Mortgage Meltdown And Qualifying For Home Loan Today With Bad Credit

This BLOG On Mortgage Meltdown And Qualifying For Home Loan Today With Bad Credit Was UPDATED On November 6th, 2017

Overall lack of concern, awareness, and education caused the government, banks, investors and rating agencies from misusing and misunderstanding the financial system and ultimately causing it to collapse.

  • Prior to the 2008 Real Estate And Mortgage Collapse, it was so easy to get any type of real estate loans.
  • There was no mortgage regulations.
  • Sub-Prime Loans did not require income tax returns or all of the mortgage documentations that is required today.
  • No doc and stated income loans were very popular.
  • Adjustable Rate Mortgages with initial teaser rates were extremely popular.
  • Real Estate prices were appreciating double digits year after year. 

Qualifying For Home Loans Prior To Real Estate And Mortgage Meltdown

  • Money was easy to get and there were mortgage programs such as stated income mortgage loan products.
  • There is no income verification and all the borrower needed to do was just state his or her own income. 
  • There were adjustable rate mortgage products with teaser introductory ratess.
  • The starter rate was a negative amortization rate program where after the initial teaser rate period expired, the monthly payment will sky rocket and the mortgage balance will increase. 
  • Once the teaser mortgage rate period was over, the monthly mortgage payment doubled, tripled, or quadrupled. 
  • How can a salaried employee afford the doubling of his or her monthly mortgage payments.  
  • Homeowners were falling further and further behind on their monthly mortgage payments where they could no longer afford their housing payments.
  • The foreclosure crisis was about to begin and boy, did it last for almost a half a decade.

Real Estate And Mortgage Meltdown Of 2008 Hits The United States Harder Than Any Hurricane And Lasts For Many Years To Come

Real estate prices have escalated double digits in many parts of the country where nobody saw a potential real estate and mortgage meltdown was in the works.

  • Many American families thought that investing in real estate was the hottest game in town and the most conservative investment. 
  • Some folks owned two, three, four, or more homes in the hopes that the increase in real estate prices will continue to climb year after year. 
  • Then the real estate and mortgage meltdown of 2008 hit our country like a major hurricane and millions of homeowners were sitting on homes that their mortgage amount was higher than the value of their property.

Foreclosures And Bankruptcies At Historical High

Mortgage lenders caused the problems by lobbying for lenient laws but at the same time doing what their investors wanted who ultimately pays their salaries.

  • People ended up defaulting on their loans because the interest rates and housing prices fluctuated in ways they did not expect.
  • At the same time, they were caught by the sales pitch and media in turn buying into the hot housing market.
  • Mortgagors were expecting property values to rise and interest rates to stay stable.
  • Market works by having government, investors, and lenders working together.

Qualifying For Mortgage With Bad Credit After Mortgage Meltdown

Mortgage Borrowers can now qualify for home loans with bad credit after mortgage meltdown.

  • New mortgage regulations and guidelines were created and implemented.
  • The CFPB, Consumer Financial Protection Bureau, was created.
  • The SAFE ACT was created and implemented, Quality Mortgage, (QM), was created and implemented.
  • High Cost Regulations is now in effect. NMLS and licensing requirements were implemented.
  • Borrowers can qualify for government and conventional loans with bad credit.

FHA And VA Loans With Bad Credit And No Lender Overlays

The Gustan Cho Team at USA Mortgage is a direct lender with no lender overlays licensed in multiple states. Lender Overlays are additional guidelines that is above and beyond those required by government agencies (FHA, VA, USDA) and Fannie Mae and Freddie Mac for Conventional Loans. We just go off AUS Findings (Automated Underwriting Approval).

Here are the minimum FHA Mortgage Lending Guidelines

  • 580 credit scores to qualify for FHA Loans for 3.5% down payment
  • Borrowers with 500 to 579 credit scores can qualify for FHA Loans with 10% down payment 
  • Outstanding collections and charge off accounts do not have to be paid
  • 46.9% front end and 56.9% back end debt to income ratio caps for borrowers with at least 620 credit scores to get approve/eligible per Automated Underwriting System
  • Under 620 credit scores, debt to income ratio caps gets reduced to 43% DTI to get AUS Findings Automated Approval
  • 2 Year Waiting Period After Chapter 7 Bankruptcy discharged date
  • 3 year waiting period after foreclosure, deed in lieu of foreclosure, short sale to qualify for FHA Loans

Here are the minimum VA Mortgage Lending Guidelines

The Gustan Cho Team at USA Mortgage has no lender overlays on VA Loans.

  • No minimum credit score requirements on VA Loans, however, to get an approve/eligible per AUS Findings, Veterans normally need a 580 credit score
  • No minimum debt to income requirements on VA Loans: We just go off AUS Findings
  • Outstanding collections and charge off accounts do not have to be paid
  • Deferred Student Loans that are deferred more than 12 months are exempt from debt to income ratio calculations
  • Two year waiting after Chapter 7 Bankruptcy discharged date
  • Two year waiting period after foreclosure, short sale, deed in lieu of foreclosure

FHA And VA Loans During And After Chapter 13 Bankruptcy

The Gustan Cho Team at USA Mortgage does not have lender overlays during and after Chapter 13 Bankruptcy.

Here are the FHA and VA Guidelines During And After Chapter 13 Bankruptcy:

  • Mortgage Borrowers can qualify for both FHA and VA Loans one year into a Chapter 13 Bankruptcy repayment plan with Trustee Approval
  • There is no waiting period to qualify for FHA and VA Loans after a Chapter 13 Bankruptcy discharged date

Mortgage Borrowers who need a direct lender with no lender overlays licensed in multiple states, please contact The Gustan Cho Team at USA Mortgage at 262-716-8151 or email us at gcho@usa-mortgage.com. We are available 7 days a week, evenings, weekends, and holidays.

Gustan Cho NMLS 873293

The information contained on Gustan Cho Associates website is for informational purposes only and is not an advertisement for products offered by The Gustan Cho Team @ Gustan Cho Associates or its affiliates. The views and opinions expressed herein are those of the author and/or guest writers of Gustan Cho Associates Mortgage & Real Estate Information Resource Center website and do not reflect the policy of Gustan Cho Associates Lenders Network, its officers, subsidiaries, parent, or affiliates.

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