Home Loan After Second Mortgage Charge Off And Foreclosure

Charge Off Accounts

Home Loan With Second Mortgage Charge Off

Mortgage loan borrowers can qualify for home loan after second mortgage charge off after meeting mandatory waiting period after the charge off depending on the mortgage loan program. Home buyers after second mortgage charge off is a commonly asked questions by many of our viewers at Gustan Cho Associates.  Many home buyers with a prior foreclosure with a second mortgage charge off get different waiting period after second mortgage charge off answers by different mortgage lenders.  This mortgage blog article will cover specific waiting periods after foreclosure and second mortgage charge off for various mortgage loan programs. FHA Loans and Conventional Loans have different mortgage lending guidelines when it comes to qualifying for home loan after second mortgage charge off and foreclosure.

How Does FHA View Charge Offs?

You can have charge off accounts and qualify for a FHA Loan.  A charge off is when a creditor writes the bad debt off their books.  When a debtor stops paying a creditor, the creditor will try to collect on their debt for the first 90 days.  After 90 days, the creditor can subcontract a third party collection agency or sell the bad debt to a third party collection agency if they believe that the debtor is collectible.  The collection agency then can try to collect on the debt by suing the debtor and try to get a monetary judgment and pursue collection activities such as wage garnishments, levying bank accounts, or placing liens on the debtor’s assets.  If the creditor believes that the debtor is not collectible because they have no job or assets and is judgment proof, the creditor can decide to write off the debtor’s unpaid account and deem it a charge off.  A charge off is when a creditor writes the debt off their books.  FHA Loans exempt charge offs and you can qualify for a FHA Loan with charge off accounts and no portion of the uncollected debt will be used to calculate debt to income ratios .  What happens to second mortgage charge off accounts?  Are there mandatory waiting period to qualify for a FHA Loan after a second mortgage charge off account?  The answer is YES.

Qualifying For A FHA Loan With A Second Mortgage Charge Off Account

You can qualify for a FHA insured mortgage loan with a second mortgage charge off account after three years from the date of the charge off.  Even though second mortgages are not government loans and are portfolio loans funded by banks, the Federal Housing Administration has a three year waiting period after a second mortgage charge off account in order for a FHA Loan mortgage borrower can qualify for a FHA Loan.

Qualifying For A Conventional Loan With A Second Mortgage Charge Off Account

There is a seven year waiting period after a second mortgage charge off account to qualify for a conventional loan.  Again, second mortgages are not government loans but Fannie Mae and Freddie Mac treats second mortgages like first mortgages and a second mortgage charge off account is classified the same as a regular conforming loan foreclosure.

Foreclosure And Charge Off Accounts On Timeshares

FHA treats timeshare foreclosures as consumer loans and have no waiting period after timeshare foreclosure to qualify for a FHA Loan.  However, Fannie Mae and Freddie Mac treats timeshare foreclosures and timeshare charge off account as a regular foreclosure and have a 7 year mandatory waiting period just like a regular standard home foreclosure.

Mortgage Lender Overlays

Many mortgage lenders will not touch anyone with a second mortgage charge off and may give you a last minute mortgage loan denial when the underwriter reviews the second mortgage charge off. However, mortgage lenders with no lender overlays like myself can qualify mortgage loan borrowers for home loan after second mortgage charge off.  If you got denied due to a second mortgage charge off that has been seasoned more than 3 years or have been denied for a FHA Loan due to a timeshare foreclosure, please contact me at 262-716-8151 or email me at gcho@gustancho.com.  Please register and become a member or our Mortgage and Real Estate Forum and participate with our online members. A large percentage of our borrowers close on their home loan after second mortgage charge off.

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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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