Home Purchase After Bankruptcy Mortgage Guidelines
This article is about home purchase after bankruptcy mortgage guidelines:
In this blog, we will cover the following points:
- How to qualify for a mortgage after bankruptcy.
- The waiting period after bankruptcy requirements
- Traditional government and conventional loans versus non-QM loans.
Buying a Home and Qualifying for a Mortgage After Bankruptcy
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 in 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. There are no waiting period requirements after Bankruptcy and/or Foreclosure,
In this article, 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.
This drop is a temporary drop off their credit scores. Their credit scores will naturally increase as months go by. This holds true even if they do nothing to re-establish 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 keeping 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 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.
The waiting period after the Chapter 7 Bankruptcy discharged date to qualify for conventional loans is four years. There is a two-year waiting period to qualify for Conventional Loans after the Chapter 13 Bankruptcy discharged date. To qualify for Conventional Loans after the Chapter 13 Bankruptcy dismissal date is four years.
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 a 10% to 30% down payment. The amount of down payment depends on the borrower’s credit scores.
Qualifying For Home Purchase After Bankruptcy: Waiting Period After Chapter 13 Bankruptcy
VA and FHA Loans allow 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 the Chapter 13 bankruptcy Repayment Plan. There are no waiting period requirements after the Chapter 13 Bankruptcy discharged date. However, any Chapter 13 Bankruptcy that has not been seasoned for 2 years after Chapter 13 Bankruptcy discharged 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 a faster response. Or email us at [email protected] You can also visit me at www.gustancho.com.
You can contact us even though your waiting period is not over. The team at Gustan Cho Associates can help you in repairing and rebuilding your credit. By re-establishing and rebuilding your credit earlier, you will be able to qualify for a mortgage loan once the mandatory waiting period is over.
Gustan Cho Associates is a mortgage company licensed in multiple states We have a national 5-star reputation for not having any lender overlays on government and conventional loans.