Qualifying For Home Loans After Bankruptcy

This Article On Home Loans After Bankruptcy Is Written By Attorney Chad Hayward 

When the market turned in 2008 many people lost their jobs, businesses, and homes and had to declare bankruptcy. Prior to that, I was primarily a real estate attorney. However, the real estate marketplace had nearly completely dried up and I had to find another way to earn a living. Several of my real estate clients were now on the brink of bankruptcy and needed help. I decided to continue working with them as clients and learn a new area of law. In this quest, I began to learn more than just the laws of bankruptcy but also learned about many of the hardships millions of families across America faced. I soon found that I received a great deal of fulfillment helping people who could not otherwise help themselves through the tedious and complex judicial system. Put another way, it really felt good to help less fortunate people stick it to the “Big Banks,” unscrupulous car lenders, payday loan lenders, and the like; especially after so many had been mistreated by such companies and corporations. Many people who were going through financial hardship not only had to deal with not making ends meet, but the stress of bill collectors calling them and the countless of collection letters threatening wage garnishment, lawsuit, and other collection threats. Those who lost their homes and faced foreclosure never thought that they will ever become homeowners again but that was not the case. People that go through bankruptcies can qualify for home loans after bankruptcy after meeting the mandatory waiting periods. The waiting periods in qualifying for home loans after bankruptcy depends on which type of loan program the home buyer applies for. The two most popular mortgage loan programs today are FHA Loans and Conventional Loans. VA Loans are limited to home buyers who are or were members of the United Armed Services with a Certificate of Eligibility and the waiting period to qualify for home loans after bankruptcy on a VA Loan is two years after a Chapter 7 Bankruptcy discharge.

Waiting Period In Qualifying For Home Loans After Bankruptcy

Prior to the Great Recession of 2008, Bankruptcy seemed like such a bad word and often humiliating in general to many Americans. However, the 2008 Mortgage and Real Estate Meltdown was one of the worst and longest lasting recession in history of not just the United States, but the world. The Recession of 2008 was more like a World Depression than the Great Recession of 2008.  The word Bankruptcy was a household word. It affected millions of hard working Americans. Many who were about to retire or retired, went back to work because the equity in their homes or investment real estate properties have diminished or many had mortgage balances that were higher than the value of their properties. The United States Bankruptcy system has never been busier and bankruptcy filings hit historical highs. Almost every American either went through a bankruptcy themselves or knows of someone close to them that has filed bankruptcy. Bankruptcy is a federal law that was created and available to all Americans who have financial hardship due to extenuating circumstances and needs the courts help in either liquidating all of their assets and discharging their debts ( Chapter 7 Bankruptcy ) or needs the help of the judicial system of the U.S. Bankruptcy Courts to restructure their overall debts and arrange a payment plan over a course of time to pay their creditors with a percentage of their gross income (Chapter 13 Bankruptcy). The economy slowly but eventually recovered and many folks who filed bankruptcy were recovering as well. Millions of Americans had to change careers altogether while others still to this day do not have the jobs of their choice and are working in jobs that they are overqualified. Still, many went back to school or vocational training programs where they started a totally new career. The once real estate market that seemed like it would never rebound and recover has recovered and real estate prices are coming back up and appreciating. Some cities, counties, and states, the appreciation are double digits every year. The whole mortgage industry has totally restructured itself with new guidelines and new standards for loan officers where mortgage loan originators now had to get licensed by passing the NMLS exam, going through an intensive criminal background investigation and credit checks and mandatory annual continuing education courses and annual credit and background checks for loan officers to maintain and renew their mortgage licenses.

The FACT is that the whole country went through a major overhaul in the mortgage industry. New laws and regulations and government agencies were created such as the SAFE ACT and the CFPB, Consumer Financial Protection Bureau. Obtaining home loans after bankruptcy was not streamlined and spelled out for every mortgage programs.

Mandatory Waiting Period To Qualify For Mortgage After Bankruptcy

VA Loans are only limited to Veterans of the U.S. Armed Services with a Certificate of Eligibility. There is a two year waiting period to qualify for a VA Loan after a Chapter 7 Bankruptcy. The Department of Veteran Affairs also limits the waiting period to a two year waiting period to qualify for a VA Loan after a foreclosure, deed in lieu of foreclosure, and short sale.

FHA requires a two year waiting period after a Chapter 7 Bankruptcy discharge date for a borrower to qualify for a FHA insured mortgage loan. To qualify for a Conventional Loan, there is a four year waiting period after a Chapter 7 Bankruptcy discharge date.

A home buyer who is currently into a Chapter 13 Bankruptcy Repayment Plan can qualify for a FHA Loan one year into their Chapter 13 Bankruptcy repayment plan with the approval of their Chapter 13 Bankruptcy Trustee and as long as they have at least a one year timely repayment history to their creditors. There is no waiting period after a Chapter 13 Bankruptcy discharge date to qualify for a FHA Loan.

There is a two year mandatory waiting period to qualify for a Conventional Loan after a Chapter 13 Bankruptcy discharge date.

Mortgage Part Of Bankruptcy

If you had a mortgage as part of your Chapter 7 Bankruptcy, there is a four year waiting period to qualify for a Conventional Loan with a 5% down payment from the discharge date of your Chapter 7 Bankruptcy and not from the recorded date of your foreclosure and/or short sale after your Chapter 7 Bankruptcy discharge date. This only applies for Conventional Loans and not any other loan programs such as FHA, VA, USDA. Due to this Fannie Mae Guidelines On Mortgage Part of Bankruptcy , many home buyers can qualify for a conventional loan BUT NOT FHA Loans, VA Loans, and/or USDA Loans.

Biography Of Chicago Bankruptcy Attorney Chad Hayward

Growing up in a small town in Michigan in a working class family, I understood what it was like to struggle and not have money. I remember times using electrical tape to hold my shoes together and waking up early before school to patch and sew up holes in my jeans. The families I decided to help reminded me much of my own family. Although we can’t always control our circumstances, we can control our destinies. I decided to pursue this area of law to help guide those families and empower them to change their lives. Over the last several years I’ve helped thousands of people turn around their lives and put them on the path to recovery. It has been a satisfying journey.
In this this article I will help you understand the inner workings of the bankruptcy court and the basic guidelines in getting approved for home loans after bankruptcy.

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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