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Home Purchase After Bankruptcy Mortgage Guidelines

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Home Purchase After Bankruptcy Mortgage Guidelines

This BLOG On Home Purchase After Bankruptcy Mortgage Guidelines Was UPDATED On June 8th, 2019

Qualifying For Home Purchase After Bankruptcy:

  • Both Chapter 7 and Chapter 13 Bankruptcy filings soared to record numbers during and after the 2008 real estate and financial meltdown
  • Millions of Americans filed Chapter 7 and Chapter 13 Bankruptcies to protect them against creditors and debt collectors
  • By filing Chapter 7 Bankruptcy or Chapter 13 Bankruptcy, it gave millions of Americans a fresh start on life
  • Folks can get credit after bankruptcy and can qualify for home purchase after bankruptcy
  • Government and conventional loans have mandatory waiting period requirements after bankruptcy
  • Gustan Cho Associates offers Non-QM Loans where there are no waiting period requirements after Bankruptcy and/or Foreclosure

In this BLOG, we will discuss Home Purchase After Bankruptcy Mortgage Guidelines, its waiting period requirements, and loan programs with no waiting period after bankruptcy. Non-QM Mortgages has no waiting period requirements after bankruptcy and/or housing event.

Qualifying For Mortgage After Chapter 7 Bankruptcy

Chapter 7 bankruptcy is the most common form of consumer bankruptcy.

  • For those who lost their jobs and have substantial unsecured debts like credit cards with little to no assets, Chapter 7 Bankruptcy might be the best option
  • Chapter 7 Bankruptcy can wipe out most of the consumer’s debts except for government loans, child support payments, and tax liens

I am not an attorney nor a bankruptcy expert so if you are contemplating filing bankruptcy, you should consult a bankruptcy attorney.

Going Through Chapter 7 Bankruptcy

A large percentage of my business consists of clients who have filed bankruptcy and/or have had prior bad credit.

  • A Chapter 7 bankruptcy eliminates a person’s debt completely
  • Chapter 7 Bankruptcy is a federal law that gives the person a fresh financial start in life
  • A bankruptcy will drop a person’s credit score by more than 100 points
  • However, this drop is a temporary drop off their credit scores
  • Their credit scores will naturally increase as months go by even if they do nothing to reestablish their credit

Rebuilding Credit After Bankruptcy To Qualify For Home Purchase After Bankruptcy

A person who just filed bankruptcy should immediately start rebuilding their credit.

  • The fastest and best way of rebuilding and reestablishing their credit is by getting 3 secured credit cards with $500 credit limits
  • Each credit card will most likely increase their credit scores by at least 20 to 50 points if the cardholder leaves at least a $10 credit balance on each card
  • Use the card regularly but never have a credit balance of over 25%
  • The lower the balance the better but the balance should not be zero

Keep the $10 dollar minimum balance every month.

Low Credit Card Balance Will Maximize Credit Scores

The reason we recommend to keep a $10 minimum credit balance is to maximize your credit scores.

  • The basic formula the credit reporting agencies optimize this portion of your credit score is by dividing the balance of your credit card by the credit card credit limit
  • The smaller the number the better but it cannot be zero
  • For example, if you have a $900 balance on your credit card and the credit limit is $1,000, you would divide the $900 by $1,000 and you get a factor of 0.90 which is a high factor
  • However, if you had a $100 balance on your $1,000 credit limit credit card, you get a factor of 0.10 which is a lower factor
  • However, if you have a zero balance on your credit card balance and the credit limit is $1,000, anything divided into zero will yield zero so there will be no positive credit score impact

That is the reason we recommend a $10 credit limit.

Waiting Period After Bankruptcy To Qualify for Home Loan

Mandatory waiting period requirements to qualify for home loans after bankruptcy depends on the particular loan program.

  • There is a 2 year mandatory waiting period for a home buyer to be able to apply for a mortgage loan in from the discharge date of Chapter 7 bankruptcy on FHA and VA Loans
  • The waiting period is 3 years after bankruptcy to qualify for USDA Loans
  • There is a four year waiting period after Chapter 7 Bankruptcy discharge date to qualify for conventional loans
  • There is a two year waiting period to qualify for Conventional Loans after Chapter 13 Bankruptcy discharge date
  • There is a four year waiting period to qualify for Conventional Loans after Chapter 13 Bankruptcy dismissal date

There are no waiting period requirements to qualify for Non-QM Loans after Chapter 7 and/or Chapter 13 Bankruptcy discharge date. However, Non-QM Loans require 10% to 20% down payment. The amount of down payment depends on the borrowers credit scores.

Qualifying For Home Purchase After Bankruptcy: Waiting Period After Chapter 13 Bankruptcy

VA and FHA Loans allows borrowers to qualify for VA and FHA Loans during Chapter 13 Bankruptcy Repayment Plan with Trustee Approval. Chapter 13 does not need to be discharged. It needs to be a manual underwrite and does not have to be discharged. There is a one-year mandatory waiting period for a home buyer to be able to apply for FHA and VA Loans during Chapter 13 bankruptcy Repayment Plan. There are no waiting period requirements after Chapter 13 Bankruptcy discharge date. However, any Chapter 13 Bankruptcy that has not been seasoned for 2 years after Chapter 13 Bankruptcy discharge date needs to be manually underwritten.

  • If you filed Chapter 7 or Chapter 13 bankruptcy and are interested in being a homeowner, please contact me at 262-716-8151 or text us for faster response
  • Or email us at gcho@loancabin.com
  • You can also visit me at www.gustancho.com
  • You can contact me even though your waiting period is not over
  • I can help you in repairing and rebuilding your credit so that you will be able to qualify for a mortgage loan once the mandatory waiting period is over
  • Gustan Cho Associates at Loan Cabin Inc. are direct lenders with a national 5-star reputation for not having any overlays on government and conventional loans

We are experts in Non-QM Loans and bank statement loans for self-employed borrowers. There is no income tax required with bank statement loans for self-employed borrowers.

Related> Bankruptcy Process

Related> Mortgage After Chapter 13 Bankruptcy

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