Bankruptcy And Foreclosure Waiting Periods To Qualify For Mortgage

Bankruptcy And Foreclosure Waiting Periods To Qualify For Mortgage

This BLOG On Bankruptcy And Foreclosure Waiting Periods To Qualify For Mortgage Was UPDATED On June 21, 2017

The mortgage industry went through a major overhaul after the 2008 Great Recession and Mortgage Meltdown.

  • Countless of Americans lost their jobs, businesses, and most importantly, their life earned savings including the equity in their homes.
  • Bankruptcies and foreclosures have hit historical highs.
  • Never in American history had we had an economic collapse like we did in 2008.
  • The subprime mortgage markets vanished overnight and subprime loans went extinct. HUD implemented new FHA Guidelines.
  • HARP was created and launched to stop the foreclosure crisis and help homeowners with upside down mortgages.
  • Fannie Mae and Freddie Mac got taken over by the federal government.
  • The real estate and mortgage markets were at a stand still. New Mortgage Guidelines were launched where home buyers can qualify for mortgage loans after bankruptcy and foreclosure.
  • Bankruptcy And Foreclosure Waiting Periods To Qualify For Mortgage were mandated for government and conventional loans.

Qualifying For Mortgage After Bankruptcy And Foreclosure

Bankruptcy And Foreclosure Waiting Periods to qualify for mortgage depends on the mortgage loan program. Home Buyers can qualify for government and conventional loans after bankruptcy, deed in lieu of foreclosure, foreclosure, and short sale.

  • However, there is a bankruptcy and foreclosure waiting periods.
  • Mortgage loan applicants who filed bankruptcy can qualify for a FHA Loan after a 2 year waiting period after the discharge date of the Chapter 7 bankruptcy. 
  • The two year period does not start until the actual discharge date and not the filing date of the Chapter 7 bankruptcy.
  • One day after two years of the Chapter 7 discharged date, the borrower can apply for a mortgage application. 
  • There is a 3 year waiting period to qualify for FHA Loans from the recorded date of a foreclosure and/or deed in lieu of foreclosure or date of the sheriff’s sale.
  • The three year waiting period start date is the date the deed was transferred out of the homeowner’s name or the sale of the property.
  • There is a three year period to qualify for FHA Loans from the date of a short sale.
  • There is no waiting period to qualify for FHA Loans after a Chapter 13 Bankruptcy discharged date.
  • Borrowers can qualify for FHA Loans one year into a Chapter 13 Bankruptcy Repayment Plan.

Recorded Date Of Foreclosure

Many mortgage lenders are in no hurry to transfer the foreclosure out of the homeowner and into the lender’s name.

  • Sometimes it might take them a year or longer before they transfer the name out into the lender’s name. 
  • Homeowners who are going through a foreclosure, make sure that the name gets transferred out of the deed of the house or it might prolong bankruptcy and foreclosure waiting periods.

Bankruptcy And Foreclosure Waiting Periods With Mortgage Part Of Bankruptcy

For those homeowners who had a bankruptcy and put their home loan as part of their bankruptcy, there is a three year waiting period from the recorded date of the foreclosure and/or date of the sheriff’s sale.

  • Even though your foreclosure was part of the bankruptcy, the latter applies. 
  • Many mortgage loan borrowers think that because the foreclosure was part of the bankruptcy, they only need to wait two years but that is absolutely not correct.
  • Bankruptcy and Foreclosure waiting periods is a rule and regulation that cannot be broken and there are no exceptions in waiving the bankruptcy and foreclosure waiting periods with government and conventional loans. 
  • However, home buyers can consult with a loan officer prior to bankruptcy and foreclosure waiting periods is over so they can plan on rebuilding their credit and improving credit scores.

2015 Update On Bankruptcy And Foreclosure Waiting Periods

For conventional loans, homeowners who had mortgage part of Chapter 7 bankruptcy, the waiting period is 4 years from the discharge date of your bankruptcy.

  • The deed of the mortgage can be recorded after the discharge date of your bankruptcy with conventional loans. 
  • This rule does not apply for FHA insured mortgage loans. 
  • For FHA loans, if you have a mortgage part of bankruptcy, the waiting period does not start until the recorded date of your foreclosure or the date of the sheriff’s sale.

Waiting Period Requirements On VA Loans

VA Loans are restricted to veterans only with valid Certificate of Eligibility. VA Loans have mandatory waiting period requirements after bankruptcy and foreclosure.

  • There is a two year waiting period to qualify for VA Loans after Chapter 13 Bankruptcy
  • There is a two year waiting period to qualify for VA Loans after the recorded date of foreclosure and/or deed in lieu of foreclosure.
  • There is a three year waiting period to qualify for VA Loans after short sale of a home.
  • There is no waiting period to qualify for VA Loans after Chapter 13 Bankruptcy discharged date.
  • Veterans can qualify for VA Loans one year into a Chapter 13 Bankruptcy repayment period.

Waiting Period To Qualify For Conventional Loans After Bankruptcy And Foreclosure

Conventional borrowers can qualify for conventional loans after bankruptcy and foreclosure if the meet the following:

  • Four year waiting period after Chapter 7 Bankruptcy discharged date
  • Two year waiting period after Chapter 13 Bankruptcy discharged date
  • Seven year waiting period after the recorded date of foreclosure
  • Four year waiting period after short sale date
  • Four year waiting period after the recorded date of a deed in lieu of foreclosure

Mortgage loan applicant who have any questions on the bankruptcy and foreclosure waiting periods, please contact us at 1-800-900-8569 or email us at gcho@gustancho.com.

Gustan Cho NMLS ID 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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