How Lenders View Late Payments After Bankruptcy And Foreclosure

This article covers How Lenders View Late Payments After Bankruptcy And Foreclosure

In this article, we will discuss the negative impact on how lenders view late payments after bankruptcy and foreclosure. It is alright to have prior bad credit, a prior bankruptcy, or a prior housing event such as a foreclosure, deed in lieu of foreclosure, short sale. However, mortgage loan applicants should not have any late payments after bankruptcy and/or foreclosure. Homebuyers can qualify for a home mortgage with a prior bankruptcy and/or foreclosure. Borrowers can qualify for a home mortgage with prior bad credit.

You do not have to pay outstanding collections and charged-off accounts to qualify for a mortgage. Lenders do understand that hard-working Americans can go through periods of bad credit. Most Americans recover and reestablish themselves after going through periods of bad credit. Mortgage underwriters understand periods of financial difficulties happen to the best of us. There are certain mandatory waiting period requirements after bankruptcy and/or a housing event.

Just because you have passed the mandatory waiting period after bankruptcy, foreclosure, deed in lieu of foreclosure, a short sale does not mean you automatically qualify for a mortgage. Lenders want to see re-established credit and no late payments post-bankruptcy and/or foreclosure.

Waiting Period Requirements To Qualify For A Home Mortgage After Bankruptcy And Foreclosure

The waiting period requirements are different depending on the home mortgage program. FHA loans require a two-year waiting period requirement after the Chapter 13 Bankruptcy discharged date. There is a three-year waiting period after foreclosure, deed in lieu of foreclosure, short sale to qualify for an FHA loan. VA loans require a two-year waiting period after Chapter 7 Bankruptcy, foreclosure, deed in lieu of foreclosure, short sale. USDA loans have a three-year waiting period after Chapter 7 Bankruptcy discharge, foreclosure, deed in lieu of foreclosure, short sale.

Fannie Mae and Freddie Mac require a four-year waiting period after Chapter 7 Bankruptcy, deed in lieu of foreclosure, short sale, and a seven-year waiting period after a regular foreclosure. Non-QM loans do not have any waiting period requirements after bankruptcy and/or foreclosure. Borrowers can qualify for FHA and VA loans one year into Chapter 13 Bankruptcy repayment plan after being in the repayment plan for at least twelve months with Trustee Approval and a manual underwrite. Chapter 13 Bankruptcy does not have to be discharged.

There are no waiting period requirements after the Chapter 13 Bankruptcy discharged date to qualify for FHA and VA loans. However, if the Chapter 13 Bankruptcy has not been discharged for at least 24 months, it needs to be a manual underwrite. Gustan Cho Associates are experts in helping borrowers with less than perfect credit scores and have no lender overlays on government and conventional loans. The GCA Mortgage Group is a five-star mortgage company licensed in multiple states with no lender overlays on FHA, VA, USDA, and Conventional loans.

How Lenders View Late Payments After Bankruptcy And Lender Overlays?

As mentioned earlier, just passing the mandatory waiting period after bankruptcy and/or foreclosure does not automatically qualify a borrower for a home mortgage. Lenders, in general, expect borrowers to have reestablished credit. Late payments after bankruptcy and/or foreclosure is the kiss of death for most lenders. Lenders prefer borrowers with late payments after bankruptcy and/or foreclosure as second offenders and will definitely not want them.

This holds true even though borrowers get an approved/eligible per automated underwriting system (AUS). There are instances when strong borrowers with high credit scores will get an approve/eligible per AUS with one or two late payments after bankruptcy and/or foreclosure. However, lenders will often have lender overlays and deny any borrowers any late payments after bankruptcy and/or a housing event.

The great news is GCA Mortgage Group is a national five-star lender licensed in multiple states with no lender overlays. We have zero lender overlays on FHA, VA, USDA, and Conventional loans. This includes having late payments after bankruptcy and/or foreclosure. As long as you get an approved/eligible per automated underwriting system (AUS), Gustan Cho Associates can do the loan. We have no lender overlays. We just go off the automated underwriting system findings.

Solutions To Get A Mortgage Approval With Late Payments After Bankruptcy And Foreclosure

Mortgage Approval With Late Payments After Bankruptcy And Foreclosure

The automated underwriting system (AUS) is a sophisticated, intricate computerized system that determines the eligibility of a borrower in a matter of seconds after analyzing the borrower’s credit, income, assets, liability, payment history, derogatory credit tradelines, and public records. The AUS will determine whether or not to approve a borrower with late payments after bankruptcy, foreclosure, deed in lieu of foreclosure, short sale. If the borrower gets a refer/eligible per AUS due to late payments after bankruptcy, a shrewd experienced loan officer can advise on how to improve their credit.

The best way of re-establishing your credit after bankruptcy to get an approved/eligible is to add additional positive credit tradelines. See if you can add three to five additional credit card accounts and one additional installment loan. Let the credit cards season for six months to one year and have your loan officer re-run your application through the automated underwriting system. Another way of trying to get an approved/eligible per AUS with late payments after bankruptcy is to put a larger down payment on a home purchase. If you have late payments after bankruptcy and/or a housing event and need to qualify for a home mortgage, please contact us at Gustan Cho Associates at 262-716-8151 or text us for a faster response. Or email us at [email protected] The team at GCA Mortgage Group is available 7 days a week, evenings, weekends, and holidays.

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