Mortgage Loan After Bankruptcy Guidelines And Requirements

Mortgage Loan After Bankruptcy Guidelines And Requirements

This BLOG On Mortgage Loan After Bankruptcy Guidelines And Requirements Was UPDATED On June 15th, 2019

Qualifying For Mortgage Loan After Bankruptcy

There are two types of bankruptcies a person can file.

  • A person who has no assets would normally file which is total liquidation and protection from creditors
  • Consumers who do not have income or are not employed and those with little to no assets often
  • file Chapter 7 Bankruptcy
  • Most debts are discharged with Chapter 7 Bankruptcies except for government loans, government debts, child support, alimony, student loan debts, and tax liens
  • If someone who has overwhelming debts with no short term solution would probably consider filing Chapter 7 Bankruptcy
  • Homeowners can keep their homes and still file Chapter 7 Bankruptcy

In this BLOG, we will discuss qualifying for a Mortgage Loan After Bankruptcy.

Waiting Period To Qualify For Mortgage Loan After Bankruptcy

For those who have recently filed Chapter 7 bankruptcy and want to be homeowners, there is a mandatory 2 year waiting period from the discharge date of the bankruptcy in order for them to qualify for an FHA and VA Loan:

  • For those who have just filed bankruptcy should immediately start reestablishing their credit and try to improve their credit scores
  • A bankruptcy can drop a person’s credit score by more than 150 points
  • The good news is that the person’s credit score will improve as months passes
  • Many folks who have filed bankruptcies have credit scores north of 700 after two years
  • This is because they consciously worked on repairing their credit and credit scores from the day they filed bankruptcy

Remember that you get a fresh start after filing for bankruptcy.  Debt collectors can no longer come after you and all judgments on your record are null and void.

Debt Restructuring: Chapter 13 Bankruptcy

For those who have assets and a job, they probably would be advised to file Chapter 13 bankruptcy.

  • A Chapter 13 bankruptcy is a reorganization plan where a bankruptcy trustee is appointed to you
  • Your trustee will look at your gross monthly income and will take a portion of that and allocate it to your creditors
  • Most Chapter 13 reorganization payment plans last 60 months before all debts are completely discharged
  • For those who have filed Chapter 13 bankruptcy, they are eligible to purchase a home via residential loan after one year into the Chapter 13 bankruptcy
  • They would need the trustee’s approval

Most folks get approved by the bankruptcy courts for a home purchase because many times, a home purchase mortgage loan is less than the monthly rental payments.

Mortgage Loan After Chapter 13 Bankruptcy

Like those folks who filed Chapter 7 bankruptcy, those who filed Chapter 13 bankruptcy should start repairing and rebuilding their credit as soon as they file bankruptcy.

  • They should be always paid their monthly bills on time and try never to be late with any payments
  • Many lenders frown upon those who have late payments after a bankruptcy and often times reject them for a mortgage loan

Mortgage Guidelines After Bankruptcy And Housing Event

Here are the mortgage guidelines after bankruptcy and/or housing event:

  • There is a two-year waiting period after a Chapter 7 Bankruptcy discharge date to qualify for FHA and VA Loans
  • There is a three-year waiting period after Chapter 7 Bankruptcy, foreclosure deed in lieu of foreclosure, short sale to qualify for USDA Loans
  • There is a two-year waiting period to qualify for VA Loans after Chapter 7 Bankruptcy discharge date, foreclosure, deed in lieu of foreclosure, short sale
  • There is a four-year waiting period to qualify for Conventional Loans after a deed in lieu of foreclosure and/or short sale
  • There is a seven-year waiting period to qualify for a Conventional Loan after a regular foreclosure
  • There is no waiting period requirement after Chapter 13 Bankruptcy discharge date on VA and FHA Loans
  • Borrowers can qualify for FHA and VA Loans during Chapter 13 Bankruptcy Repayment Plan with Trustee Approval and Manual Underwriting
  • There is a two-year waiting period after Chapter 13 Bankruptcy discharge date to qualify for Conventional Loans
  • There is a four-year waiting period after Chapter 13 Bankruptcy dismissal date to qualify for Conventional Loans

Non-QM Loans does not require any waiting period after bankruptcy, foreclosure, deed in lieu of foreclosure, short sale. For more information on this blog or other mortgage topics, please contact us at Gustan Cho Associates at 262-716-8151 or text us for faster response. Or email us at gcho@loancabin.com.

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