Late Payments After Chapter 13 Bankruptcy Mortgage Guidelines

Late Payments After Chapter 13 Bankruptcy Guidelines

Gustan Cho Associates are mortgage brokers licensed in 48 states

This guide covers late payments after Chapter 13 bankruptcy mortgage guidelines. Mortgage lenders do not want to see any late payments after Chapter 13 bankruptcy from mortgage loan applicants. Homebuyers can qualify for an FHA loan after Chapter 13 bankruptcy. There is no waiting period to qualify for VA or FHA loans after the Chapter 13 bankruptcy discharged date.  All mortgage loans right after a Chapter 13 bankruptcy discharge are all manual underwriting.

The Automated Underwriting System cannot render an approve/eligible per DU FINDINGS until two years have 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.

Qualifying For a Mortgage Credit After Bankruptcy

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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 payment after Chapter 13 and Chapter 7 bankruptcy until the late payment or late payments have seasoned for at least seven years. However, one or two late payments after Chapter 13 or Chapter 7 bankruptcy is not a deal killer. Lenders like Gustan Cho Associates will evaluate the circumstances of the late payments after bankruptcy 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.  Aualify for your mortgage credit after bankruptcy

Obtaining a Mortgage After Chapter 13 Bankruptcy

When obtaining a mortgage after completing a Chapter 13 bankruptcy, lenders have specific guidelines regarding late payments during the bankruptcy repayment plan. In the following paragraphs, we will cover typical guidelines on qualifying for a mortgage after Chapter 13 Bankruptcy.

Waiting Period Mortgage Guidelines After Chapter 13 Bankruptcy

Most lenders require a waiting period of 12-24 months after the discharge date of a Chapter 13 bankruptcy before considering a mortgage application. Some may require a longer waiting period if the bankruptcy was dismissed without a discharge.

On-Time Payments

Lenders will closely examine the borrower’s payment history during the Chapter 13 repayment plan. They generally require that all payments be made on time, without any late or delinquent payments.

Bankruptcy Trustee Approval

In some cases, lenders may require a letter or documentation from the bankruptcy trustee confirming that the borrower made all payments as agreed upon in the repayment plan.

Extenuating Circumstances

If there were a few isolated late payments during the repayment plan, lenders might consider approving the mortgage if there were valid extenuating circumstances, such as a job loss, medical issue, or other hardship. Proper documentation and explanation will be required.

Late Payments After Chapter 13 Bankruptcy With Re-established Credit

Lenders never want to see late payments after Chapter 13 Bankruptcy. Late payments after Chapter 13 Bankruptcy is often referred to as second offenders. Lenders will also evaluate the borrower’s credit history and scores after the bankruptcy discharge. They will look for a re-established pattern of timely payments on new credit accounts.

Down Payment and Reserves

Borrowers may be required to make larger down payments (usually 10% or more) and have significant cash reserves (e.g., 6-12 months of mortgage payments) to compensate for the higher risk associated with recent bankruptcies.

Debt-to-Income Ratio Mortgage Guidelines

Lenders will closely examine the borrower’s debt-to-income ratio to ensure they can comfortably afford the new mortgage payment and any other recurring debts. It’s important to note that guidelines can vary among lenders, and some may have additional overlays or requirements. Maintaining excellent payment history, re-establishing good credit, and providing thorough documentation of the bankruptcy and any extenuating circumstances can improve the chances of mortgage approval after a Chapter 13 bankruptcy.

Qualifying For FHA Loan  With Late Payments After Chapter 13 Bankruptcy

In general, you cannot have late payments after Chapter 13 Bankruptcy. In fact, you cannot have late payments during and after Chapter 13 Bankruptcy. Homebuyers can qualify for FHA loan after Chapter 13 bankruptcy discharge date without any mandatory waiting period.

All FHA loans after the 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 of canceled checks. VOR payments need to be payable to the landlord and have been timely for the past 12 months. If the renter has paid his or her rental payments online, then 12 months of 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.  Get qualify for FHA Loan with Late payment after chapter 13 bankruptcy

Manual Versus Automated Underwriting System

Manual Versus Automated Underwriting SystemManual underwrites mean that the mortgage underwriter will manually review the whole mortgage package. For 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.

Borrowers with late payments after Chapter 13 bankruptcy and were told they do not qualify for an FHA loan by other lenders, please contact us at Gustan Cho Associates at 800-900-8569. Text us for a faster response. Or email us at We may be able to help you. We are available 7 days a week, evenings, weekends, and holidays.

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. 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.  Get qualify for your mortgage with no overlays

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