In this blog, we will discuss and cover Freddie Mac bankruptcy guidelines on conventional loans. Mortgage borrowers can qualify for government and conventional loans after bankruptcy. However, government and conventional loans require a waiting period after bankruptcy. The waiting period requirements depend on the individual mortgage program. Gustan Cho Associates offer non-QM mortgages one day out of bankruptcy.
Qualifying for Non-QM Loans One Day out of Bankruptcy with No Waiting Period Requirements
Homebuyers can qualify for non-QM loans one day out of bankruptcy. However, a 30% down payment is required on non-QM loans one day out of bankruptcy. Just waiting out the waiting period after bankruptcy does not guarantee borrowers to qualify for a mortgage. To get an approve/eligible per automated underwriting system (AUS), borrowers need timely payments after bankruptcy. No late payments after bankruptcy. Rebuilt and reestablished credit after bankruptcy is very important. Secured credit cards are the easiest and fastest tool for re-establishing your credit after bankruptcy. We highly recommend three to five secured credit cards with at least a $500 credit limit as soon as your bankruptcy has been discharged.
Waiting Period After Bankruptcy To Qualify For A Conforming Loan
Fannie Mae And Freddie Mac Bankruptcy Guidelines On Conventional Loans require mandatory waiting period requirements after bankruptcy. Conventional Loans are called Conforming loans. The reason conventional loans are called conforming loans is that they need to conform to Fannie Mae and/or Freddie Mac Agency Mortgage Guidelines. Fannie Mae and Freddie Mac are the two mortgage giants. They are often referred to as Government Sponsored Enterprises (GSE).
What Is The Role of Fannie Mae and Freddie Mac?
Fannie Mae and Freddie Mac are private companies but are sponsored by the federal government. The Federal Housing Finance Agency is the federal agency in charge of Fannie Mae and Freddie Mac. The main role of Fannie/Freddie is to purchase conventional loans on the secondary market. Once the lender funds a conventional loan, either Fannie and/or Freddie will purchase the loan on the secondary market. If the conventional loan does not conform, Fannie and/or Freddie will not purchase the loans. If Fannie or Freddie does not purchase the loan, the lender is stuck holding the loan in their portfolio and/or selling it as a scratch-and-dent mortgage on the secondary market
Fannie And Freddie Mac Bankruptcy Guidelines Versus Other Loan Programs
All government and conventional loans have a mandatory waiting period after bankruptcy to qualify for home loans. The waiting period is different depending on the particular loan program. We will compare the government versus conforming bankruptcy waiting period requirements in this paragraph.
Qualifying For Government Loans After Bankruptcy
Here are Bankruptcy Guidelines on government loans:
- HUD, the parent of FHA, require a two-year waiting period after Chapter 7 Bankruptcy
- The Department of Veterans Affairs (The VA) require a two-year waiting period after Chapter 7 Bankruptcy on VA loans
- The USDA requires a three-year waiting period after Chapter 7 Bankruptcy to qualify for USDA loans
- There is no waiting period requirements on VA and/or FHA loans after the Chapter 13 Bankruptcy discharged date
Borrowers can qualify for VA and/or FHA Loans during Chapter 13 Bankruptcy Repayment Plan without the bankruptcy being discharged with Trustee Approval.
Qualifying For Conventional Loans After Bankruptcy
Fannie And Freddie Mac Bankruptcy Guidelines On Waiting Periods To Qualify On Conventional loans:
- There is a four-year waiting period to qualify for Conventional loans after the Chapter 7 Bankruptcy discharged date
- There is a two-year waiting period to qualify for Conventional loans after the Chapter 13 discharge date
- There is a four-year waiting period to qualify for Conventional loans after the Chapter 13 dismissal date
Unlike VA and FHA loans, borrowers cannot qualify for Conventional loans during the Chapter 13 Bankruptcy Repayment Period.
Freddie Mac Bankruptcy Guidelines Versus Non-QM Loans: No Waiting Period To Qualify For A Mortgage After Bankruptcy with Non-QM Mortgages
Homebuyers can now qualify for a mortgage one day out of bankruptcy and/or foreclosure with Non-QM Loans. There are no waiting period requirements after bankruptcy and/or a housing event. A housing event is one of the following:
- Foreclosure
- Deed In Lieu Of Foreclosure
- Short-Sale
Gustan Cho Associates has dozens of non-QM loan programs.
Non-QM Versus Freddie Mac Bankruptcy Guidelines
The following are the eligibility requirements on Non-QM loans:
- Minimum credit scores down to 500 FICO
- 10% to 20% down payment
- The down payment requirements depend on the borrower’s credit scores
- Bank statement mortgage loan program for self-employed borrowers
- Late payments in the past 12 months allowed
- No maximum loan limits
- No private mortgage insurance is required on all Non-QM Loans
- For primary, second homes, and investment properties
- No pre-payment penalty on owner-occupant properties
- Up to 50% debt to income ratios allowed
For more information about the contents of this article and/or other mortgage-related topics, please contact us at Gustan Cho Associates at 800-900-8569 or text us for a faster response. Or email us at gcho@gustancho.com. The Team at Gustan Cho Associates Mortgage Group is available 7 days a week, evenings, weekends, and holidays. Gustan Cho Associates has a national reputation of being a one-stop mortgage shop. Not only do we have no lender overlays on government and conventional loans, but we offer dozens of non-QM mortgage loan programs. Some of our most popular loan programs include bank state mortgages, non-QM Jumbo loans, non-QM mortgages one day out of bankruptcy and foreclosure, asset-depletion mortgages, fix and flip loans, and dozens of other alternative mortgage programs.
February 10, 2022 - 4 min read