Mortgage After Filing Bankruptcy With No Waiting Period

This BLOG On Mortgage After Filing Bankruptcy With No Waiting Period Was Updated On November 26th, 2018

The federal government created federal bankruptcy laws for consumers who are drowning in debt:

Bankruptcy gives consumers a chance to re-structure their debts or discharged their debts and start new
Everyone has good intent on paying their bills on time and make good on their debts
However, there are extenuating circumstances where people can lose their jobs, lose their business, go through a divorce, medical issues, or other issues where it affects their finances
These extenuating circumstances affect their ability to pay their bets

Bankruptcy is a solution where consumers can get a fresh financial start.

In this article, we will discuss and cover qualifying for a Mortgage After Filing Bankruptcy With No Waiting Period.

Reasons Consumers File Bankruptcy

Once a person is behind on their monthly debts, they had to deal with bill collectors as well as relentless threatening letters from collection agencies.

Dealing with one or two collection agency is fine but dealing with dozens of them can be extremely stressful
Bankruptcy is an option for those who had an economic issue during their lives
Countless of hard-working Americans filed bankruptcy after the 2008 Real Estate and Credit Meltdown
Most homebuyers who filed bankruptcy have re-established themselves
Many are ready to become homeowners

Just until recently, there was a mandatory waiting period in getting a mortgage after filing bankruptcy.

NON-QM Loans Does Not Have Waiting Period Requirements After Bankruptcy And Housing Events

Good news is that with the introduction of NON-QM Loans:

There is no waiting period in getting a mortgage after filing bankruptcy and foreclosure with NON-QM Loans and Alternative Lending Mortgage Programs

Standard Waiting Period In Getting Mortgage After Filing Bankruptcy

There are waiting period requirements to qualify for a mortgage after filing bankruptcy on government and conventional loans.

We will briefly outline the waiting period in getting a mortgage after filing bankruptcy for FHA, VA, USDA, and Conventional Loans.

FHA and VA have a two-year waiting period after Chapter 7 Bankruptcy discharged date to qualify for a mortgage:

3 year waiting period after Chapter 7 Bankruptcy to qualify for USDA Loans

FHA and VA have no waiting period after Chapter 13 Bankruptcy discharged date:

FHA and VA allows someone under a Chapter 13 Bankruptcy Repayment Plan to qualify for a home loan one year into Chapter 13 with Trustee Approval
Fannie Mae and Freddie Mac require a four-year waiting period after Chapter 7 Bankruptcy discharged date on conventional loans

Fannie Mae and Freddie Mac require a two year waiting period after Chapter 13 Bankruptcy discharged date on conventional loans:

Four year waiting period after Chapter 13 dismissal date

Preparing To Qualify For Mortgage After Filing Bankruptcy By Re-Establishing Credit

After a consumer files bankruptcy, their credit scores will drop significantly.

It can drop 100 points or more.
However, the drop in credit scores is temporary
It will improve as the bankruptcy on the credit report ages
There are many cases where a person files bankruptcy and the person’s credit score is over 700 one year after the bankruptcy
This holds true when the person re-establishes their credit by getting a few secured credit cards

Consumers who filed bankruptcy should immediately start re-establishing their credit after the bankruptcy discharged date.

Re-Establishing Credit After Bankruptcy

Many folks who went through a bankruptcy do not want anything to do with credit, Not getting new credit after bankruptcy will hurt them as a consumer and qualify for a mortgage. Lenders want to see established credit tradelines when they are qualifying a borrower for a home loan.

NO CREDIT, NO LATE PAYMENTS is equivalent to BAD CREDIT under the eyes of lenders
Re-Established Credit with traditional credit tradelines

Here are a few pointers for home buyers getting ready for mortgage after filing bankruptcy:

After filing bankruptcy, monitor credit report like monitoring bank account
Make sure that all information is correct and are no errors or misreporting by creditors
Check credit report every 3 months
Consumers are entitled by law for a free copy of credit report every year from the three credit reporting giants;
- Transunion
- Experian
- Equifax
Try to request the three credit reports at different times from each individual credit bureau for 3 different times a year
Free annual credit reports will have no credit score on them
For a fee, credit scores can be requested

Re-Establishing Credit After Bankruptcy With Secured Credit Cards

Start to reestablish new credit after bankruptcy discharge with secured credit cards.

Utility bills, insurance bills, cell phone bills, and many other vendors do not report positive payment history to credit reporting agencies but will report negative and/or delinquent balances due

Be timely with all monthly minimum payment due to whether the vendor reports it or not to the credit bureaus.

Secured credit cards are the best tools for reestablishing credit after bankruptcy and/or foreclosure
For maximum effect in improving and re-establishing a strong credit profile, 3 to 5 secured credit cards with at least a $500 credit limit is recommended
Just getting one secured credit card will definitely improve credit scores
If a person cannot afford all three at once, getting started with one secured credit card is a good approach to the road of great credit

Getting two or more secured credit cards will not just improve credit scores but will create a stronger credit profile.

