In this blog, we will cover and discuss qualifying for a mortgage with new lenders after getting mortgage denial for late payments during Chapter 13 repayment plan. Not all lenders have the same mortgage guidelines on government and conventional loans. A mortgage denial for late payments during Chapter 13 plan is normally a dead issue for most lenders. However, Gustan Cho Associates are experts in helping borrowers who got a mortgage denial for late payments during Chapter 13 repayment plan. FHA and VA loans are the only two loan programs borrowers can qualify for a mortgage during Chapter 13 Bankruptcy repayment plan.
Lenders Issue Mortgage Denial For Late Payments During Chapter 13 Plan as Part of Their Overlays
Mortgage borrowers can qualify for FHA and VA loans during Chapter 13 Bankruptcy repayment plan without having the bankruptcy discharged. However, the borrower needs to be in the bankruptcy repayment plan for 12 months. 12 months of timely payments to the Trustee needs to be provided in order to be eligible for FHA and/or VA loans. If the bankruptcy has not been discharged, the file needs to be manually underwritten. One glitch is that all manually underwritten borrowers need for borrowers to be timely for the past 24 months. How can a borrower qualify if they have been timely with their bankruptcy payments for the past 12 months but have been late with multiple payments prior to filing bankruptcy? In this article, we will cover and discuss Chapter 13 Late Payment Guidelines On FHA Mortgages.
Why Lenders Issue Mortgage Denial For Late Payments During Chapter 13 Plan
HUD Chapter 13 Bankruptcy Guidelines allow for borrowers to qualify for an FHA loan during Chapter 13 Bankruptcy repayment plan. Borrowers can qualify for FHA loans during Chapter 13 Bankruptcy after one year into the plan. Borrowers need to have made 12 timely payments to Chapter 13 Trustee. No late payments during the repayment plan for the past 12 months. Chapter 13 does not need to be discharged. All borrowers who are in Chapter 13 and without a discharge needs to be manually underwritten.
Mortgage Denial For Late Payments During Chapter 13 Plan Due To Not Having Rental Verification
Manual underwriting guidelines require timely payments for the past 24 months. There is no waiting period after Chapter 13 Bankruptcy discharge date. However, any discharge that has not been seasoned for at least 24 months after Chapter 13 needs to be a manual underwrite. Verification of rent is required on all manual underwriting. However, Gustan Cho Associates will exempt rental verification if borrowers are living rent-free with family members. Those without a VOR need a living rent-free with family member form completed and signed by the family member. Gustan Cho Associates will provide the rent-free letter. Traditional credit tradelines are not required to qualify for FHA loans during Chapter 13 Bankruptcy repayment plan. Please read this article on FHA Manual Underwriting Guidelines
Mortgage Denial For Late Payments During Chapter 13 Plan Due to Manual Underwriting
FHA and VA loans are the only two loan programs that allow manual underwriting. There is really not much difference with manual versus automated underwriting. Debt to income ratios is reduced on manual underwrites. However, per manual underwriting guidelines, timely for the past 24 months is normally required. How can borrowers qualify for FHA loans via manual underwriting if the guidelines on manual underwrite state 24 months timely payments?
Mortgage Denial For Late Payments During Chapter 13 Due to Rulesof Timely Payments in The Past 24 Months on Manual Underwriting
How can borrowers qualify for a manual underwrite after 12 months of timely payments during the Chapter 13 Repayment plan? As mentioned earlier, manual underwriting requires 24 months of timely payments. Most consumers who file bankruptcy are normally late and have derogatory credit prior to filing
The rules for this are the following:
- Any creditor and/or credit tradelines that are included in the Chapter 13 bankruptcy petition is exempt from the 24-month timely payment rule
- However, if the creditor is not listed on the bankruptcy petition, then the 24 months of timely payments rule apply
- What this means is if you have debts that were outside bankruptcy and not included in the filings, then the 24-month timely payment guidelines apply
- If a borrower forgot to list a creditor in their bankruptcy petition and has been late prior to the filing, then they can amend their petition and include the creditors
- By doing so, the borrower will qualify
Consumers who file bankruptcy should list all of their creditors on their bankruptcy petition. Make sure your bankruptcy attorney is aware of this rule and guidelines. If all creditors are listed on the bankruptcy petition, whether or not the creditor is dischargeable, then the borrower only needs to be timely for 12 months versus 24 months on manual underwriting.
Mortgage Denial For Late Payments During Chapter 13 Plan Due to Lender Overlays
Gustan Cho Associates are experts in helping borrowers qualify for FHA loans during and after Chapter 13 Bankruptcy discharge. Not all mortgage companies have the same guidelines on FHA loans. All lenders need to meet the minimum HUD Agency Guidelines. However, mortgage companies can have higher credit and income standards called lender overlays. Gustan Cho Associates are one of the very few national lenders that have no lender overlays on FHA, VA, USDA, and Conventional loans.
Qualifying With New Lender After Mortgage Denial For Late Payments During Chapter 13 Plan
Over 75% of our borrowers are folks who could not qualify at other lenders due to their lender overlays. Many lenders do not entertain manual underwriting files. However, over 30% of our borrowers at Gustan Cho Associates are folks who need manual underwriting on FHA and/or VA loans. For more information about this article and/or to qualify with a direct lender with no overlays, please contact us at Gustan Cho Associates at 800-900-8569 or text us for a faster response. Or email us at gcho@gustancho.com. We are available 7 days a week, evenings, weekends, and holidays.
