Qualifying Borrowers With Foreclosure In Mortgage Qualification

This BLOG On Qualifying Borrowers With Foreclosure In Mortgage Qualification Was UPDATED On October 20th, 2017

Foreclosure In Mortgage Qualification

There are mandatory waiting periods after foreclosure in mortgage qualification process on government and conventional loans. Government Loans are home loans that are guaranteed and insured by the federal government.

There are three different types of government loans:

  1. FHA Loans
  2. VA Loans
  3. USDA Loans

Conventional Loans are home loans that conform to Fannie Mae and/or Freddie Mac Guidelines. Conventional Loans are private loans where if a lender conforms to Fannie and/or Freddie, they can resell the loans to Fannie and/or Freddie. If they do not conform, banks and lenders cannot sell it on the secondary market.

FHA Loans With Foreclosure In Mortgage Qualification

USDA And FHA Guidelines After Foreclosure In Mortgage Qualification are as follows:

  • 3 year waiting period after the recorded date of foreclosure and/or deed in lieu of foreclosure or the date of sheriff’s sale
  • 3 year waiting period after date of short sale reflected on the HUD-1 Settlement Statement
  • 2 year waiting period after Chapter 7 Bankruptcy discharged date to qualify for FHA and USDA Loans
  • FHA allows those who are in a Chapter 13 Bankruptcy repayment plan to qualify for FHA Loans as long as they have been one year into a Chapter 13 repayment plan
  • There is no waiting period after Chapter 13 Bankruptcy discharged date to qualify for FHA Loans with The Gustan Cho Team at USA Mortgage
  • The Gustan Cho Team at USA Mortgage are direct lenders with no lender overlays on government and conventional loans

Exceptions To Waiting Period Requirements On FHA Loans

If homeowner had a prior short sale and the mortgage payments as well as all other payments have been timely in the past 12 months preceding the short sale, there is no waiting period requirements. If a married couple has a foreclosure and one spouse is on title but not on the note, the borrower not on the note is not subject to any waiting period requirements.

VA Loans Waiting Period Requirements After Foreclosure

VA Loans have shorter waiting period requirements after foreclosure, deed in lieu of foreclosure, short sale.

  • Waiting period after Chapter 7 and Chapter 13 Bankruptcy is the same on VA Loans as they are with FHA Loans.
  • However, there is only a two year waiting period to qualify for VA Loans after short sale and recorded date of foreclosure and/or deed in lieu of foreclosure.
  • The Gustan Cho Team at USA Mortgage does not have any overlays on VA Loans
  • VA borrowers with credit scores of 580 and approve/eligible per Automated Underwriting System findings can qualify for VA Loans with The Gustan Cho Team at USA Mortgage
  • No debt to income ratio requirements on VA Loans: We just go off AUS Findings

Judgments

Borrowers with outstanding Judgments can qualify for mortgage loans:

  • Judgments need to be paid in full prior to mortgage loan approval and/or clear to close
  • On refinance mortgages, judgments can be paid at closing
  • Judgments do not have to be paid in full to qualify for mortgage loans
  • Borrowers can get written payment agreement with judgment creditor and have three months seasoning to qualify for mortgage with judgments
  • Monthly payment on judgment needs to be included in debt to income ratio calculations
  • Cannot pre-pay three months payments on judgments upfront to meet three months seasoning requirements

No Waiting Period After Foreclosure

The Gustan Cho Team at USA Mortgage now has a special mortgage program called NON-QM Loans where there is no waiting period after foreclosure, deed in lieu of foreclosure, short sale.

  • There is a one year waiting period after a Chapter 7 Bankruptcy. 20% down payment is required.
  • Contact us for more information.
  • NON-QM Loans is a bridge loan program where home buyers do not have to wait the mandatory waiting period after foreclosure or short sale and can refinance later when they meet the minimum waiting period requirements.

Foreclosure In Mortgage Qualification On Conventional Loans

Conventional Loans classifies deed in lieu of foreclosure and short sale differently than standard foreclosures.

Here are the waiting period requirements on conventional loans after foreclosure in mortgage qualification:

  • 4 year waiting period to qualify for conventional loans after short sale and deed in lieu of foreclosure
  • 7 year waiting period to qualify for conventional loans after standard foreclosure

There are many instances where mortgage borrowers can qualify for conventional loans where they do not qualify for government loans.

  • This is when homeowners had mortgage part of Chapter 7 Bankruptcy.
  • With conventional loans, the four year waiting period clock starts from the discharged date of the Chapter 7 on cases where people had mortgages part of their Chapter 7 Bankruptcy.
  • Mortgage cannot be reaffirmed and the housing event needs to be finalized. 
  • With government loans, if homeowners had mortgage or mortgages part of Chapter 7 Bankruptcy discharged date, then the waiting period starts when the foreclosure, deed in lieu of foreclosure, or short sale has been finalized.

Borrowers who have questions in qualifying with a direct lender with no lender overlays, please contact The Gustan Cho Team at USA Mortgage at 1-800-900-8569 or text Gustan Cho at 262-716-8151 for faster response. Or email us at gcho@usa-mortgage.com. We are available 7 days a week, evenings, weekends, and holidays.

Gustan Cho NMLS ID # 873293

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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