Is A Timeshare Foreclosure Considered Mortgage Foreclosure Or Installment Loan?

This BLOG On ” Is A Timeshare Foreclosure Considered Mortgage Foreclosure Or Installment Loan?” Was Written By Gustan Cho 

Is A Timeshare Foreclosure Considered Mortgage Foreclosure Or Installment Loan? I get this question asked several times a week where borrowers call me and ask me Is A Timeshare Foreclosure Considered Mortgage Foreclosure Or Installment Loan? Unfortunately, my borrowers have checked HUD Guidelines on waiting period after a time foreclosure and it states that a timeshare foreclosure is an installment loan and not a real estate but get told by loan officers and many times by a mortgage underwriter. Under HUD Guidelines, a loan which is collateralized by an interest in a timeshare is not considered a housing obligation. Under FHA Guidelines On Timeshare Foreclosure, a loan which is secured by an interest in a timeshare is considered an Installment Loan even though the timeshare property results in a timeshare foreclosure, therefore, borrowers with a foreclosure on a timeshare resulting in a foreclosure have no waiting period after the timeshare foreclosure to qualify for a FHA Loan.

Waiting Period After Foreclosure

There are mandatory after foreclosure to qualify for the following loans:

  • FHA Loans
  • VA Loans
  • USDA Loans
  • Fannie Mae and Freddie Mac which are Conventional Loans
  • Jumbo Mortgages

Here are the mandatory waiting period after foreclosure for the following loan programs:

  • FHA requires a waiting period of 3 years after a foreclosure and deed in lieu of foreclosure from the recorded date of the deed in lieu of foreclosure and/or foreclosure.
  • VA Loans has a two year waiting period after the recorded date of the deed in lieu of foreclosure and/or foreclosure to qualify for a VA Loan.
  • USDA has a three year waiting period to qualify for a USDA Loan after the recorded date of the foreclosure and/or recorded date of the foreclosure.
  • Both Fannie Mae and Freddie Mac has a 7 year waiting period after a standard foreclosure to qualify for a Conventional Loan after the recorded date of the foreclosure. However, if the borrower has a deed in lieu of foreclosure and/or short sale, the waiting period is greatly reduced to a four year waiting period to qualify for a Conventional Loan. The waiting period start clock to qualify for a Conventional Loan starts from the recorded date of the deed in lieu of foreclosure reflected on the public records or in the event if it is a short sale, the actual date of the short sale that is reflected on the HUD-1 Settlement Statement.
  • Jumbo Mortgages are considered non-conforming loans because they do not conform to Fannie Mae and/or Freddie Mac Conforming Guidelines. Most Jumbo Mortgage Lenders will set their own waiting period requirements after foreclosure to qualify for Jumbo Loans. Most Jumbo Lenders will require a 7 year waiting period to qualify for a Jumbo Mortgage after foreclosure while there are a few Jumbo Lenders that will accept Jumbo Borrowers where they have four years after a foreclosure.

Why Am I Told That Timeshare Foreclosure Is A Foreclosure?

Under FHA Guidelines, a timeshare foreclosure is considered an installment loan and not a real estate foreclosure. However, just because you may meet FHA Guidelines On Qualifying For A FHA Loan After Timeshare Foreclosure, the lender you consulted with may have their own overlays where they many have their own FHA Lending Requirements that is above and beyond than those of the minimum 2017 FHA Guidelines, which is perfectly legal and most lenders do have overlays.

What Are Lender Overlays?

Lender Overlays are mortgage lending requirements that is above and beyond of the minimum mortgage guidelines set by :

  • FHA
  • VA
  • USDA
  • FANNIE MAE
  • FREDDIE MAC

Lets take case scenarios of typical overlays on FHA Loans to better explain what overlays are:

  • FHA Guidelines On Credit Scores: Most lenders will have FHA Guidelines On Credit Scores . FHA requires to qualify for a 3.5% down payment FHA Loan, the borrower needs a minimum of a 580 FICO Credit Score. However, most lenders will require you to have a minimum of a 620 FICO Credit Score while most banks will require you to have a 640 FICO Credit Score although FHA requires only a 580 credit score. This higher credit score requirement to qualify for a FHA Loan is called FHA Overlays On Credit Scores where borrowers do qualify for a FHA Loan but do not qualify with the particular lender they have consulted with. The Gustan Cho Team at CrossCountry Mortgage has no lender overlays on FHA Loans.
  • FHA Guidelines On Collection Accounts: Most lenders will have overlays on collection accounts where they will require borrowers to pay off outstanding collection accounts to qualify for a FHA Loan. Under FHA Guidelines On Collection Accounts . FHA Guidelines on Collections state that borrowers do not have to pay off outstanding collections to qualify for a FHA Loan. However, most lenders will have overlays on collection accounts with outstanding balances where it will require borrowers to pay off all of their outstanding collections with balances or may have a maximum limit on outstanding balances on unpaid collection accounts. The Gustan Cho Team at CrossCountry Mortgage does not have any lender overlays on outstanding collection accounts no matter how much the unpaid outstanding balances on their collections are.
  • FHA Guidelines On Charge Off Accounts: Most mortgage lenders have lender overlays on charge off accounts where they will require FHA Borrowers to pay off outstanding charge off accounts in order to qualify for a FHA Loan. FHA Guidelines On Charge Offs does not require that FHA Borrowers pay off outstanding charge off accounts to qualify for a FHA Loans. Borrowers can qualify for a FHA Loan with outstanding charge off accounts no matter how much the outstanding charge off account balance is. The Gustan Cho Team at CrossCountry Mortgage does not have any overlays on charge offs no matter how large the outstanding charge off account balance is.
  • FHA Guidelines On Debt To Income Ratio: Most lenders will have overlays on debt to income ratio where they will limit the maximum debt to income to 45% DTI to 50% DTI where the maximum allowable debt to income ratio is 56.9% DTI set by under FHA Guidelines On DTI . The Gustan Cho Team at CrossCountry Mortgage has no overlays on debt to income ratios and will up to the maximum 56.9% DTI.
  • VA Guidelines On Debt To Income Ratio: VA Loans does not have a maximum cap on debt to income ratios. Most lenders have debt to income ratios on VA Loans overlays capped at 43% DTI to 50% DTI. The Gustan Cho Team at CrossCountry Mortgage does not have overlays on debt to income ratios on VA Loans and will just go off the findings of the Automated Underwriting System.
  • VA Guidelines On Credit Scores : One thing that most folks, including many loan officers, is that VA does not have minimum credit score requirements. Credit score requirements is determined by VA lenders. Most VA lenders will require a 620 FICO credit score. However, The Gustan Cho Team at CrossCountry Mortgage only requires a 580 FICO Credit Score on VA Loans and has no other overlays on VA Loans.

The above bullet points are examples of overlays set by mortgage lenders and this applies to qualifying for a FHA Loan after a timeshare foreclosure. Again, FHA considers a timeshare secured by a loan as an installment loan and not real estate loan so there is no waiting period after a timeshare foreclosure to qualify for a FHA Loan. If you are told that you do not qualify for a FHA Loan due to a timeshare foreclosure, give Gustan Cho of The Gustan Cho Team at CrossCountry Mortgage at 262-878-1965 or text Gustan Cho on his cell at 262-716-8151 for faster response. CrossCountry Mortgage is a five start national FANNIE/FREDDIE/DIRECT Lender licensed in 50 states with a solid national reputation for its no overlays and being able to close loans in 21 days or less. Gustan Cho and The Gustan Cho Team at CrossCountry Mortgage is available 7 days a week, evenings, weekends, and holidays.

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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