Chapter 13 Buyout While In Repayment Plan With Cash-Out Mortgage
October 30, 2021 - 5 min read
Benefit To Do A Chapter 13 Buyout While In Repayment Plan With Cash-Out Mortgage During Booming Housing Market And Skyrocketing Home Prices
Most Common Types Of Personal Consumer Bankruptcy
The two most common personal consumer bankruptcy in the United States are Chapter 7 and Chapter 13 Bankruptcy. Chapter 7 Bankruptcy is the more common of the two bankruptcy. Consumers with little to no income and little to no assets will benefit from Chapter 7 Bankruptcy. Chapter 7 is also referred to as total liquidation. This is because the trustee will liquidate the assets of the petitioners to pay creditors of the consumer. Petitioners can get Chapter 7 Bankruptcy discharged in 90 days from the filing debt.
A bankruptcy discharge means the consumer is now debt-free and creditors cannot come after the consumer for past due debts. People with assets or who want to protect their homes or other things of value may not benefit from Chapter 7 and may need to file Chapter 13 Bankruptcy. People with stable full-time jobs and/or income and who have assets to protect benefit from Chapter 13 Bankruptcy. Unlike Chapter 7 Bankruptcy where a bankruptcy discharge only takes 90 days, payment terms on Chapter 13 Bankruptcy are normally for five years (60 months). The bankruptcy trustee will determine a percentage of the person’s income to be set aside every month to pay creditors. After five years or the term of Chapter 13, all unpaid debts are discharged and the consumer is debt-free.
Chapter 7 Bankruptcy Agency Mortgage Guidelines
Borrowers can qualify for government and/or conventional loans after the Chapter 7 Bankruptcy discharged date. The waiting period requirements after Chapter 7 Bankruptcy differs depending on the mortgage loan program.
Here are the waiting period requirements after Chapter 7 Bankruptcy:
- HUD, the parent of FHA requires a two year waiting period after the Chapter 7 Bankruptcy discharge date on FHA loans
- VA requires a two year waiting period after Chapter 7 Bankruptcy on VA loans
- USDA loans require a three-year waiting period after the Chapter 7 Bankruptcy discharge date
- Fannie Mae and Freddie Mac require a four-year waiting period after Chapter 7 Bankruptcy
People should start rebuilding and re-establishing credit after bankruptcy the day the bankruptcy has been discharged. Getting three to five secured credit cards with at least a $500 credit limit is the easiest and fastest way to rebuild your credit after bankruptcy. Gustan Cho Associates have helped thousands of people rebuild and boost their credit scores to 700 FICO in less than one year after Chapter 7 Bankruptcy discharged date.
Chapter 13 Bankruptcy Agency Mortgage Guidelines
Mortgage borrowers can qualify for an FHA and/or VA home purchase or refinance mortgage while in Chapter 13 Bankruptcy repayment plan. Needs to be a manual underwrite. FHA and VA loans are the only two mortgage loan programs that allow manual underwriting. Manual underwriting and Chapter 13 Bankruptcy agency guidelines on FHA and VA loans are exactly the same. However, VA manual underwriting guidelines are much lenient than HUD manual underwriting guidelines.
Here are the HUD/VA Chapter 13 Bankruptcy Agency Mortgage Guidelines on home purchase and/or refinance FHA and/or VA loans:
- Borrowers can qualify for an FHA and/or VA home purchase and/or refinance mortgage loan after they have been in Chapter 13 Bankruptcy repayment plan for at least 12 months with bankruptcy trustee approval
- Chapter 13 Bankruptcy does not have to be discharged
- There is no waiting period after the Chapter 13 Bankruptcy discharged date on FHA and/or VA loans via manual underwrite
- The debt to income ratio on manual underwriting is 31/40 with no compensating factors, 37/47 with one compensating factor, and 40/50 with two compensating factors
- 580 credit score is required for a 3.5% down payment home purchase FHA loan
- There is no minimum credit score requirements on VA loans
Not all lenders will originate and fund mortgages during Chapter 13 Bankruptcy repayment plan and manual underwriting. Gustan Cho Associates is a mortgage company licensed in multiple states with no lender overlays.
Can I Qualify For A Chapter 13 Buyout While In Repayment Plan With Cash-Out Mortgage
Mortgage borrowers can qualify for an FHA and/or VA loan while in a Chapter 13 Bankruptcy repayment plan. FHA and VA loans are the two loan programs that allow mortgage borrowers to qualify for an FHA and/or VA loan home purchase or refinance mortgage loan during Chapter 13 Bankruptcy repayment without the bankruptcy being discharged through manual underwriting. There is no waiting period to qualify for an FHA and/or VA loan after the Chapter 13 Bankruptcy discharged date. If the Chapter 13 Bankruptcy discharge has not been discharged for at least two years, it needs to be a manual underwrite. Homeowners with substantial equity in their homes can qualify for a cash-out refinance FHA and/or VA loan and pay Chapter 13. Chapter 13 Buyouts are very common. HUD allows up to an 80% LTV on cash-out refinances. The VA allows up to 100% LTV on VA cash-out refinances. Many people do not want to be supervised by a bankruptcy trustee for three to five years on their finances. While you are in Chapter 13 Bankruptcy repayment plan, you cannot purchase something of substantial value without the permission of the bankruptcy trustee. This is why most people want to pay off their Chapter 13 Bankruptcy early. Homeowners with substantial equity in their homes have the option of getting a cash-out refinance and doing a Chapter 13 Bankruptcy Buyout.
To qualify for a Chapter 13 Buyout while in repayment plan with cash-out mortgage, please contact us at Gustan Cho Associates at 262-716-8151. Text us for a faster response. Or email us at [email protected] The team at Gustan Cho Associates is available 7 days a week, evenings, weekends, and holidays.