This guide covers government and conventional loans after bankruptcy and foreclosure. There are mandatory waiting period requirements on government and conventional loans after bankruptcy and foreclosure. Government loans are residential home loans insured by a government agency. The mandatory waiting period on government and conventional loans after bankruptcy and foreclosure depends on the individual loan program.
Government-backed mortgage loans are home loans that need to be primary owner-occupant mortgages. You cannot get government-backed loans for second homes and investment home loans.
Second homes and investment homes are not insured by any government agencies. Second and investment home loans are conventional loans, which are not guaranteed by the government. In this article, we will cover and discuss government and conventional loans after bankruptcy and foreclosure.
How Can I Get Approved For Government and Conventional Loans After Bankruptcy or a Housing Event
After experiencing bankruptcy and foreclosure, obtaining a government-backed or conventional loan for a home can be challenging, but it is not impossible. The specific requirements and waiting periods can vary based on the type of loan, the lender’s policies, and your financial situation. Here’s an overview of the typical waiting periods and considerations for obtaining these types of loans after bankruptcy and foreclosure.
VA Guidelines on VA Loans After Bankruptcy and Foreclosure
VA Loans (Government-backed): Chapter 7 Bankruptcy: The waiting period for VA loans after a Chapter 7 bankruptcy discharge is usually two years. You may be eligible for a VA loan during the Chapter 13 bankruptcy repayment period if you have a history of making on-time payments and receive permission from the court. Foreclosure: VA loans typically have a two-year waiting period after a foreclosure, but exceptions may be made under certain circumstances.
How Agencies Guarantee Government and Conventional Loans
It’s important to note that individual lenders may have their eligibility requirements and policies, as well as their income and down payment when evaluating your application. Rebuilding your credit, maintaining stable finances, and saving for a down payment can improve chances of getting approved for a home loan after bankruptcy and foreclosure. Consulting with a knowledgeable mortgage professional can provide specific guidance tailored to your unique financial situation. Here are the three government-backed loans:
- HUD insures FHA loans
- Department of Veterans Affairs insures VA home loans
- U.S. Department of Agriculture Rural Development insures USDA loans
By government guarantee and insurance, the above agencies will insure lenders in the event borrowers were to default on the home loan. In order for government agencies to insure lenders, mortgage lenders need to follow their specific mortgage guidelines. Government and Conventional loans after bankruptcy and foreclosure have mandatory waiting periods. Gustan Cho Associates offers non-qm loans where there is no waiting period after bankruptcy or foreclosure.
Fannie Mae and Freddie Mac Guidelines on Conventional Loans
Fannie Mae and Freddie Mac Chapter 7 Bankruptcy Guidelines: The waiting period for conventional loans after a Chapter 7 bankruptcy discharge is typically four years, but it can be shorter under certain circumstances. Chapter 13 Bankruptcy: Typically, you must wait two years after a Chapter 13 bankruptcy discharge and demonstrate a history of on-time payments. Foreclosure: Conventional loans often have a seven-year waiting period after a foreclosure, although this can be reduced with extenuating circumstances.nventional loans are not government loans.
Conventional loans are called conforming loans. The reason it is called conforming loans is that they need to conform to Fannie Mae or Freddie Mac Guidelines.
Why do they need to conform to Fannie or Freddie Guidelines if they are not insured by the government? Fannie Mae or Freddie Mac will not purchase loans by lenders that do not meet their lending guidelines. Mortgage Lenders do not want to hold the loans they fund for 30 years. They use their warehouse line of credit to fund conventional loans. After funding, lenders will sell these loans on the secondary market to either Fannie Mae or Freddie Mac.
HUD Waiting Period Guidelines After Bankruptcy and Foreclosure
FHA loans (Government-backed): You may be eligible for an FHA loan after a Chapter 7 bankruptcy discharge. However, typically, you must wait at least two years from the discharge date. However, some lenders may consider borrowers after one year if they can demonstrate extenuating circumstances. Chapter 13 Bankruptcy:
If you’ve completed at least one year of payments in your Chapter 13 bankruptcy plan and have court approval, you may be eligible for an FHA loan. Some lenders may consider you earlier with extenuating circumstances.
