruptcy is not frowned upon as badly in the eyes of mortgage lenders.
Is Chapter 13 Bankruptcy Right For You?
Before you go gung ho and file bankruptcy or hire a lawyer to help you file, one of the most important questions you must ask yourself is whether Chapter 13 Bankruptcy is right for you. Gustan Cho Associates must be clear: we are mortgage brokers without legal standing to help you file bankruptcy. You will want to contact a reputable bankruptcy attorney in your area. That being said, we will go over a few basics of Chapter 13 Bankruptcy before we dive into how to obtain a mortgage during Chapter 13 Bankruptcy.
How Does The Chapter 13 Bankruptcy Process Work?
A Chapter 13 Bankruptcy is often called a wage earner bankruptcy because only people with a steady income can file a Chapter 13 bankruptcy. Since you have a reliable income, the federal courts will work with you and your creditors to develop a repayment plan. Typically, you will be put on a three or five-year repayment plan. The amount you will pay each month is based on your income and how much debt you owe.
How Does Chapter 13 Bankruptcy Help Me?
Chapter 13 Bankruptcy will allow you to pay off your unsecured debt and secured loans, even if you are behind on payments. While we do understand this information is confusing, please reach out to a qualified bankruptcy attorney to go over your specific situation. Once the bankruptcy courts agree on a repayment plan, you will start paying directly to the trustee. They will often take these funds directly from your paycheck to ensure you do not miss a payment.
How Can I Get A Mortgage During Chapter 13 Bankruptcy Repayment?
The repayment plan is set up to teach you how to be more financially responsible—obtaining a mortgage during a Chapter 13 bankruptcy. This process is a specialty of Gustan Cho Associates. Buying a home during a Chapter 13 Bankruptcy can be stressful, especially if you are not working with an experienced mortgage team. Our loan officers and operations staff are very familiar with the Chapter 13 process and are here to hold your hand from start to finish.
HUD Chapter 13 Bankruptcy Mortgage Guidelines
That being said, we will go over the basic qualifications and steps for obtaining a mortgage during Chapter 13 Bankruptcy. Since the federal courts rule over bankruptcy debt, you may only utilize a government-backed mortgage for this process. This means an FHA loan, or if you serve time in the military, you may utilize your VA loan for this process. You must make at least 12 on-time payments to your Chapter 13 plan before you apply for a mortgage.
How Can I Get Pre-Approved For Mortgage During Chapter 13 Bankruptcy
As part of the process, you will obtain a pre-approval letter from Gustan Cho Associates and send that to your bankruptcy attorney to get trustee permission to enter into a new mortgage. Once again, we will assist with this process. Once you have permission from the court to enter into a new mortgage, you may start the home shopping process.
Home Buying Process With Chapter 13 Bankruptcy
In some states, the courts want you to be under contract before you contact the attorney for permission. Typically, a judge will permit you to enter into a mortgage if the monthly housing payment is similar to what you currently pay for rent.
The bankruptcy trustee really appreciate it when your housing expense does not change much. If your payment will increase substantially, you may need to re-organize your Chapter 13 bankruptcy plan.
Either way, the court approval to enter a mortgage is the main difference between obtaining a mortgage loan without bankruptcy and during bankruptcy.
Refinancing Your Home Mortgage During Chapter 13 Bankruptcy
Refinancing a mortgage loan during a Chapter 13 bankruptcy. Once you have made at least 12 payments to your Chapter 13 trustee, you may be eligible to refinance your current mortgage loan during the Chapter 13 plan. If you plan on taking cash out during the refinance, please note that the bankruptcy trustee must be paid in full with the cash-out proceeds from the refinance.
FHA Cash-Out Refinance During Chapter 13 Bankruptcy Repayment
Depending on your equity position, you may still be able to pull additional cash out after paying off the bankruptcy. You may also complete a rate and term transaction during the bankruptcy.
Since a rate and term mortgage transaction must save you money, typically, a trustee is willing to sign off on this transaction.
Gustan Cho Associates are experts in helping people get a cash-out refinance during bankruptcy to buy out the bankruptcy. Buying out the bankruptcy allows the homeowner to end the Chapter 13 Bankruptcy early.
Bankruptcy Trustee Mortgage Approval
As part of the refinance process with an active Chapter 13 bankruptcy, you must receive permission from the judge to enter into the new mortgage. It is very similar to a purchase transaction.
When taking cash out, the trustee is paid in full, so, rarely, the courts will not approve the transaction.
We have helped many clients discharge their Chapter 13 bankruptcy early with a cash-out refinance. Putting your equity to work can be the end of your bankruptcy. Home values are very high at the moment, so this could be a great time
to capitalize.
HUD Chapter 13 Bankruptcy Guidelines on FHA Loans
General requirements for qualifying for an FHA loan with a Chapter 13 Bankruptcy. 500 – 579 credit score with a 10% down payment. 580 credit score or higher, 3.5% down payment. No missed payment since filing bankruptcy to the trustee or any items reported on your credit report. Proof of one-month reserves after closing costs and down payment. Trustee permission to enter a new mortgage. Up to 40/50% that to income ratio with compensating factors.
VA Chapter 13 Bankruptcy Guidelines on VA Loans
There is no minimum qualifying credit score on VA loans. There is no down payment required on VA loans. At least 12 on-time payments to the trustee. No missed payment since filing bankruptcy to the trustee or any items reporting on credit. Up to 55% DTI. One month of reserves
FHA and VA Loans During Chapter 13 Bankruptcy Guidelines
Why do so many lenders tell clients they must be completely discharged from a Chapter 13 Bankruptcy for two years before they qualify? Most banks do not manually underwrite mortgage transactions and have additional overlays surrounding bankruptcies. Even if you are discharged from a Chapter 13 bankruptcy, but two years have not elapsed, many banks cannot help you.
Chapter 13 Bankruptcy Manual Underwriting Mortgage Process Process
Please note, for all mortgage loans during an active Chapter 13 Bankruptcy or less than two years discharge from your Chapter 13, your file will be downgraded to a manual underwrite for qualification purposes. The majority of banks do not participate in manual underwriting. This is something that sets Gustan Cho Associates apart. We are experts in the manual underwriting process and are here to answer any questions. Manually underwriting a mortgage loan will have a slightly more strict debt-to-income requirement.
Does HUD Require Reserves on Manual Underwriting?
You will also need to have one month of reserves in the bank after closing costs and down payment. One month of reserves equals one month of your total mortgage and payment, including principal, interest, property taxes, homeowners insurance, and any homeowners association dues. Do not let manual underwriting scare you, as our team is here to help you get to the finish line quickly and seamlessly. By now, you should understand that we are professionals with mortgage lending surrounding a Chapter 13 Bankruptcy.
What Are Lender Overlays?
No overlay platform allows us to help more potential borrowers than most banks and lending institutions. Since we pride ourselves on staying current on the ever-changing mortgage guidelines, we are a one-stop shop for all your mortgage needs. While we specialize in bankruptcy loans, we also have a full lineup of NON-QM loan programs.
The team at Gustan Cho Associates are experts in specialty mortgage programs and commercial loan programs and are always growing the programs we offer.
Even if you have been turned down by a mortgage lender in the past, we strongly encourage you to reach out to our team today. Our team would love the opportunity to put a second set of eyes on your mortgage application! This guide on qualifying for a mortgage during Chapter 13 Bankruptcy was updated on November 11th, 2023.
