Preparing On Getting Mortgage After Filing Bankruptcy With No Waiting Period

Preparing On Getting Mortgage After Filing Bankruptcy With No Waiting Period

This BLOG On Preparing On Getting Mortgage After Filing Bankruptcy With No Waiting Period Was Updated On May 12, 2017

The federal government created federal bankruptcy laws for consumers who are drowning in debt 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 divorce, medical issues, or other issues where it affects their finances and affects their ability to pay their bets. 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. Countless of hard working Americans filed bankruptcy after the 2008 Real Estate and Credit Meltdown. Most home buyers who filed bankruptcy have re-established themselves and are ready to become homeowners. Just until recently, there were mandatory waiting period in getting mortgage after filing bankruptcy. Good news is that with the introduction of NON-QM Loans, getting mortgage after filing bankruptcy and foreclosure with no waiting period is now possible with The Gustan Cho Team 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 mortgage after filing bankruptcy on government loans and conventional loans. We will briefly outline the waiting period in getting mortgage after filing bankruptcy for FHA, VA, USDA, and Conventional Loans.

  • FHA, VA, USDA has a two year waiting period after Chapter 7 Bankruptcy discharged date to qualify for mortgage
  • FHA, VA, USDA has no waiting period after Chapter 13 Bankruptcy discharged date to qualify for home loan.
  • FHA, VA, USDA allows someone under a Chapter 13 Bankruptcy Repayment Plan to qualify for a home loan one year into the Chapter 13 with Trustee Approval
  • Fannie Mae and Freddie Mac requires a four year waiting period after Chapter 7 Bankruptcy discharged date for a home buyer to qualify for a conventional loan 
  • Fannie Mae and Freddie Mac requires a two year waiting period after Chapter 13 Bankruptcy discharged date for a home buyer to qualify for a conventional loan

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 and 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 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 which will hurt them as a consumer and as a home buyer. 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 a lender.
  • 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 entitle by law for a free copy of credit report every year from the three credit reporting giants; Transunion, Experian, and 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 request.

Re-Establishing Credit After Bankruptcy With Secured Credit Cards

Start to re-establish 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 whether the vendor reports it or not to the credit bureaus.

  • Secured credit cards are the best tools for re-establishing 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 recommend.
  • Just getting one secured credit card will definitely improve credit scores and 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. 
  • 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 getting 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 your 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 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 and 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 regards on credit disputes during mortgage process . 

Here are the FHA mortgage guidelines on credit disputes during 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 needs 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.

Here is the reason why credit disputes are not allowed:

  • When consumers dispute a 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 a derogatory credit tradelines such as an 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”

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 home buyers planning on getting a home mortgage after filing bankruptcy, they need to realize that the most lenders will disqualify any borrowers with late payments after bankruptcy and foreclosure. 
  • A late payment after bankruptcy is generally frowned upon from a lender and the late payment might make the waiting period to qualify for a mortgage much longer. 
  • 35% of your 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 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 home buyers can benefit from it. Home buyers can qualify for non-qm loans after filing bankruptcy or one day out of foreclosure with no waiting period.

Here is 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 $1 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 The Gustan Cho Team at 800-900-8569 or text Gustan at 262-716-8151 for faster response or email us at gcho@gustancho.com. We are available 7 days a week, evenings, weekends, and holidays.

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The information contained on Gustan Cho Associates website is for informational purposes only and is not an advertisement for products offered by The Gustan Cho Team @ Gustan Cho Associates or its affiliates. The views and opinions expressed herein are those of the author and/or guest writers of Gustan Cho Associates Mortgage & Real Estate Information Resource Center website and do not reflect the policy of Gustan Cho Associates Lenders Network, its officers, subsidiaries, parent, or affiliates.

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