Foreclosure: Typically, you must wait at least three years from the foreclosure date before being eligible for an FHA loan, but exceptions may be made with extenuating circumstances. HUD is the parent of FHA. In this section, we will cover HUD’s Guidelines in qualifying for FHA loans after bankruptcy and foreclosure.
FHA Loans After Chapter 7 Bankruptcy
To qualify for an FHA loan, there is a 2 year waiting period after Chapter 7 Bankruptcy discharged date. Borrowers can qualify one year into their Chapter 13 Bankruptcy Repayment Plan. Chapter 13 Bankruptcy does not have to be discharged.
Need Trustee Approval to qualify for an FHA loan during a Chapter 13 Bankruptcy repayment plan. Cannot be late on their Chapter 13 Repayment for the past 24 months.
There is no waiting period to qualify for FHA loans after Chapter 13 discharged date. There is a three-year waiting period after finalization of foreclosure, short sale, deed-in-lieu of foreclosure. If there is a mortgage included in a bankruptcy, the waiting period is four years from the finalization of housing event and NOT discharged date of bankruptcy.
USDA Waiting Period Guidelines After Bankruptcy and Foreclosure
USDA loan guidelines after bankruptcy and foreclosure. There is a 3 year waiting period after Chapter 7 bankruptcy. There is a 3 year waiting period after foreclosure, deed in lieu of foreclosure, short sale. USDA Loans (Government-backed): Chapter 7 Bankruptcy: Typically, you must wait three years after the Chapter 7 bankruptcy discharge to be eligible for a USDA loan. Chapter 13 Bankruptcy: USDA guidelines vary, but you may be eligible during the Chapter 13 repayment period if you demonstrate a history of on-time payments. Foreclosure: A three-year waiting period is usually required after a foreclosure before you can apply for a USDA loan.
VA Waiting Period Guidelines After Bankruptcy and Foreclosure
Government and conventional loans after bankruptcy and foreclosure has mandatory waiting period requirements. This rule applies to VA home loans. Department of Veterans Affairs has the following mortgage guidelines after bankruptcy and foreclosure:
- There is a two-year waiting period after Chapter 7 Bankruptcy to qualify for VA loans
- There is a two-year waiting period after foreclosure, deed in lieu of foreclosure, short sale to qualify for VA Mortgages
- Borrowers can qualify one year into their Chapter 13 Bankruptcy Repayment Plan:
- Chapter 13 does not have to be discharged
- Need Trustee Approval
- Cannot be late on their Chapter 13 Repayment for the past 24 months
- Borrowers for VA loans after Chapter 13 Bankruptcy discharged date with no waiting period
- If there is a mortgage included in the bankruptcy, the waiting period is four years from the discharged date of bankruptcy:
- Mortgage cannot be re-affirmed
- Finalization of housing event does not matter
Fannie Mae and Freddie Mac Guidelines After Bankruptcy and Foreclosure on Conventional Loans
In order for Fannie Mae or Freddie Mac to purchase conventional loans, they need to conform to their guidelines. Waiting period after bankruptcy or foreclosure are one of the guidelines for Fannie Mae and Freddie Mac. Here are the conventional waiting period requirements after bankruptcy and foreclosure:
- 4-year waiting period after Chapter 7 Bankruptcy discharged date
- 2-year waiting period after Chapter 13 Bankruptcy discharged date
- 4 year waiting period after Chapter 13 dismissal date
- 4 year waiting period after a deed-in-lieu of foreclosure or short sale
- 7 year waiting period after foreclosure
- If there is a mortgage included in the bankruptcy, the waiting period is four years from the discharged date of bankruptcy:
- Mortgage cannot be re-affirmed
- Finalization of housing event does not matter
Gustan Cho Associates offers non-qm loans and bank statement loans for self employed borrowers. There is no waiting period after bankruptcy or housing event with non-QM and bank statement loans for self-employed borrowers. To qualify for our loan programs, please contact us at 800-900-8569 or text us for faster response. Or email us at gcho@gustancho.com. Gustan Cho Associates Mortgage Group is available 7 days a week, evenings, weekends, and holidays. This BLOG on Government and Conventional loans After Bankruptcy and Foreclosure updated and PUBLISHED on January 11th, 2024.
