Mortgage After Chapter 13 Bankruptcy Guidelines And Requirements
This BLOG On Mortgage After Chapter 13 Bankruptcy Guidelines And Requirements Was UPDATED On August 13th, 2019
There are two types of bankruptcy.
A Chapter 7 bankruptcy is total liquidation and is often filed from consumers who have no assets and either little income or no income.
- Petitioners can file a Chapter 7 bankruptcy and still keep home
- Homeowners can reaffirm their mortgage
- A Chapter 7 bankruptcy gives consumers a fresh start
- Discharges consumers of all debts, collection accounts, and judgments
- However, tax liens, student loans, child support, debts incurred due to fraud, and all types of government loans or government obligations cannot be discharged with a Chapter 7 bankruptcy
Chapter 13 bankruptcy is the second type of consumer bankruptcy which is filed by consumers who are employed or have income and assets or consumers who want to protect their assets.
- Petitioners need income in order to qualify for Chapter 13 bankruptcy
- Petitioners with no income will not qualify for a Chapter 13 bankruptcy
In this article, we will cover and discuss Mortgage After Chapter 13 Bankruptcy Guidelines And Requirements.
Chapter 13 Bankruptcy
Filing Chapter 13 bankruptcy will halt all collection activities by the creditor and a bankruptcy trustee will be appointed to petitioner by the United States Bankruptcy Courts. The Chapter 13 Bankruptcy Trustee will be in charge of restructuring debts and approve a re-payment plan with creditors.
- The Chapter 13 bankruptcy trustee will review income and will allocate a percentage of income to pay creditors
- Once a Chapter 13 bankruptcy is filed, there will be a re-payment plan for a number of years
- Petitioners make a reduced monthly payment to creditors from a percentage of their gross income that is taken out of their gross monthly income
- It can be a 3 year re-payment plan, a 4-year re-payment plan, or 5-year re-payment plan
Chapter 13 Bankruptcy Discharge
Once petitioners are timely on all of their payments within the period of the re-payment plan, Chapter 13 bankruptcy will get discharged which means that whatever balance owed to creditors will be discharged and there will be no mortgage debts owed.
- If during the re-payment plan of Chapter 13 bankruptcy petitioners default, Chapter 13 bankruptcy will be dismissed and petitioners will still have those liabilities
Chapter 7 Bankruptcy
Many consumers who start out with filing a Chapter 13 bankruptcy and lose their jobs during the re-payment plan often convert to a Chapter 7 bankruptcy.
- There are many cases where a Chapter 13 bankruptcy gets dismissed
- If consumers lose their job and cannot meet their payments to creditors, Chapter 13 Bankruptcy can get converted to a Chapter 7 bankruptcy
- Consumers who have filed either a Chapter 7 bankruptcy or Chapter 13 bankruptcy can qualify for a mortgage after Chapter 13 bankruptcy or Chapter 7 bankruptcy
- However, there are certain mandatory waiting periods after bankruptcy for FHA Loans, VA Loans, USDA Loans, and Conventional Loans
- Mortgage after Chapter 13 Bankruptcy is different than Chapter 7 bankruptcy
- Each bankruptcy type have separate waiting period requirements after bankruptcy
Requirements to qualify for a mortgage after bankruptcy will depend on the type of bankruptcy filed, the type of mortgage loan type and credit scores, income, assets, liabilities.
Waiting Period For Mortgage After Chapter 13 Bankruptcy And Chapter 7 Bankruptcy For FHA And VA loans
For FHA loans and VA loans, the waiting period to qualify for a mortgage after Chapter 7 bankruptcy is two years from the discharge date of the Chapter 7 bankruptcy.
- To qualify for FHA and VA mortgage during Chapter 13 bankruptcy, homebuyers can qualify one year into a Chapter 13 Repayment Plan
- However, need to have the U.S. Bankruptcy Court Trustee approval
- Lenders need a history of 12 months timely payments of Chapter 13 re-payment plan
- Lenders will require a detailed letter of explanation as of what initiated the Chapter 7 bankruptcy and/or Chapter 13 bankruptcy
- There is no waiting period after a Chapter 13 discharge date
- Borrowers will not get an automated approval per DU FINDINGS VA and FHA Loans
If Chapter 13 Bankruptcy has not been seasoned for at least two years, borrowers need to be manually underwritten in order to get an FHA and/or VA mortgage approval.
Waiting Period For USDA Loan After Bankruptcy
USDA loan lending guidelines on waiting period after Chapter 7 bankruptcy discharge is a mandatory waiting period of 3 years from the Chapter 7 discharge date.
- For those who had a discharge of Chapter 13 bankruptcy, there is a 24 month waiting period of the discharge date of Chapter 13
Conventional Loan Guidelines On Mortgage After Bankruptcy
Conventional loan guidelines with regards to qualifying for a mortgage after Chapter 7 bankruptcy is a mandatory waiting period of four years after the discharge date.
- There is a mandatory two-year waiting period to qualify for a mortgage after Chapter 13 bankruptcy discharge date
- In the event, if borrowers had a Chapter 13 dismissed, there is a four year waiting period from the dismissal date of Chapter 13 bankruptcy to qualify for a conventional mortgage
Late Payments After Bankruptcy
Other requirements to qualify for a mortgage after bankruptcy is borrowers cannot have any late payments after bankruptcy. Late payments after bankruptcy and/or housing event is not a deal killer. However, it will be tightly scrutinized and reviewed by mortgage underwriters. A good letter of explanation to mortgage underwriter will be required.
- Borrowers also need re-established credit after bankruptcy
- Many mortgage lenders will require at least three credit tradelines
- A credit tradeline is a credit history with at least a 12 months payment history
Home Buyers with a prior bankruptcy or had lower credit scores or issues and were told they do not qualify from another mortgage company, please contact us at Gustan Cho Associates Mortgage Group at 262-716-8151 or text us for faster response. Or click this icon, APPLY NOW FOR PRE-APPROVAL to get started.