Qualifying For Conventional Loan After Chapter 13 Bankruptcy

What Is The Waiting Period To Qualify For Conventional Loan After Chapter 13 Bankruptcy

Qualifying for a Conventional Loan After Chapter 13 Bankruptcy discharge is no problem for home buyers needing a conventional loan, however, Fannie Mae and Freddie Mac Guidelines state that there is a two year mandatory waiting period after the Chapter 13 Bankruptcy discharged date. A Chapter 7 Bankruptcy is also known as total liquidation and there is a four year waiting period to qualify for a conventional loan after a Chapter 7 Bankruptcy discharged date. A Chapter 13 Bankruptcy is also known as a repayment or restructuring of debts and you need to have a job and/or continuous income to qualify for a Chapter 13 Bankruptcy. With a Chapter 13 Bankruptcy, the United States Bankruptcy Courts will assign a Chapter 13 Bankruptcy Trustee, who normally is a private attorney, who will be in charge of the repayment plan for the consumer’s creditors. Normally, the Chapter 13 Bankruptcy Trustee will review the consumer’s gross income, monthly debts, the debts owed to all creditors, and decide on a percentage of the consumer’s household income and allocate that percentage in paying the consumer’s creditors for a period of time, normally between three to five years. Once that period is over, the Chapter 13 Bankruptcy Trustee will discharge all of the consumer’s debts and the consumer will be debt free. There are mandatory waiting periods to qualify for mortgage loans after bankruptcy for the various different types of mortgage loan programs.

Qualifying For Home Loans After Bankruptcy

All mortgage loan programs require mandatory waiting period after Chapter 13 Bankruptcy. Once a Chapter 13 Bankruptcy has been completed, the Chapter 13 Bankruptcy Trustee will discharge the consumer’s debts and the consumer will be debt free. Home Buyers can now qualify for home loans after a Chapter 13 Bankruptcy Discharge as long as they meet the federal mortgage lending guidelines after Chapter 13 Bankruptcy. Here are the qualifying factors in qualifying for a home loan after Chapter 13 Bankruptcy:

Qualifying For Conventional Loan After Chapter 13 Bankruptcy

  1. 2 years mandatory waiting period from the completion of the Chapter 13 Bankruptcy discharge date with no late payments during the Chapter 13 Bankruptcy repayment period and no late payments after the Chapter 13 Bankruptcy discharge date.
  2. Minimum credit scores of 620 FICO credit scores.
  3. Debt to income ratios of not greater than 45% DTI. These are the maximum debt to income ratios permitted under Fannie Mae and Freddie Mac debt to income ratio guidelines on conventional loans.

Qualifying For FHA Loan After Chapter 13 Bankruptcy

  1. Home Buyers can qualify for a FHA Loan one year into a Chapter 13 Bankruptcy with the approval of the Chapter 13 Bankruptcy Trustee and proof that he or she has been timely with at least 12 months of payments to all of their creditors and no late payments.
  2. FHA has no waiting period after a Chapter 13 Bankruptcy Discharged Date but needs to be done via manual underwriting if the discharge of the Chapter 13 Bankruptcy has been seasoned for less than two years. Reason why it needs to be manual underwriting is because you cannot get an approve/eligible per Automated Underwriting System unless the Chapter 13 Bankruptcy has been at least two years out of a Chapter 13 Bankruptcy Discharge Date.
  3. Manual Underwriting and Verification of Rent: All manual underwriting FHA loans require verification of rent on all manual underwrites. Verification of Rent is only valid if and only if the renter can provide 12 months canceled checks that was paid to the landlord and/or 12 months bank statements showing that they monthly rental payments were transferred out of the renter’s bank account into the bank account of the landlord. If the renter is renting their unit from a registered property management company, then a VOR completed by the property manager of the property management company is sufficient and can be used in lieu of the 12 months canceled checks and/or 12 months bank statements.
  4. Minimum credit scores required for a 3.5% down payment FHA home purchase loan is 580 FICO.
  5. Compensating Factors are required for manual underwrites. Examples of compensating factors are larger down payment, longevity on the job, credit tradelines , and reserves.

Qualifying For VA Loan After Chapter 13 Bankruptcy Discharged Date

  1. The waiting period to qualify for a VA Loan after a Chapter 13 Bankruptcy discharged date is the same as the waiting period in qualifying for a VA Loan after a Chapter 7 Bankruptcy discharged date, which is two years from the date of the bankruptcy discharge.
  2. Re-established credit and no late payments after the bankruptcy discharged date is expected.

Qualifying For USDA Loan After Chapter 13 Bankruptcy Discharged Date

  1. The waiting period to qualify for a USDA Loan after a Chapter 13 Bankruptcy Discharged Date is the same as the waiting period after a Chapter 7 Bankruptcy Discharged Date, which is two years from the discharged date of the bankruptcy.
  2. Re-established credit and no late payments after the bankruptcy is expected by USDA mortgage lenders.

Conventional Loan After Bankruptcy

Qualifying for Conventional Loan After Bankruptcy is different than qualifying for FHA Loan After Bankruptcy . To qualify for FHA Loan After Chapter 7 Bankruptcy, there is a two year waiting period after the discharged date of the Chapter 7 Bankruptcy. There are no waiting periods to qualify for a FHA Loan After A Chapter 13 Bankruptcy Discharged Date. There is a four year waiting period to qualify for a Conventional Loan After A Chapter 7 Bankruptcy. There is a two year waiting period to qualify for Conventional Loan After Chapter 13 Bankruptcy. If you had a mortgage part of bankruptcy , there is a four year waiting period to qualify for a conventional loan from the discharged date of your Chapter 7 Bankruptcy even though the foreclosure and/or sheriff’s sale happened at a later date from the discharged date of the Chapter 7 Bankruptcy. This is not the case with FHA Loans. If you had a mortgage part of your Chapter 7 Bankruptcy, there is a three year mandatory waiting period from the recorded date of the foreclosure and/or sheriff’s sale which is reflected on the recorded of deeds office of the county the property got foreclosed upon.

If you need to qualify for a conventional loan after Chapter 13 Bankruptcy and are looking for a mortgage lender with no mortgage lender overlays, please contact me at 262-716-8151 or email me at gcho@gustancho.com. I am available 7 days a week, weekends, evenings, and holidays to take your phone call and answer any questions you may have.

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.

1 Comment

  1. Val says:

    Hi, my BK chapter 13 has been over 1 year since its been discharged. Im in process of buying a home thru FHA loan but I want to do a conventional loan since I’m willing to put 20%down. Would I be qualified for conventional?