Guidelines On Mortgage Part Of Bankruptcy On Conventional Loans

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Guidelines On Mortgage Part Of Bankruptcy On Conventional Loans

This BLOG On Guidelines On Mortgage Part Of Bankruptcy On Conventional Loans Was PUBLISHED On July 1st, 2019

Guidelines On Mortgage Part Of Bankruptcy On Conventional Loans

Qualifying Guidelines On Mortgage Part Of Bankruptcy:

  • Mortgage Lending Guidelines with regards to mortgage part of bankruptcy is different for all mortgage loan programs
  • FHA has its own mortgage lending guidelines with regards to lending guidelines on mortgage part of bankruptcy
  • Fannie Mae has just come up with new mortgage lending guidelines with regards to guidelines on mortgage part of bankruptcy

In this blog, we will discuss Guidelines On Mortgage Part Of Bankruptcy on Conventional Loans.

Qualifying For Conventional Loans With A Prior Mortgage Included In Bankruptcy

Qualifying For Conventional Loans With A Prior Mortgage Included In Bankruptcy

If a mortgage loan debt was discharged through a Chapter 7 bankruptcy, the mandatory waiting periods after a bankruptcy discharge date is the waiting period start date.

  • The date of the foreclosure, deed in lieu of foreclosure, short sale after the bankruptcy does not matter
  • The mortgage cannot be reaffirmed after the bankruptcy
  • There is a four year waiting period after the discharge date of the bankruptcy to qualify for a conventional loan

This is a great benefit with conventional versus FHA Loans.

FHA Guidelines On Mortgage Part Of Bankruptcy

FHA Guidelines On Mortgage Part Of Bankruptcy

To qualify for an FHA Loan if you have a mortgage part of bankruptcy, the waiting period starts from the recorded date of the foreclosure and not the discharge date of the bankruptcy.

  • For example, if you filed bankruptcy in June of 2010
  • And you included your mortgage as part of your bankruptcy
  • And the discharge date of your bankruptcy was October of 2010 but your foreclosure did not get recorded until October of 2012
  • The waiting period to qualify for an FHA Loan starts 3 years from the October 2012 recorded date of your foreclosure

Even though the loan balance was wiped out from the Chapter 7 bankruptcy, the waiting period does not start from the recorded date the deed was transferred out of your name into the name of the lender.

Guidelines On Mortgage Part Of Bankruptcy For Conventional Loans

Guidelines On Mortgage Part Of Bankruptcy For Conventional Loans

The mandatory waiting period to qualify for a conventional loan is 4 years from the date of the bankruptcy discharge date.

  • The great news with Fannie Mae conventional loan programs is that if you had a mortgage part of bankruptcy, the waiting period starts from the discharge date of your bankruptcy and not the recorded date of the foreclosure
  • The foreclosure can be recorded past the discharge date of the bankruptcy
  • For example, if you filed bankruptcy in January of 2010
  • And the bankruptcy was discharged in May 2010 and had a mortgage part of bankruptcy
  • And the foreclosure was not recorded until January 2013
  • The 4-year waiting period starts from the discharge bankruptcy date of May 2014

This is a new Fannie Mae guidelines on mortgage part of bankruptcy which will enable home buyers who had their foreclosures recorded at a later date than the date of their discharged bankruptcy dates.

Derogatory Event StatusWaiting Period Requirements to Qualify for Conventional LoanWaiting Period with Extenuating Circumstances per Fannie Mae Guidelines
Bankruptcy — Chapter 7 or 11 Filing4 years from Bankruptcy Discharge Date2 years from the bankruptcy discharge date
Bankruptcy — Chapter 13 Filing 2 years from the discharge date of the Bankruptcy Date of the Bankruptcy 4 years from dismissal date of the Chapter 13 Bankruptcy 2 years from the discharge date of the bankruptcy. 2 years from dismissal date of the Chapter 13 date of the Bankruptcy
Multiple Bankruptcy Filings5 years if more than one filing BANKRUPTCY  within the past 7 years3 years from the most recent discharge or dismissal date of bankruptcy
Foreclosure7 years from the recorded date of the foreclosure which is reflected on the county records or the date of the sheriff’s sale3 years from the recorded date of the foreclosure which is reflected on county records or the date of the sheriff’s sale. Additional requirements after 3 years up to 7 years:   90% maximum LTV ratios Purchase, principal residence Limited cash-out refinance, all occupancy types
Deed-in-Lieu of Foreclosure, Preforeclosure Sale, or Charge-Off of Mortgage Account4 years from the recorded date of the deed in lieu of foreclosure or the 4 years from the date of the short sale which is reflected on the HUD-1 Settlement Statement.2 years

For more information on this blog and/or other mortgage-related topics, please contact us at Gustan Cho Associates at 262-716-8151 or text us for faster response. Or email us at gcho@loancabin.com. Gustan Cho Associates Mortgage Group is available 7 days a week, evenings, weekends, and holidays.

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