Late Payments After Chapter 13 Bankruptcy Mortgage Guidelines

This BLOG On Late Payments After Chapter 13 Bankruptcy Mortgage Guidelines Was PUBLISHED On May 29th, 2020

Late Payments After Chapter 13 Bankruptcy
Gustan Cho Associates

Mortgage lenders do not want to see any late payments after Chapter 13 Bankruptcy from mortgage loan applicants.

  • Home Buyers can qualify for a FHA Loan After Chapter 13 Bankruptcy
  • There is no waiting period to qualify for VA and/or FHA Loans after Chapter 13 Bankruptcy discharge date
  • However, all mortgage loans right after a Chapter 13 Bankruptcy discharge are all manual underwriting
  • This is because the Automated Underwriting System cannot render an approve/eligible per DU FINDINGS until two years has passed since the Chapter 13 Bankruptcy discharge on VA and FHA Home Loans
  • Gustan Cho Associates help home buyers all the time right after a Chapter 13 Bankruptcy discharge date without any waiting period
  • However, manual underwriting guidelines are required
  • We will discuss more on late payments after bankruptcy

In this article, we will discuss and cover Late Payments After Bankruptcy Mortgage Guidelines.

Credit After Bankruptcy

As a right-hand rule, lenders do not want to see any late payments after Chapter 7 and Chapter 13 Bankruptcy as well as any foreclosures and short sale.

  • There are many lenders that will not accept borrowers with even one late payments after Chapter 13 and Chapter 7 Bankruptcy until the late payment and/or late payments has seasoned for at least for seven years
  • However, one or two late payments after Chapter 13 or Chapter 7 Bankruptcy is not a deal killer
  • Lenders like GCA Mortgage Group will evaluate the circumstances of the late payments after bankruptcy and/or housing event
  • Borrowers need to provide a detailed letter of explanation to mortgage underwriters on why they had late-payments and the circumstances of it

12 months of timely payments on all credit tradelines are required on all manual underwrites.

Qualifying For FHA Loan After Chapter 13 Bankruptcy

How to Qualify for an FHA Loan after Bankruptcy in Chapter 13

Homebuyers can qualify for FHA Loan After Chapter 13 Bankruptcy discharge date without any mandatory waiting period.

  • All FHA Loans After Bankruptcy discharge date are all manual underwriting
  • Manual underwriting guidelines will apply
  • Mortgage underwriters will require verification of rent
  • Verification Of Rent can only be used and is only valid if the renter has 12 months canceled checks
  • VOR payments need to be payable to the landlord and has been timely for the past 12 months
  • If the renter has paid his or her rental payments online, then 12 months canceled checks will be required
  • On manual underwrites, there is maximum debt to income ratio requirements  of 50% DTI under FHA Guidelines with compensating factors

However, most lenders may cap the maximum DTI to 43% on manual underwriting.

Manual Versus Automated Underwriting System

Manual underwrites means that the mortgage underwriter will manually review the whole mortgage package:

  • Borrowers with late payments after Bankruptcy, the mortgage underwriter will carefully review the circumstances of the late payment
  • I have a current case where the borrower has two late payments after Bankruptcy and there were totally legitimate and did not show that the borrower had disregard to credit
  • The first late payment was during her Chapter 13 repayment period back in 2013 where the automatic withdrawal from her bank account was rejected due to a bank takeover
  • So the auto finance company reported her 30 days late
  • The second late payment was on the home she currently sold in December of 2015
  • The title company missed the pay off date by a few days
  • The mortgage lender reported her 30 days late on her credit report
  • These two types of late payments after Bankruptcy is totally acceptable
  • However, if the borrower had total disregard of credit and was continuously had late payments after Chapter 13 Bankruptcy, then this can be an issue with a mortgage loan approval

Mortgage borrowers with late payments after Chapter 13 Bankruptcy and were told they do not qualify for a FHA Loan by other lenders, please contact us at Gustan Cho Associates Mortgage Group at 262-716-8151 or text us for a faster response. Or email us at gcho@gustancho.com. We may be able to help you. We are available 7 days a week, evenings, weekends, and holidays.

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