Late Payments After Bankruptcy Mortgage Guidelines

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This BLOG On Late Payments After Bankruptcy Mortgage Guidelines Was PUBLISHED On January 28th, 2020

What are the guidelines for mortgage loans. Late payments after bankruptcy

Most consumers are under the belief that bankruptcies are the end of the world.

  • This is absolutely not the case
  • Bankruptcies is a federal law that all American consumers can utilize to help them with a fresh financial start
  • Consumers can qualify for a home mortgage after bankruptcy
  • Consumers under a Chapter 13 Bankruptcy Repayment Plan can qualify for a home mortgage while in a Chapter 13 Repayment
  • They do not have to wait until their discharged date of Chapter 13
  • Homebuyers can qualify for an FHA Loan just 2 years after a Chapter 7 Bankruptcy discharged date
  • Gustan Cho Associates Mortgage Group has non-QM loans where there is no waiting period after bankruptcy and/or foreclosure

In this article, we will discuss and cover qualifying for a mortgage with late payments after bankruptcy and foreclosure.

How Does Bankruptcies Affect Credit Scores

Bankruptcies and/or foreclosures will temporary affect consumer credit scores.

  • However, as time passes, consumer credit scores will gradually increase as the bankruptcy ages
  • To boost credit scores sooner than later, consumers should get three secured credit cards after bankruptcy
  • Secured credit cards are the best tools in re-establishing credit after bankruptcy
  • For maximum effect, secured credit cards should have at least $500 credit limit
  • The higher the limit, the more effective it is in increasing credit scores
  • As secured credit card ages, it will have more of a positive effect on consumer credit scores and profile
  • I have seen consumer credit scores north of 700 FICO in just one year after bankruptcy discharged date

These folks re-established their credit after bankruptcy by getting a few secured credit cards.

Bankruptcy Reporting On Credit Bureaus And How It Impacts Qualifying For Home Loans

What is the importance of reporting bankruptcy at credit bureaus and how does it affect eligibility for housing loans

Most derogatory credit tradelines stay on consumer credit reports for seven years from the date of the last activity.

  • This includes late payments, collections, charged-off accounts, judgments, short sale, and other bad debt
  • Chapter 7 Bankruptcies stay on for 10 years on consumer credit reports
  • Usually, the first six to twelve months is the time frame where bankruptcies will have the most devastating effect on credit scores
  • FHA and VA Loans allow borrowers to qualify for mortgages two years after filing Chapter 7 Bankruptcy
  • Borrowers can qualify for VA and FHA Loans one year into a Chapter 13 Bankruptcy Repayment Plan with Trustee Approval
  • There is no waiting period after Chapter 13 Bankruptcy discharged date to qualify for VA and/or FHA Loans
  • Lenders and creditors do not care about bankruptcies reporting on credit bureaus
  • What lenders care about is timely payments and payment history after bankruptcy discharged date
  • Late payments after bankruptcy are extremely bad and frowned upon by all lenders
  • Most lenders will have overlays on not granting any credit after late payments after bankruptcy
  • One or two late payments after bankruptcy is not a deal killer

However, multiple late payments after bankruptcy may require borrowers to wait two years after timely payments.

Filing Bankruptcy Due To Judgments And Federal Income Taxes

Judgments can be discharged in bankruptcies.

  • Depending on how old federal income taxes are, it can be discharged in bankruptcies
  • Federal income tax or state income tax that is more than 3 years old from the due date, can be discharged in bankruptcy
  • This holds true only as long as the income taxes were filed timely
  • An example would be for 2014 income taxes that were due on April 15th, 2015, could be discharged after April 15, 2018
  • Although income taxes may not be dischargeable, the penalties and interest incurred as a result of unpaid taxes may be dischargeable
  • Furthermore, even if an individual does not qualify for Chapter 7 Bankruptcy, assuming that taxes are dischargeable, such person can possibly decrease their income tax liability to 10% of the amount owed

Moreover, chapter 13 bankruptcy is a great tool that can be used to set up a payment plan with the IRS or state agency without the need to deal directly with such entities.

Late Payments After Bankruptcy And Waiting Period After Bankruptcy Guidelines

What are the guidelines for late payments after bankruptcy and what is the waiting period after bankruptcy

There is a mandatory waiting period after bankruptcy on government and conventional loans. Gustan Cho Associates has no overlays on government and conforming loans. We also offer non-QM loans. There is no waiting period after bankruptcy and foreclose with non-qm loans.

Here are the mandatory waiting period requirements on loan programs:

  • FHA and VA Loans require 2 year wait period after Chapter 7 Bankruptcy discharged date
  • USDA Loans have three year waiting period
  • Conventional Loans require four years after Chapter 7 bankruptcy discharged date
  • NON-QM Loans does not have any waiting period requirements
  • There is no waiting period after Chapter 13 Bankruptcy discharged date on VA and FHA Loans

Borrowers can qualify for FHA and VA Home Loans one year into Chapter 13 Bankruptcy Repayment Plan:

  • Trustee approval required
  • Chapter 13 bankruptcy does not have to be discharged
  • 2-year waiting period after Chapter 13 Bankruptcy discharged date to qualify on conventional loans
  • 4 year waiting period after Chapter 13 dismissal date to qualify for conforming loans

Home Loan Approval With Late Payments After Bankruptcy

There are no specific mortgage guidelines on late payments after bankruptcy. However, all lenders frown upon late payments after bankruptcy and foreclosure. Most lenders automatically want nothing to do with borrowers with late payments after bankruptcy and/or housing event. This holds true even though borrowers have an approve/eligible per automated underwriting system approval. The good news is that Gustan Cho Associates accepts borrowers with late payments after bankruptcy and/or housing event if they get an approve/eligible per automated underwriting system. We have done many loans with late payments after bankruptcy on VA and FHA Manual Underwriting. Feel free to contact us at Gustan Cho Associates at 262-716-8151 or text us for a faster response. Or email us at gcho@gustancho.com.

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