FHA Versus Conventional Loan After Bankruptcy And Foreclosure

This BLOG On FHA Versus Conventional Loan After Bankruptcy And Foreclosure Was UPDATED On July 30, 2017

Home buyers can qualify for a mortgage loan after bankruptcy, foreclosure, deed in lieu of foreclosure, short sale.

  • However, there are mandatory waiting period after bankruptcy and foreclosure with government and conventional loans.
  • There are major waiting period differences with FHA Versus Conventional Loan After Bankruptcy And Foreclosure.
  • Home buyers who are intending on getting a home purchase mortgage loan and after bankruptcy and foreclosure need to meet the mandatory waiting period mortgage guidelines.
  • We will cover the waiting period guidelines of FHA Versus Conventional Loan After Bankruptcy And Foreclosure.

Mortgage Guidelines On FHA Versus Conventional Loan After Bankruptcy And Foreclosure

Waiting Period On FHA Versus Conventional Loan After Bankruptcy And Foreclosure is just one of many requirements to qualify for home loans. Mortgage Loan Applicants need to meet other credit and debt to income ratio requirements.

  • Meeting the mandatory waiting period after bankruptcy and/or foreclosure does not automatically qualify borrowers for mortgage loans.
  • Mortgage Loan Applicants need to meet income, credit, credit history, and other mortgage guidelines an automated approval by Fannie Mae’s Automated Underwriting System ( AUS ).

Waiting Period After Foreclosure

The waiting period to qualify for a mortgage loan after a foreclosure  depends on the loan program.

  • FHA and USDA requires a three year waiting period after the recorded date of the foreclosure and/or date of the sheriff’s sale.
  • The date the deed to the home was transferred out of homeowners name and into the name of the mortgage lender is the waiting period start date with foreclosures and deed in lieu of foreclosures.
  • Again, just because borrowers have passed the three year waiting period does not guarantee a mortgage loan approval. 
  • Mortgage application needs to get an Automated Underwriting System ( AUS ) approval before the mortgage lender can issue pre-approval.
  • Besides getting an automated approval, the loan officer needs to review all docs before proceeding with processing and underwriting mortgage application. 
  • VA Loans require 2 year waiting period after Chapter 7 Bankruptcy, deed in lieu of foreclosure, foreclosure, short sales to qualify for a VA Home Loan.
  • Conventional loan waiting periods after foreclosure is 7 years.
  • Conventional Loan Waiting Period after deed in lieu of foreclosure and/or short sale is 4 years.

Waiting Period After Deed In Lieu And Short Sale

The Federal Housing Administration ( FHA ) treats short sales and deed in lieu of foreclosure the same as a regular foreclosure.

  • Whether a homeowner had a deed in lieu of foreclosure or a short sale, under FHA’s eyes, it is no different than a regular foreclosure and the three year mandatory waiting period applies. 
  • However, with a deed in lieu of foreclosure or a short sale, mortgage applicants can qualify for a conventional mortgage loan in 4 years with 5% down payment. 
  • Again, the mortgage borrower’s application will need an automated approval by Fannie Mae’s Automated Underwriting System ( AUS ).

Automated Underwriting System ( AUS )

Fannie Mae’s Automated Underwriting System ( AUS ) is like its own brain.

  • In order to get a mortgage loan, all mortgage lenders require an approved eligible reading from the Automated Underwriting System, also known as Desktop Underwriter (DU).
  • Otherwise they will not process and underwrite the mortgage application. 
  • The Automated Underwriting System will take into account borrower’s income, asset, debt, liabilities, and credit report into account and analyze them and will issue an approval or a denial. 
  • The Automated Underwriting System will detect bankruptcies, foreclosures, shorts sales, and deed in lieu of foreclosure. 
  • The AUS will also detect late payments, tax liens, judgments, collections, charge offs, and multiple properties. 
  • The Automated Underwriting System will also detect late payments after you have had a bankruptcy or foreclosure and evaluate your risk level.

It is wise that mortgage loan applicants start re-establishing credit as soon as possible after a bankruptcy, foreclosure, deed in lieu, and/or short sale.

Fannie Mae Guidelines Mortgage Part Of Chapter 7 Bankruptcy

Conventional Mortgage Borrowers who had a mortgage or mortgages part of their Chapter 7 Bankruptcy discharge and did not reaffirm their mortgages can qualify for a Conventional Loan four years from the discharged date of the Chapter 7 Bankruptcy date even if the foreclosure and/or short sale did not get recorded after the discharged date. This rule only applies for Conventional Loans and not FHA, VA, USDA Loans. With FHA, VA, and USDA Loans, the waiting period clock starts from the recorded date of the foreclosure on cases where mortgage was part of Chapter 7 Bankruptcy.

No Waiting Period After Bankruptcy And Foreclosure Loan Programs

NON-QM Loans are non-conforming loans that do not have to meet waiting period mortgage guidelines and have no waiting period requirements after bankruptcy, foreclosure, deed in lieu, and/or short sale. However, 10% to 20% down payment is required.

Mortgage borrowers who need to qualify for mortgage loans after bankruptcy and foreclosure, please contact us at The Gustan Cho Team at 1-800-900-8569 or email us at gcho@gustancho.com. We are available 7 days a week, evenings, weekends, and holidays.

Related> Waiting Period After Bankruptcy And Foreclosure

Related> Fannie Mae Guidelines On Waiting Periods

Related> No Waiting Period After Bankruptcy And Foreclosure

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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