Qualifying For Home Loans After Chapter 7 Bankruptcy

Qualifying For Home Loans After Chapter 7 Bankruptcy:

For those who fell victim to our country’s economic collapse and lost their jobs, chances are that they are overwhelmed with debts.

  • Many have lost high paying jobs and compromised with lower paying jobs with little or no benefits. 
  • In the meantime, they are struggling with making minimum payments on high interest credit cards and other debts where they cannot get ahead and see the light at the end of the tunnel. 
  • Maybe the best solution for those who cannot seem to get ahead is to consider filing Chapter 7 bankruptcy and have a fresh start.
  • Borrowers can now qualify for home loans after Chapter 7 Bankruptcy as long as they meet the waiting period after bankruptcy on government and conventional loans.

Qualifying For Home Loans After Chapter 7 Bankruptcy

The minute an individual files for Chapter 7 bankruptcy, creditors cannot make contact and demand payment on past due bills from consumers.

  • Petitioners of bankruptcy need to make a list of all creditors that want the bankruptcy court to relieve of the debts owed to creditors. 
  • Petitioners can keep auto loan and exclude it from bankruptcy and other credit items. 
  • Once Chapter 7 bankruptcy is discharged by the bankruptcy court, all of debts gets wiped out and consumers can have a fresh financial start.

Credit After Bankruptcy

Filing bankruptcy can plummet credit scores more than 200 plus points.

  • However, that drop is a temporary drop.
  • Credit scores will gradually increase as bankruptcy ages. 
  • Consumers should start re-establishing credit as soon after Chapter 7 Bankruptcy discharge. 
  • The easiest and fastest way to re-establish credit after filing bankruptcy is by getting three to five secured credit cards with at least $500 credit limits. 
  • Each one of those secured credit cards will boost credit scores by a minimum of 20 or more points and credit scores will gradually increase as time passes. 
  • There are many cases where people’s credit scores are in the 700’s after a year of bankruptcy discharge with the use of secured credit cards.

Tips In Qualifying For Home Loans After Chapter 7 Bankruptcy

There is a minimum of a 2 year waiting period after filing bankruptcy in order to qualify for a FHA home loans after Chapter 7 bankruptcy.

  • Just waiting out the 2 year mandatory waiting period does not guarantee a mortgage loan approval.  
  • Lenders do not want to see any late payments after Chapter 7 Bankruptcy.
  • Mortgage lenders want to see the mortgage loan borrower has re-established credit. 
  • Most lenders like to see a minimum of three credit trade lines and no late payments after filing bankruptcy. 
  • Mortgage lenders also do not want to see any overdrafts in the borrower’s checking accounts in the past 12 months. 
  • Mortgage lenders want to see rental verification. 
  • It is very important that when paying monthly rent pay it with a check. 
  • Cancelled checks is how mortgage lenders document rental verification.

FHA Loans During & After Chapter 13 Bankruptcy

Home Buyers can qualify for FHA Loans during and after Chapter 13 Bankruptcy.

  • Home Buyers can qualify for FHA Loans one year into a Chapter 13 Bankruptcy Repayment Plan with the approval of their Chapter 13 Bankruptcy Trustee.
  • Most Trustees will approve a home purchase.
  • Out of the countless of FHA Loans during and after Chapter 13 Bankruptcy I have originated and funded, I did not have a single Trustee not approve a FHA Borrower from a FHA Loan during a Chapter 13 Bankruptcy Repayment Plan.
  • There is no waiting period to qualify for FHA Loans after a Chapter 13 Bankruptcy discharged date.
  • However, if the Chapter 13 Bankruptcy discharge has been seasoned less than two years, it needs to be a manual underwrite.
  • The Gustan Cho Team at USA Mortgage does manual underwriting and is a direct lender with no lender overlays.

Mortgage Approval After Bankruptcy With Government Loans

Government Loans are owner occupant home loans guaranteed by FHA, USDA, VA.

Here are the waiting period to qualify for government loan programs after bankruptcy.

  • Home Buyers should have no problem qualifying for FHA Loans after two years of bankruptcy discharge date with re-established credit and no late payments after bankruptcy.
  • Veteran home buyers can qualify for VA Loans after two years of their Chapter 7 Bankruptcy discharged date.
  • USDA Guidelines On Qualifying for USDA Loans after Chapter 7 Bankruptcy is 2 years.
  • With FHA & VA Loans, home buyers can qualify for home loans after one year into a Chapter 13 Bankruptcy Repayment Plan with the approval of Bankruptcy Trustee.
  • There is no waiting period to qualify for FHA and VA Loans after Chapter 13 Bankruptcy discharged date.
  • However, if the Chapter 13 Bankruptcy discharge is seasoned less than two years after the discharged date, it needs to be a manual underwrite.

Conventional Mortgage Loan After A Bankruptcy

There is a mandatory four year waiting period to qualify for a conventional mortgage loan after a Chapter 7 Bankruptcy discharged date.  Re-established credit and no late payments after the Chapter 7 bankruptcy is normally required to get an approve/eligible per Automated Underwriting System. A minimum credit score of 620 FICO is required on conventional loans.

  • The four year waiting period starts from the discharge date of the Chapter 7 bankruptcy. 
  • New Fannie Mae Guidelines for consumers who had a mortgage as part of their bankruptcy that came into effect last August 2014.
  • Conventional mortgage borrower who had a mortgage part of Chapter 7 bankruptcy, the waiting period start date starts from Chapter 7 bankruptcy discharge date and not the recorded date of foreclosure. 
  • That is great news for mortgage loan borrowers seeking a conventional loan or those whose foreclosures got recorded at a later date.

Home Buyers who had a prior Chapter 7 and/or Chapter 13 Bankruptcy can now qualify for Home Loans After Bankruptcy with The Gustan Cho at USA Mortgage. For more information or to qualify, please contact us at 1-800-900-8569 or text us at 262-716-8151 for faster response. Or email us at gcho@gustancho.com. We are available 7 days a week, evenings, weekends, and holidays.

Related> Waiting Period After Bankruptcy And Foreclosure

Related> Approval Prior To Waiting Period 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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