Secured Credit Cards Are Easiest And Fastest Way Of Re-Establishing Credit

The key target number is 3 secured credit cards:

Do not be surprised if credit score jumps more than 100 points after 3 to 5 months after you get 3 secured credit cards
Again, religiously pay monthly credit card bills on time
Remember that one late payment can drop credit scores by 50 points or more
Do not max out credit cards
Always keep them at the 20% level or less
After a year of having secured credit cards, consumers will be able to qualify for unsecured credit cards or get an unsecured credit limit on their secured credit cards

Always keep a small balance on credit cards and not leave them at zero balance.

Importance Of Credit

Whatever purchase decision is being made, see if financing is available even though it can be paid with cash.

For example, most buyers of autos purchase it with cash
However, in order to develop credit, a car buyer should explore the option if the dealer can finance 50% of the car and put a 50% down payment
If this is the route the consumer takes, check with the finance manager

Make sure the payment history of the car payment will be reported to all three credit reporting agencies.

Mortgage Guidelines On Credit Disputes

There are strict rules with regard to credit disputes during mortgage process .

Here are the FHA mortgage guidelines on credit disputes during the mortgage process:

Borrowers cannot have any credit disputes on non-medical collections with outstanding balances
Non-Medical collections up to an aggregate outstanding unpaid balance of $1,000 is exempt from credit disputes
Zero balance credit disputes are exempt
No credit disputes on charge off accounts
Medical disputes are exempt no matter how large the unpaid outstanding balance of the medical collection
All credit disputes need to be retracted prior to the mortgage process
Retraction of credit disputes will drop credit scores

The above is the FHA Guidelines on Credit Disputes but most mortgage loan programs follow these guidelines.

Credit Disputes Halts Mortgage Process

Here is the reason why credit disputes are not allowed:

When consumers dispute derogatory tradelines from their credit report, the credit bureaus will automatically take out the negative impact of the derogatory from the credit scoring model
When consumers dispute derogatory credit tradelines such as unpaid collection accounts, the credit bureau will take out that collection account from the credit scoring formula
Therefore, the negative impact that collection account has will be treated like it does not exist and the consumer’s credit scores will increase

The credit bureaus will post the verbiage that “consumer disputes the credit account and that the matter is under investigation”

Mortgage After Filing Bankruptcy With Late Payments After Bankruptcy And Foreclosure

Lenders do not want to see any late payments after bankruptcy and foreclosure.

Late payments after bankruptcy and foreclosure can be an automatic denial even though the borrower may have excellent credit scores.

Potential homebuyers planning on getting a home mortgage after filing bankruptcy, they need to realize that most lenders will disqualify any borrowers with late payments after bankruptcy and foreclosure
Late payment after bankruptcy is generally frowned upon from a lender
The late payment might make the waiting period to qualify for a mortgage much longer
35% of credit score is derived by payment history
So by paying bills timely on a monthly basis would definitely be a great way of increasing credit scores and keeping a strong credit profile and payment history
Remember that one late payment can instantly drop credit scores by more than 50 points
One of two late payments after bankruptcy is not a deal killer by certain lenders like myself

I have helped many folks get a mortgage with late payments after bankruptcy and foreclosure but would need an approve/eligible per AUS.

Qualifying For NON-QM Mortgage After Filing Bankruptcy With No Waiting Period

NON-QM Loans are alternative lending programs that many homebuyers can benefit from it. Homebuyers can qualify for non-QM loans after filing bankruptcy or one day out of foreclosure with no waiting period.

Here are the NON-QM Mortgage Guidelines:

There is no waiting period after a housing event such as foreclosure, short sale, deed in lieu of foreclosure, and no waiting period after bankruptcy to qualify for home loans
Loan Limits up to $3 million
Jumbo Loans down to 500 FICO
Borrowers can have credit scores down to 500 FICO
Up to 80% to 90% Loan To Value
Debt To Income Ratio up to 50% DTI
Bank Statement Mortgage Loan Program where no tax returns or income verification is required
Primary owner-occupied properties as well as 2nd homes, and investment properties ARE eligible for alternative financing
No doc fix and flip rehab loans for rehabbers
No doc investment property loans for real estate investors
Rental and Investment properties can close under the name of LLC
Non-warrantable condominium financing
Adjustable Rate Mortgages, ARM, or 15, 20, and 30-year fixed mortgage loan terms
No pre-payment penalty for owner-occupant homes and 2nd homes
No credit tradeline requirements
Single Family Homes, Townhomes, Non-Warrantable Condominiums and, 2-4 units on residential and investment properties
Seller concessions allowed on owner occupant and second home financing up to 6%.
Investment properties are limited to 2% sellers concessions.

Borrowers of NON-QM and Alternative Lending Mortgages, please contact us at Gustan Cho Associates at 800-900-8569 or text for faster response. Or email us at gcho@gustancho.com. We are available 7 days a week, evenings, weekends, and holidays.