Qualifying For Home Loan After Deed In Lieu Of Foreclosure

This BLOG On Qualifying For Home Loan After Deed In Lieu Of Foreclosure Was UPDATED On August 5, 2017

Home Buyers can qualify For Home Loan After Deed In Lieu Of Foreclosure deed in lieu of foreclosure.

  • Government and Conventional Loans require mandatory waiting periods for borrowers who need to qualify for home loan after deed in lieu of foreclosure.
  • FHA and USDA treats it like a regular foreclosure and the waiting period is 3 years from the recorded date of the deed in lieu of foreclosure.
  • VA has a two year waiting period to qualify for VA Qualifying For Home Loan After Deed In Lieu Of Foreclosure.
  • The waiting period starts from the date the deed of the property was transferred out of the deed into the mortgage lender’s name.

Waiting Period Requirements For Home Loan After Deed In Lieu Of Foreclosure

Most folks think that the deed in lieu of foreclosure is finalized when they sign the paperwork and turn over the keys to the mortgage lender.

  • That is absolutely not the case. 
  • Homeowners can turn over the keys to the mortgage lender and sign all the necessary paperwork but the deed can still be in name of homeowner for months if not years until the deed has changed hands. 
  • This will hurt ability to purchase a new home because the waiting period does not officially begin until the date the mortgage lender’s name on the deed is recorded at the Recorder of Deeds in the particular county.  
  • Most mortgage lenders are in no hurry to transfer their names into the deed and are well aware that the waiting period does not start until they transfer the deed out of homeowners name into theirs.

Deed In Lieu Of Foreclosure As Part Of Bankruptcy

There are many homeowners who have included their deed in lieu of foreclosure in their bankruptcy and waited three years and think they are eligible to purchase a home.  With FHA Loans and other government loans like VA and USDA Loans, if mortgage borrowers had mortgage part of Chapter 7 Bankruptcy, the waiting period starts when the mortgage has finalized either via foreclosure, deed in lieu, and/or short sale.

  • That is not always the case. 
  • I get dozens of phone calls from potential home buyers who have rigorously and diligently re-established their credit and have waited three years and contact me to get pre-approved. 
  • Many times I give them the bad news that the deed in the deed in lieu of foreclosure they included in their bankruptcy has not transferred into the lender’s name. 
  • Three years later, they still have the deed in their names. 
  • Unfortunately, to these folks the 3 year waiting period did not even started.

Good news is that mortgage borrowers who had mortgage part of Chapter 7 Bankruptcy can qualify for conventional loans four years from the discharged date of the Chapter 7 Bankruptcy discharged date even though the foreclosure, deed in lieu, short sale finalized after the discharged date.

Expediting Waiting Period Start Date

Homeowners who included the deed in lieu of foreclosure in Chapter 7 bankruptcy, technically own the house free and clear with no mortgage or lien on the home.

  • If the mortgage lender will not transfer the deed from homeowners name to theirs, one quick way to get their attention is to list the house and sell it. 
  • Technically,  the bank does not want the house because they do not want to transfer it to their name and the only option for the homeowner is to sell the home. 
  • No mortgage. 
  • Technically in theory, the homeowner should be able sell and keep all the proceeds. 
  • When homeowners tell the bank of their intentions, the deed will be transferred into their name and recorded in a matter of hours.

No Waiting Period For Home Loan After Deed In Lieu Of Foreclosure And Bankruptcy

The Gustan Cho Team at USA Mortgage now offers NON-QM Loans and Bank Statement Mortgage Loans For Self Employed Borrowers with no waiting period after the following:

  • No Waiting Period To Qualify For Home Loan After Deed In Lieu Of Foreclosure And Short Sale
  • No Waiting Period After Bankruptcy
  • No Waiting Period After Foreclosure
  • 10% to 20% down payment required
  • Down Payment Requirements depends on credit scores
  • No Pre-Payment Penalty
  • Great Tool for bridge financing

2017 Update With Qualifying For Home Loan After Deed In Lieu Of Foreclosure And Short Sale

The 2 year waiting period after deed in lieu of foreclosure and short sale to qualify for a conventional loan with a 20% down payment is no longer in effect as of last August 2014.

  • Fannie Mae and Freddie Mac now changed the waiting period to qualify for a conventional loan after a deed in lieu of foreclosure and short sale to a 4 year waiting period with 5% down payment. 
  • Another new positive conventional loan guideline that Fannie Mae implemented in 2014.
  • The new Fannie Mae Guidelines is that if a home buyer has a mortgage part of bankruptcy, there is a four year waiting period from the discharge date of the Chapter 7 bankruptcy discharged date.
  • The finalization of the foreclosure, deed in lieu of foreclosure, short sale can happen after the discharged date of the Chapter 7 Bankruptcy discharged date and it does not matter.
  • The foreclosure, deed in lieu of foreclosure, or short sale needs to be finalized.
  • The recorded date of the foreclosure does not matter if the borrower has mortgage part of the Chapter 7 Bankruptcy.
  • The mortgage cannot be re-affirmed.
  • This will open up many doors for home buyers who had mortgage part of Chapter 7 bankruptcy but the foreclosure did not recorded at a later date. 
  • The mortgage part of bankruptcy lending guidelines only applies to Conventional Loans and not FHA Loans or any other loan program.

Related> Mortgage After Deed In Lieu Versus Foreclosure

Related> Mortgage After Deed In Lieu In California

Related> Conventional Loan After Deed In Lieu Of 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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