Home Loan After Debt Settlement Versus Bankruptcy

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This BLOG On Home Loan After Debt Settlement Versus Bankruptcy Was UPDATED On January 2nd, 2019

The Importance of a Home Loan after Debt Repayment and Bankruptcy

Home Loan After Debt Settlement:

Many folks who have gone through a period of financial hardship and fallen behind try to avoid filing for Chapter 7 or Chapter 13 Bankruptcy and try to go through a debt settlement program.

  • Homebuyers can qualify for a home loan after debt settlement
  • Debt settlement is contacting your creditors and working out a repayment plan on your past due debts
  • There are various debt settlement programs where it ranges from a reduced monthly payment, a discounted payoff, or a combination of discounted payoff and reduced payment plan
  • Many creditors will try to work with consumers who have fallen behind on their monthly payment obligations and try to work things out with them
  • I praise those who go through a voluntary debt settlement program because they are showing financial responsibility and trying to avoid filing bankruptcy to honor their debt obligations
  • However, and unfortunately, many lenders view debt settlement as a form of bankruptcy
  • Some lenders will not take a look at a mortgage application that reports the mortgage loan client has gone through a debt settlement program

In this article, we will cover and discuss Home Loan After Debt Settlement Versus Bankruptcy.

Home Loan After Debt Settlement And Applying For Mortgage

I have countless of mortgage loan applicants who have gone through a period of financial hardship to an unfortunate economic event.

  • Some had gone through a debt settlement program in order to avoid bankruptcy
  • Many of these borrowers came to me after getting denied by other lenders for having gone through a debt settlement program

Many Lenders Consider Home Loan After Debt Settlement Same As Bankruptcy

Why do many lenders consider home loans after paying back the same debt as bankruptcy?

Many lenders consider borrowers who have gone through a debt settlement program the same as if they went through bankruptcy.

  • Even though debt settlement is no violation of any HUD, FHA, FANNIE MAE, VA, nor FREDDIE MAC guidelines, many lenders have their own overlays when it comes to debt settlement programs
  • Some mortgage lenders consider debt settlement worse than bankruptcy
  • Under their views, someone who has gone through a debt settlement knows the system in negotiating debt settlement repayment
  • Some lenders view consumers can always file for bankruptcy whereas someone who has filed bankruptcy cannot file another bankruptcy for a period of 7 years
  • Actually, these lenders favor bankruptcy over debt settlement
  • Unfortunately, many rules and regulations in the mortgage business do not make common sense

The good news is that there are lenders who are willing to work with borrowers who have gone through a debt settlement program and have re-established their credit and show stable employment.

Denied By Lender Because Of Debt Settlement

If you got denied by a lender because you went through a debt settlement program, please contact us at Gustan Cho Associates.  The Team at Gustan Cho Associates will be able to help you.  We represent dozens of investors that do not have overlays on Fannie Mae guidelines and have experience in dealing with situations like these.  Many wholesale lenders who advertise they have no Fannie Mae guideline overlays still do.  From experience, I always take a mortgage application and go over the individual case scenario with a senior mortgage underwriter before I submit the full mortgage application and that is how I am able to get 100% mortgage loan approvals.  Please contact me at www.gustancho.com if you have been denied for a mortgage loan by another lender for having gone through a previous debt settlement program or have been denied for other reasons.  We are direct lenders with no overlays on government and conventional loans. Gustan Cho Associates is available 7 days a week at 262-716-8151 or text us for faster response. Or email us at gcho@gustancho.com.

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