Bankruptcy Versus Debt Settlement
There are two types of bankruptcy. The first type of bankruptcy is Chapter 7 bankruptcy which is total liquidation and complete discharge of the filers debts where the bankruptcy petitioner gets zeroes out all of their debts and gets a fresh financial start. The second type of bankuptcy is Chapter 13 bankruptcy which is debt reorganization and a payment plan where all the debtors debts are restructured and a repayment plan is structured with the petitioners income and a percentage of the petitioners income is allocated every month to pay the creditors in a certain amount of time.
Home Loan After Bankruptcy
For those who file bankruptcy, there are mandatory waiting periods in order for them to be able to qualify for a residential mortgage loan. There is a mandatory 2 year waiting period from the discharge date of a Chapter 7 bankruptcy to qualify for a residential mortgage loan. There is a mandatory one year waiting period for those who have filed Chapter 13 bankruptcy for them to qualify for a residential mortgage loan and they must obtain the Chapter 13 trustee’s approval.
Should I File Bankruptcy Or Should I Wait It Out?
Many folks victimized by this country’s economic and real estate meltdown have tried very hard not to file bankruptcy and decided to enter into a debt management and debt settlement program where they contact all of their creditors and negotiate on a payment plan or a reduction of their debts. This is a real honorable way of satisfying their debt obligation and the majority of the people consider this tactic as being financially responsible, however, mortgage lenders do not feel this way.
If you were in a debt settlement program at one time or another in your past and are about to apply for a residential mortgage loan, you might be running into some hurdles where the mortgage lender will not accept your mortgage application. Most mortgage lenders consider debt settlement as another form of bankruptcy and frown on those who have entered into such program. To be frank, most mortgage lenders prefer bankruptcy than debt settlement. That does not seem like common sense but due to Barney Frank and Chris Dodd, the Dodd-Frank Mortgage Act, many new laws and regulations do not make sense. That is what we get having two politicians with no banking and mortgage experience create our banking and credit laws.
Can I still get qualified for a mortgage loan if I entered into a debt settlement program
If you have had entered into a prior debt settlement program, I strongly recommend consulting with a mortgage broker who has access to dozens of correspondent lenders. A bank will most likely deny you and so will the majority of mortgage bankers. However, a mortgage broker who specializes in bad credit mortgage loans will definitely be able to help you. I had a recent client who had excellent credit scores but had a prior bump several years ago where he lost his job that had to go through a debt settlement program. My client got rejected by more than a dozen wholesale correspondent lenders but I had one lender that was overlook his prior debt settlement program and approve the mortgage loan.
Home Loan After Debt Settlement
If you had a prior debt settlement and are having a difficult time in getting a mortgage lender to approve your mortgage loan, please contact me at Gustan Cho Associates . Here is the website of Gustan Cho Associates , www.gustancho.com . I am licensed in California, Illinois and Florida but do have a network of licensed mortgage professionals throughout the country who I can refer you to.