Home Loan After Second Mortgage Charge Off Guidelines

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Home Loan After Second Mortgage Charge Off Guidelines

This BLOG On Home Loan After Second Mortgage Charge Off Guidelines Was UPDATED On July 10th, 2018

Mortgage loan borrowers can qualify for home loan after second mortgage charge off with no 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 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?

Borrowers 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 normally charges it off
  • Creditors 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
  • They can 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
  • Borrowers can qualify for a FHA Loan with charge off accounts
  • 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 NO

Second Mortgage Lien After Charge Offs

If a homeowner forecloses on their home and has a second mortgage charged off, there is a three year waiting period after the recorded date of the first mortgage but no waiting period after the second mortgage charge off.

  • However, if the second mortgage lender charges off the second lien and the homeowner still owns the home, there is a second lien on the home even though the second mortgage has been charged off
  • The charge off need to either be settled and/or paid off prior to and/or at closing

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

Borrowers can qualify for FHA Home Loans with a second mortgage charge off account with no waiting period.

  • Second mortgages are not government loans and are portfolio loans funded by banks
  • The Federal Housing Administration does not have any waiting period after a second mortgage charge off account

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.

  • There is no waiting period after timeshare foreclosure to qualify for a FHA Loan
  • Unfortunately, most lenders consider timeshare foreclosure as real estate foreclosure and mandates a three year waiting period
  • Gustan Cho Associates has no overlays on government and conventional loans and has no waiting period after timeshare foreclosure

Mortgage Lender Overlays

Many mortgage lenders will not touch anyone with a second mortgage charge off. Lenders may give borrowers a last minute mortgage loan denial when the underwriter reviews the second mortgage charge off.

  • However,  lenders with no overlays like myself can qualify borrowers for home loan after second mortgage charge off

Borrowers who got denied due to a second mortgage charge off or have been denied for a FHA Loan due to a timeshare foreclosure, please contact us at Gustan Cho Associates Mortgage Group at 262-716-8151 or text us for faster response. Borrowers can also email us 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.

Related> HARP With Second Mortgage

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Related> Can Second Home Be Primary Home?

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