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Mortgage Guidelines Chapter 13 Versus Chapter 7 Bankruptcy

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Mortgage Guidelines Chapter 13 Versus Chapter 7 Bankruptcy

This BLOG On Mortgage Guidelines Chapter 13 Versus Chapter 7 Bankruptcy Was UPDATED On May 18th, 2019

Home buyers qualifying for a mortgage after bankruptcies: Home buyers can qualify for a mortgage after bankruptcies after they pass the waiting periods. There are separate types of qualification requirements depending on the types of bankruptcies. Mortgage Guidelines Chapter 13 Versus Chapter 7 Bankruptcy is different depending on the loan program.

The two types of consumer bankruptcies are the following:

  • Chapter 7 Bankruptcy
  • Chapter 13 Bankruptcy

Borrowers can qualify for a mortgage after bankruptcies and foreclosures. However, there are requirements borrowers must meet.

Waiting Period Mortgage Guidelines Chapter 13 Versus Chapter 7 Bankruptcy

All mortgage loan programs have a waiting period after bankruptcies. The waiting period depends on the type of bankruptcy and the type of loan program the borrower is trying to qualify for.

The following are Mortgage Guidelines Chapter 13 Versus Chapter 7 Bankruptcy with regards to the waiting period and the loan program:

  • FHA and USDA requires a 2 year waiting period after a Chapter 7 Bankruptcy discharged date
  • VA requires a 2 year waiting period after a Chapter 7 Bankruptcy discharge date as well
  • Fannie Mae and Freddie Mac require a four year waiting period to qualify for a Conventional Loan after a Chapter 7 discharged date
  • Most Jumbo Lenders will require a 7 year wait period
  • However, there are lenders that will accept a Jumbo Borrower who has been 4 years out of Chapter 7.
  • No late payments after a bankruptcy or foreclosure
  • Gustan Cho Associates Mortgage Group has Non-QM Jumbo Mortgages with no waiting period after housing event and bankruptcy

The underwriter will also look at the borrower’s credit profile before the event to see whether he or she established good payment history. However, the most important factor the underwriter will consider is the applicant’s housing payment record after the bankruptcy discharge; whether rental or mortgage, it must display perfect payment history.

Mortgage Loan After Chapter 13 Bankruptcy

Borrowers can qualify for an FHA Loan while in Chapter 13 or after the Chapter 13 Bankruptcy discharge date:

  • For those who are under a Chapter 13 bankruptcy repayment plan, they can qualify for FHA and VA Home Loans 12 months into their Chapter 13 bankruptcy with the approval of the Chapter 13 bankruptcy trustee
  • For those who just had there Chapter 13 bankruptcy discharged, there is no mandatory waiting period to qualify for FHA and VA Loans
  • However, it will need to be a manual underwrite
  • All manual underwriting mortgage loan applications require verification of rent, also known as VOR
  • Rental Verification can only be provided by providing 12 months canceled checks if renting from a private landlord
  • Renters renting from a registered property management company, all is needed is verification of rent form to be completed and signed by the property management manager
  • The VOR Form is provided by the lender
  • There is a two-year waiting period to qualify for conventional loans after Chapter 13 Bankruptcy discharged date
  • There is a four-year waiting period to qualify for conventional loans after Chapter 13 dismissal date

Mortgage Guidelines Chapter 13 Versus Chapter 7 Bankruptcy With Mortgage Included

Borrowers who had a mortgage as part of your bankruptcy, there is a four year waiting period after the discharge date of bankruptcy to qualify for a conventional mortgage loan under Fannie Mae and Freddie Mac Guidelines.

  • The foreclosure can be recorded after the Chapter 7 Bankruptcy discharged date and that does not matter
  • The four year waiting period clock will start from the discharged date of the Chapter 7 Bankruptcy
  • The mortgage included in bankruptcy cannot be reaffirmed
  • In order for borrowers to qualify, the foreclosure needs to have been finalized and not be pending

There is a three-year waiting period to qualify for an FHA Loan after the recorded date of the foreclosure that is recorded on the county’s recorder of deeds office.

  • If the borrower had a mortgage as part of their Chapter 7 Bankruptcy, the waiting period to qualify for an FHA Loan starts from the recorded date of the foreclosure, deed in lieu, or short sale
  • Not the Chapter 7 Bankruptcy discharged date like Fannie Mae and/or Freddie Mac
  • HUD Guidelines on mortgage part of Chapter 7 Bankruptcy is different than Fannie Mae and Freddie Mac

The same guidelines apply for VA Loans. If borrowers had mortgage included in Chapter 7 Bankruptcy, waiting period to qualify for VA Loans starts from the recorded date of housing event and not the discharged date of bankruptcy.

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