Seller Financing On Home Purchase For Buyers With Bad Credit

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This BLOG On Seller Financing On Home Purchase For Buyers With Bad Credit Was Updated And PUBLISHED On February 14th, 2020

Like financing a seller when buying a home for buyers with bad credit

The housing market has recovered from the real estate market crash and mortgage meltdown of 2008.

  • Illinois was one of the hardest-hit states where home values plummeted and the recession affected many residents of Chicago and the state of Illinois
  • We will discuss seller financing and non-QM loans on this blog

In this article, we will discuss and cover using seller financing as a bridge loan for homebuyers.

Mortgage After The 2008 Real Estate Meltdown

Many homeowners filed bankruptcy and had their homes foreclosed upon:

  • The main reason is that they lost their jobs, had medical emergencies, or went through a divorce due to the real estate and credit market collapse of 2008
  • For those homeowners who lost their homes because of filing bankruptcy and/or foreclosure, there are certain waiting periods before they are able to qualify for government and conforming loans

Seller financing was one of the options they had.

Waiting Period Guidelines After Bankruptcy And/Or A Housing Event

What are the guidelines for waiting periods after a bankruptcy and/or housing event

Consumers who filed Chapter 7 bankruptcy, there is a two year waiting period before they can qualify for VA and FHA Loans:

People who had a foreclosure, the waiting period is three years from the recorded date of the foreclosure and/or date of sheriff’s sale or the date the recorded date the deed was transferred out of their name to qualify for FHA Loan:

  • VA requires two year wait period after housing event

For those folks who have filed bankruptcy and/or had a foreclosure, buying a house with seller financing was a great option:

  • Seller financing is a short term bridge loan
  • Eventually, these homeowners need to refinance their seller financing on home purchase with a traditional loan term FHA or Conventional Loan

Home Buyers With Seller Financing On Home Purchase

For those who filed bankruptcy and/or had a foreclosure, seller financing on home purchase was a great option to become homeowners again.

  • Seller Financing can be done without having to wait for the mandatory waiting period
  • Other homebuyers purchase homes using hard money loans
  • Or other alternative lending programs where they paid high origination costs and had high-interest rates
  • Seller financing on home purchase and hard money financing were short term loans home buyers used as temporary forms of financing
  • These short term loans need to be refinanced once borrowers got their credit re-established and/or met the mandatory waiting period after bankruptcy and/or foreclosure

With seller financing on home purchase, the homeowner has time to do the following:

  • Rebuild credit to qualify for mortgage
  • Wait out the minimum waiting period after bankruptcy, deed in lieu of foreclosure, foreclosure, short sale
  • Become a homeowner and not miss out on homes in areas where homes are appreciating

Qualifying For Refinance And Pay Off Seller Financing On Home Purchase

How to qualify for refinancing and repay seller financing when buying a home

Homeowners who purchased homes with seller financing on home purchase can refinance their seller-financed homes with FHA or Conventional Loans with no closing costs.

Here are the Refinancing Mortgage Guidelines:

  • FHA allows refinancing mortgage loans up to 97.75% Loan To Value
  • HUD allows up to 85% Loan To Value on FHA Cash-Out Refinance Mortgages
  • VA allows up to 100% cash-out refinance mortgages
  • Fannie Mae and Freddie Mac will allow up to 97% Loan To Value on rate and term conventional refinance mortgages
  • Fannie Mae and Freddie Mac will allow up to 80% Loan To Value on Conventional Loan Refinance Mortgages

Non-QM Loans will allow up to 80% Loan To Value Refinance Mortgages and Cash-Out Refinance Mortgages.

NON-QM And Alternative Financing Programs Offered At Gustan Cho Associates

A safer option for homebuyers who are actively seeking seller financing on home purchase is our new NON-QM Loan Programs.

Here are our NON-QM Loan Programs offered by Gustan Cho Associates at Loan Cabin Inc.

  • No waiting period after housing event and/or bankruptcy
  • 10% to 20% down payment
  • Credit Scores down to 500 FICO
  • No private mortgage insurance required
  • Bank statement loans for self-employed borrowers
  • 5% down payment Jumbo Loans with no mortgage insurance
  • Asset Depletion Loan Program

Homeowners who purchased homes with hard money loans or seller financing on home purchase and need to qualify for traditional low interest refinance mortgage loans, contact us at Gustan Cho Associates at 262-716-8151 or text us for faster response. Or email us at gcho@gustancho.com. We are available 7 days a week, evenings, weekends, and holidays to take calls and answer any questions.

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