Mortgage Programs After Bankruptcy And Foreclosure

Mortgage Programs After Bankruptcy And Foreclosure

This BLOG On Mortgage Programs After Bankruptcy And Foreclosure Was Written By Gustan Cho NMLS 873293 

Government and Conventional Loans require mandatory waiting period after bankruptcy and/or housing event.

  • However, non-qm loans was launched at The Gustan Cho Team at USA Mortgage in 2017
  • There is no waiting period after housing event with non-qm loans
  • However, there is 20% down payment required to qualify for non-qm loans
  • Mortgage Rates are higher on non-qm loans than they are on government and conventional loans
  • Many home buyers can use our non-qm loan program to qualify for home loan and refinance their non-qm loan with a traditional loan program after they meet the waiting period

Current Waiting Period For Government Mortgage Programs After Bankruptcy And Foreclosure

  • The current waiting period for those who had a prior bankruptcy is a two year waiting period from the discharge date of Chapter 7 Bankruptcy on FHA, VA, and USDA Loans
  • For those who had a prior foreclosure, deed in lieu of foreclosure, or short sale, the waiting period is 3 years after foreclosure, deed in lieu of foreclosure, short sale for FHA Loans and USDA Loans
    • The waiting period starts from the recorded date of the foreclosure and/or deed in lieu of foreclosure and/or the date of the sheriff’s sale or the date of the HUD settlement statement for those with a prior short sale
  • There is a two year waiting period after foreclosure, deed in lieu of foreclosure, and/or short sale to qualify for VA Loans

Waiting Period For Conforming Mortgage Programs After Bankruptcy And Foreclosure

Conventional Loans are called conforming loans because they need to conform to Fannie Mae and/or Freddie Mac Mortgage Guidelines. Waiting period differs after deed in lieu of foreclosure and short sale versus foreclosure on conforming loans.

  • There is a four year waiting period after Chapter 7 Bankruptcy discharged date to qualify for Conventional Loans
  • There is a two year waiting period after Chapter 13 Bankruptcy discharged date to qualify for Conventional Loans
  • There is a four year waiting period after Chapter 13 Dismissal date to qualify for conforming loans
  • There is a four year waiting period after short sale and/or deed in lieu of foreclosure to qualify for conforming loans
  • There is a seven year waiting period to qualify for conventional loans after the recorded date of a regular foreclosure

What Happened With FHA Back To Work Mortgage Program?

HUD’s FHA Back to Work Extenuating Circumstances due to an economic event shortened the waiting period to one year after a bankruptcy, foreclosure, deed in lieu of foreclosure, or short sale. Again, the FHA Back To Work Loan Program is no longer available and turned out to be a total flop.

  • Home buyers who were unemployed or underemployed and had a significant impact on their household income supposedly qualified for the FHA Back To Work Mortgage
  • The borrower needed to have been unemployed for the six months prior to the bankruptcy, foreclosure, deed in lieu of foreclosure, or short sale
  • It was due to the unemployment that triggered the bankruptcy and/or housing event

2018 UPDATE ON FHA BACK TO WORK MORTGAGE: This mortgage loan program turned out to be a major disaster and most lenders have discontinued offering this loan program. The Gustan Cho Team at USA Mortgage offers NON-QM Loan Programs After Bankruptcy and Foreclosure where there is no waiting period.

To qualify for the HUD’s new FHA Back to Work Extenuating Circumstances due to an economic event mortgage loan, the first step is to write a letter of explanation detailing the economic event. 

  • The mortgage loan borrower needed to have been fired, unemployed, or underemployed for at least six or more months leading to the initiation of the bankruptcy and/or housing event  (foreclosure, deed in lieu of foreclosure, or short sale) which has led a 20% or more reduction in their household income
  • Folks who quit their jobs voluntarily did not qualify
  • Underwriters were looking for the borrower’s credit history prior to the loss of employment and expected good credit until the economic event
  • After the loss of job, the credit scores dropper
  • After the bankruptcy, foreclosure, deed in lieu of foreclosure, or short sale, the credit scores needed to be re-established after they found new employment
  • For those who had a history of bad credit prior to the economic event did not qualify  
  • Underwriters expected to see no late payment history
  • Re-established credit after the borrower gets new employment and at least 12 months good credit history was expected

All Back to Work Extenuating Circumstances due to an economic event mortgage loans were manual underwrites. 

  • The maximum front end debt to income ratios werecapped at 31%
  • The maximum back end debt to income ratios were capped at 43%
  • Compensating factors were taken into great consideration
  • Compensating factors include rental verification, reserves, low debt to income ratios, and other positive factors that strengthened the mortgage application
  • Mortgage loan applications could not be initiated until 30 days after the borrower completed a one hour HUD approved housing counseling course
  • As mentioned earlier, the letter of explanation was the most important first step and dictated whether the home mortgage loan borrower qualified
  • Again, the Back To Work Program turned out to be a disaster where most lenders did not even touch it

There were tens of thousands of FHA Back To Work mortgage loan applications. Only a small fraction got closed. This program turned out to be a major disaster.

2018 UPDATE: FHA Back to Work Mortgage Turned Out To Be Major Disaster

The Gustan Cho Team at USA Mortgage offers Mortgage Programs After Bankruptcy And Foreclosure with no waiting period requirements.  NON-QM Loans where there is no waiting period after bankruptcy or foreclosure and closing is done in 21 days or less. Home Buyers who needs to qualify for non-qm loans or bank statement loans for self employed borrowers, please contact us at The Gustan Cho Team at USA Mortgage at 262-716-8151 or email us at gcho@usa-mortgage.com. We are available 7 days a week, evenings, weekends, and holidays.

Gustan Cho NMLS ID 873293

Comments are closed.