Waiting Period After Bankruptcy And Foreclosure
Home buyers who had a prior bankruptcy, foreclosure, deed in lieu of foreclosure, or short sale have mandatory waiting period in order to qualify for a mortgage. For FHA loan programs, there is a waiting period of 2 years after a bankruptcy, waiting period time clock starts from the discharge date of the bankruptcy, to qualify for a mortgage loan. There is a three year waiting period after the recorded date of a foreclosure or deed in lieu of foreclosure to qualify for a FHA loan. There is a three year waiting period to qualify after a short sale for a FHA loan after the short sale date which is reflected on the settlement statement. However, home buyers who have lost their jobs via involuntary termination due to a layoff, company down sizing, or shut down of their employer and due to the involuntary termination of employment caused the initiation of the bankruptcy, foreclosure, deed in lieu of foreclosure, or short sale can qualify for a FHA loan just one year after the bankruptcy, foreclosure, deed in lieu of foreclosure, or short sale under HUD’s new FHA BACK TO WORK EXTENUATING CIRCUMSTANCES DUE TO AN ECONOMIC EVENT mortgage loan program.
For conventional loans, there is a four year waiting period after a bankruptcy, deed in lieu of foreclosure, and short sale to qualify for a conventional loan with a minimum of 5% down payment. There is a 7 year waiting period after a foreclosure to qualify for a conventional loan. However, if you had a foreclosure as part of your bankruptcy and the deed to the property did not transfer out of your name into the mortgage lender’s name some time after your bankruptcy discharge date, the waiting period starts from the bankruptcy discharge date. This is a brand new Fannie Mae Guideline just launched on August 15th, 2014.
Alternatives To Home Purchase Prior To Waiting Period After Bankruptcy And Foreclosure
If you recently have gone through a bankruptcy, foreclosure, deed in lieu of foreclosure, or short sale and are ready to purchase a home and do not want to wait until your waiting period is over, there are a few alternatives where you can do a home purchase now and refinance it after your waiting period after bankruptcy, foreclosure, deed in lieu of foreclosure, or short sale is over. The first and most favorable option is to get owner financing, or seller financing, from the home seller. Owner financing is when you give the home seller a down payment and the make your monthly housing payment to the home seller until you are able to get regular financing and refinance the home at a later date when you qualify for a mortgage loan. Waiting period after bankruptcy and foreclosure does not prohibit you from owning a property; Waiting period guidelines just prohibits you from qualifying for HUD or conforming loan from a mortgage lender for a certain period of time. Owner financing also offers benefits for the home seller because if they have a home that is not selling and has been listed in the market for quite some time, they get to unload the property and also make positive cash flow from the monthly payments. A home seller does not need to have the property free and clear to sell their home via owner financing. Make sure both parties have attorneys representing them so both parties are protected.
Another option is if your spouse was on title but not on the note of the mortgage loan, you can purchase a new home and just have the mortgage under your spouse’s name as long as they qualify with debt to income ratios. As long as the other spouse was not on title, and you had a foreclosure, deed in lieu of foreclosure, or short sale, that spouse can be on the mortgage loan and you, as the other spouse, can go on title. Same with bankruptcy. If you had a bankruptcy but your spouse did not, your spouse is not under the waiting period after bankruptcy waiting period restrictions. If your spouse does not have income, your spouse can have a non-occupant co-borrower who is a family member and/or relative. The non-occupant co-borrower will go on the mortgage note but not on title.
If you have a relative who is willing to do the home purchase for you since you do not qualify for a mortgage loan, make sure you do not lie on your mortgage loan application. The person who is going on the mortgage on your behalf and for them to lie on the mortgage loan application stating that they will be an owner occupant occupying the property as their main residence is totally illegal. You will be considered a straw buyer and straw buyer home purchase strategies is considered mortgage fraud and is a felony where it is punishable up to 30 years in federal prison. However, a relative or family member can purchase the property as an investment property and you can go on title and make the mortgage payments and after your waiting period is done, you can qualify for a refinance mortgage loan and refinance your family member and/or relative off.
Portfolio loans are loan programs where the mortgage lender will hold the mortgage note and not re-sell it to Fannie Mae and/or Freddie Mac. Portfolio lenders are banks, credit unions, and mortgage companies that offer adjustable rate mortgages which are amortized over 30 years and do not need to follow HUD or Conventional mortgage loan guidelines. Most portfolio mortgage lenders shy away from folks who had prior bankruptcies, foreclosures, deed in lieu of foreclosures, or short sales and expect credit scores of 700 FICO or higher, larger down payments, and debt to income ratios of no greater than 40% DTI. If you have recovered fully from your extenuating circumstances and have contacts with a lender who you have a depository and business relationship, that lender may offer you a short term portfolio loan.