Conventional Loan After Bankruptcy, Deed In Lieu, Short Sale: New Fannie Mae Guidelines

When Can I Qualify For Conventional Loan After Bankruptcy, Deed In Lieu, Short Sale?

Mortgage Loan After Bankruptcy And Foreclosure

Gustan Cho Associates

There are new waiting period requirements to qualify for a conventional loan after bankruptcy, deed in lieu, short sale that just got implemented.  The old waiting period in qualifying for a conventional loan after a deed in lieu of foreclosure or short sale was a 2 year waiting period with a minimum of 20% down payment on a home purchase or 80% loan to value on a refinance conventional mortgage loan.  The 2 year waiting period after a deed in lieu of foreclosure and/or short sale is no longer in effect, no matter how much down payment you have or loan to value is.  The new waiting period Fannie Mae guidelines to qualify for a conventional loan after a deed in lieu of foreclosure or short sale is 4 years after the recorded date of the deed in lieu of foreclosure or 4 years after the date of the short sale which is reflected on HUD’s settlement statement.  Those homeowners who closed on a conventional loan after two years of a deed in lieu of foreclosure or short sale this year with 20% down payment after a two year waiting period after a deed in lieu of foreclosure or short sale would not qualify for a refinance mortgage loan until they have waited out the four year waiting period after their deed in lieu of foreclosure and/or short sale.  Mortgage rates are really dropping due to the mini stock market crash and right now is a great time to go through a refinance mortgage loan.

Waiting Period After Foreclosure To Qualify For Conventional Loan

Unfortunately, unlike FHA, Fannie Mae treats a foreclosure differently than a deed in lieu of foreclosure or short sale.  Fannie Mae guidelines on qualifying for a conventional loan after a regular standard foreclosure is 7 years from the date of the recorded date of the foreclosure which is reflected on the public records, the county’s recorder of deeds office.  With FHA loans, the waiting period after a foreclosure is the same as the waiting period of a deed in lieu of foreclosure which is 3 years from the recorded date of the foreclosure or deed in lieu of foreclosure.  FHA treats deed in lieu of foreclosure the same as a standard foreclosure.  The waiting period is 3 years for short sales for FHA insured mortgage loans.  The three year waiting period after short sale starts from the date of the short sale which is reflected on the HUD’s Settlement Statement.  FHA has a two year waiting period after a bankruptcy in order to qualify for a FHA insured mortgage loan.  The waiting period time clock after a bankruptcy for a FHA loan starts from the discharge date of the bankruptcy.

Waiting Period After Bankruptcy To Qualify For Conventional Loan

The waiting period to qualify for a conventional loan is still a four year waiting period after the bankruptcy discharge date.  This waiting period has not changed and still remains at the 4 years from the discharge date of the bankruptcy.

Foreclosure Part Of Bankruptcy In Qualifying For Conventional Loan: New Fannie Mae Guidelines

The great news for many potential home buyers is that New Fannie Mae Guidelines effective immediately will consider new waiting period guidelines on a foreclosure part of bankruptcy .  The waiting period for the foreclosure on cases where the person had the foreclosure part of their bankruptcy starts from the discharge date of the bankruptcy.  Prior to this new guideline by Fannie Mae, the waiting period for a person who had a foreclosure part of their bankruptcy did not start until the recorded date of the foreclosure.  There are thousands of folks who had a foreclosure part of their bankruptcy but the waiting period time clock did not start yet because their foreclosures are not recorded yet, even to this date.  I know of a case where one of my potential mortgage loan borrowers had a foreclosure part of their bankruptcy four years ago and their waiting period did not even start yet because the deed is still in the homeowners name and not the mortgage lender.

Down Payment And Credit Scores Required To Qualify For Conventional Loan After Bankruptcy, Deed In Lieu, Short Sale

The great news with Fannie Mae’s new mortgage lending guidelines with regards to the four year waiting period after bankruptcy, deed in lieu of foreclosure, and short sale is that only a 5% down payment is required.  With the old waiting period of 2 years after a deed in lieu of foreclosure and/or short sale with conventional loans, a 20% down payment was required.  The bad news of the elimination of the 2 year waiting period after a deed in lieu of foreclosure and short sale with 20% down payment got offset by the 5% down payment requirement and the elimination of the 20% down payment.

Since the new 4 year waiting period after a deed in lieu of foreclosure, and/or short sale to qualify for a conventional loan is a conventional loan program, your credit scores will dictate the mortgage rate you will get.  Your prior bankruptcy, deed in lieu of foreclosure, or short sale will have no impact on your mortgage rates.

I Keep Getting Denied By Banks And Mortgage Lenders With This New 4 Year Waiting Period After Deed In Lieu And/Or Short Sale, Why Is That?

Most conventional loans I originate and close after a bankruptcy, deed in lieu, short sale are mortgage loan borrowers who have gone to their local banks, credit unions, and other mortgage lenders and were turned down even though they qualify and meet Fannie Mae’s Guidelines on conventional loan after bankruptcy, deed in lieu, short sale.  Many bankers, credit union loan officers, and other mortgage lenders refer their borrowers my way because they cannot do the deal.  Why can I do these type of mortgage loans and others can’t?  The reason is because other banks, credit unions, and mortgage lenders have mortgage lender overlays on these types of conventional mortgage loan programs.  A mortgage lender overlay are additional guidelines imposed by the individual mortgage lender that surpass the minimum mortgage lending guidelines set by Fannie Mae.  I only go off the minimum Fannie Mae Guidelines and do not have any mortgage lender overlays.  We just go off Fannie Mae’s Automated Underwriting System’s automated findings.  If you get an approve/eligible per DU FINDINGS, your loan will get closed.

Related> New Fannie Mae Guidelines: Foreclosure part of bankruptcy

Related> Foreclosure part of bankruptcy

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Related> Foreclosure part of bankruptcy: Prior to new Fannie Mae Guidelines

Related> What is waiting period to qualify for conventional loan after deed in lieu and short sale?

 

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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