FHA And Conventional Guidelines On Mortgage After Bankruptcy

0

FHA And Conventional Guidelines On Mortgage After Bankruptcy

This BLOG On FHA And Conventional Guidelines On Mortgage After Bankruptcy Was Written By Gustan Cho NMLS 873293 

Home buyers and homeowners can qualify for a home purchase mortgage loan or a home refinance mortgage after bankruptcy.

  • Both HUD and Fannie Mae recently announced new mortgage lending guidelines to qualify mortgage after bankruptcy recently. 
  • In general, FHA guidelines for mortgage after bankruptcy is 2 years from the discharge date of the bankruptcy
  • This is the same guidelines as prior years on waiting period to qualify for mortgage after bankruptcy
  • Fannie Mae lending guidelines for mortgage after Chapter 7 bankruptcy is 4 years from the discharge date
  • However, Fannie Mae came up with new Fannie Mae Guidelines:
    • if a homeowner has a mortgage included in Chapter 7 bankruptcy
    • then the waiting period for both the mortgage and bankruptcy starts four years from the bankruptcy discharge date
    • housing event needs to be finalized
    • homeowners cannot have the mortgage included in bankruptcy reaffirmed
  • Before this new Fannie Mae Guideline, borrowers with mortgage or foreclosure part of bankruptcy, the waiting period did not start until the recorded date of housing event
  • Waiting period was four years from the discharge date of the bankruptcy
  • 7 years from the recorded date of the foreclosure which is reflected on the county records
  • Waiting periods for mortgage after a deed in lieu of foreclosure and/or short sale under Fannie Mae Guidelines is 4 years
  • FHA treats short sale and deed in lieu of foreclosure the same as a regular foreclosure unlike Fannie Mae and Freddie Mac
  • Mortgage underwriters are very cautious when underwriting borrowers with a prior bankruptcy and/or housing event

What Do Underwriters Look For On Borrowers With Prior Bankruptcy?

FHA And Conventional Guidelines On Mortgage After Bankruptcy and qualification requirements of borrowers:

  • The first thing mortgage underwriters will look at when reviewing borrowers with prior bankruptcies is to confirm that the bankruptcy was discharged
  • This means that the bankruptcy is totally complete and fully discharged
  • Mortgage underwriters will also look to borrowers have met the mandatory waiting period after bankruptcy
  • 2 years from the discharge date for FHA Loans and 4 years for conventional loans
  • The filing date of a bankruptcy is different than the discharge date of a bankruptcy
  • It normally takes 90 days or more to have a Chapter 7 bankruptcy discharged from the original filing date of the bankruptcy

Late Payments After Bankruptcy And Foreclosure

Under FHA And Conventional Guidelines On Mortgage After Bankruptcy, there is no written rule that late payments after bankruptcy and foreclosure are deal killers. However, late payments after bankruptcy and/or foreclosure is not viewed favorably and may affect the findings you will get by the Automated Underwriting System.

Here are other factors that play into the equation when it comes to late payments after bankruptcy and foreclosure:

  • Another important factor that mortgage underwriters look for is late payments after a bankruptcy discharge. 
  • Most mortgage underwriters do not like late payments after a bankruptcy and/or housing event
  • It does not matter how old a bankruptcy discharge is
  • One or two late payments after a bankruptcy may not be a deal killer with a good letter of explanation
  • However, there are lenders that will flatly deny a mortgage applicant if they have had any late payments after bankruptcy
  • If lender that is telling borrowers do not qualify due to late payments after bankruptcy, please contact me at 262-716-8151 or text us for faster response
  • As long as borrowers get an approve/eligible per AUS, Gustan Cho Associates Mortgage Group can get mortgage approval
  • We are direct lenders with no mortgage lender overlays on government and conventional loans

Re-established Credit After Bankruptcy And Foreclosure

Another important factor that mortgage underwriters look at is re-established credit after bankruptcy.

  • Re-established credit is extremely important
  • Many folks who filed bankruptcy and had their bankruptcy discharged have a hard time getting new credit
  • Often times consumers do not even try to get new credit and just purchase their goods with cash
  • Unfortunately, this practice is not good when it comes to qualifying for a mortgage after bankruptcy
  • Folks who had their bankruptcies just recently discharged should immediately get three to five secured credit cards with at least a $500 credit limit
  • Secured credit cards are the best tools to use in re-establishing one’s credit
  • Each secured credit card should boost a consumer’s credit report by at least 20 to 30 points and the longer the secured credit card ages, the higher the consumer’s credit scores will be

Bankruptcy On Credit Report

All derogatory credit items will remain on credit report for a period of 7 years from the date of last activity.

  • However, a bankruptcy will remain on credit report for a period of 10 years from the discharge date of bankruptcy
  • Once someone files bankruptcy, they will see their credit scores drop by 200 points
  • However, a bankruptcy is like a major hangover
  • Even though the bankruptcy remains on credit report for a period of 10 years, as time passes, the bankruptcy will have less and less impact on credit scores
  • Adding new positive credit and being on time with new credit will offset the negative impact the bankruptcy has on credit score

Leave A Reply

Your email address will not be published.

CALL NOW