This guide covers qualifying for home loans after Chapter 13 Bankruptcy discharge on FHA and VA loans. A frequently asked question at Gustan Cho Associates is there a mandatory waiting period to qualify for home loans after Chapter 13 Bankruptcy discharge? Can you qualify for a mortgage during the Chapter 13 Bankruptcy repayment plan?
Homebuyers looking to qualify for home loans after Chapter 13 Bankruptcy discharge do not have to wait until it has been discharged. Buyers can qualify for an FHA or VA loan during their Chapter 13 Bankruptcy repayment plan.
There is no waiting period to qualify for home loans after the Chapter 13 Bankruptcy discharge date. Many lenders’ mandatory waiting period requirements after the Chapter 13 Bankruptcy discharge date are due to their lender overlays. HUD has no waiting period after a Chapter 13 Bankruptcy discharge date to qualify for a 3.5% down payment home purchase FHA-insured home loan. The minimum credit score required for a 3.5% down payment home purchase FHA loan is 580 FICO credit scores.
HUD Guidelines on FHA Loans After Bankruptcy
FHA borrowers under a 580 FICO Credit Score can qualify for an FHA loan. But for any borrowers with credit scores between 500 FICO and 579 FICO credit scores, a 10% down payment is required on a home purchase. To be eligible for a 3.5% down payment FHA home purchase loan, the borrower needs a credit score of at least 580.
This holds true as long as the home buyer can provide 12 months of timely payments to creditors and the Chapter 13 Bankruptcy Repayment. Timely payment to creditors and in good standing is mandatory.
HUD sets the mortgage guidelines during and after Chapter 13 Bankruptcy. The VA sets the agency mortgage guidelines on VA loans. Fannie Mae or Freddie Mac is responsible for setting up mortgage guidelines on conventional loans. This blog will discuss the rules and regulations for qualifying for home loans after Chapter 13 Bankruptcy discharge for FHA and Conventional loans.
Home Loans After Chapter 13 Bankruptcy During And After Bankruptcy
Qualifying for Home Loans After Chapter 13 Bankruptcy with FHA Loans is much easier than Qualifying For Home Loans After Chapter 13 Bankruptcy with Conventional Loans. With FHA and VA, a home buyer can qualify for an FHA or VA loan one year into the Chapter 13 Bankruptcy Repayment Plan with the approval of the Bankruptcy Trustee.
VA and FHA loans are the only two loan programs that allow borrowers to qualify for a mortgage during the Chapter 13 Bankruptcy repayment plan. This includes cash-out refinance VA and FHA loans.
There are no waiting period requirements after the Chapter 13 bankruptcy discharge date on VA and FHA loans. HUD, the parent of the Federal Housing Administration or commonly known by many as FHA, and the VA have different rules and guidelines for qualifying for home loans.
Manual Underwriting Mortgage Guidelines
Qualifying For Home Loan After Chapter 13 Bankruptcy with FHA Loans is all manual underwriting if the Chapter 13 Bankruptcy has been seasoned for under two years from the Chapter 13 Bankruptcy discharged date. Manual Underwriting Guidelines require verification of rent which is rental payments made to the landlord for the past 12 months.
The only way verification of rent is valid is by providing 12 months of canceled checks which have been paid to the landlord. Cash payment to the landlord and a paid receipt is not valid and cannot be used to document rental verification.
If the renter is renting from a registered property management company, then a VOR, verification of rent, can be done by the property manager. VOR Form is provided by the lender to the property management company. Completed VOR by the property manager can be used in place of 12 months of canceled checks or 12 months of bank statements. A VOR form will be provided by the lender to the property manager of the property management company. Need to be filled out, signed, dated, and stamped by the property manager.
Qualifying For Home Loans After Chapter 13 Bankruptcy on Conventional Loans
Home Buyers can qualify for a conventional loan after Chapter 13 Bankruptcy two years from the discharge date of the Chapter 13 Bankruptcy. There is a four-year waiting period after a Chapter 7 Bankruptcy discharge date to qualify for a conventional loan. f you had a mortgage part of a Chapter 7 Bankruptcy, there is a three-year mandatory waiting period after the date of the sheriff’s sale. Or date when the home deed was transferred from your name into the lender’s name. The discharge date of the Chapter 7 Bankruptcy does not matter. Sometimes, someone has a mortgage part of bankruptcy, but the foreclosure does not transfer names until years after the Chapter 7 Bankruptcy discharge date.
You cannot have any late payments during and after the Chapter 13 Bankruptcy discharge date required in qualifying for home loans after Chapter 13 Bankruptcy. Lenders do want to see re-established credit after Chapter 13 Bankruptcy.
Most people want nothing to do with credit after a Chapter 13 Bankruptcy discharge. Not having any credit after a Bankruptcy or Foreclosure is not wise and not viewed favorably by mortgage lenders and other creditors. To qualify for a conventional loan, the borrower needs a minimum of a 620 FICO credit score. The maximum debt-to-income ratio on conventional loans cannot be greater than 50% DTI, much less than the maximum FHA debt-to-income ratio requirements of 56.9% DTI.
New Fannie Mae Guidelines on Mortgage Part of Bankruptcy
Great news for homebuyers with a mortgage or mortgage part of their Chapter 7 Bankruptcy. If you had a mortgage as part of your Chapter 7 Bankruptcy, there is a four-year waiting period from the date of your Chapter 7 Bankruptcy discharge date, Not the recorded date of your foreclosure. The foreclosure can be recorded at a much later date. Online payments to the landlord’s bank account by the renter can be used to verify rent instead of 12 months’ canceled checks.
The foreclosure date is reflected either by the date of the sheriff’s sale or the recorded date of the transferred deed that is recorded on public records. The mortgage cannot be reaffirmed. This is not the case with FHA. With FHA, i
Homebuyers with a prior Chapter 13 Bankruptcy discharge and need help qualifying for home loans after Chapter 13 Bankruptcy, whether you are looking for an FHA loan or Conventional Loan, please get in touch with us at Gustan Cho Associates at 800-900-8569 or text us for a faster response. Or email us at firstname.lastname@example.org. The team at Gustan Cho Associates is available seven days a week, evenings, weekends, and holidays to answer your phone calls or emails and all your questions.