Waiting Period After Bankruptcy And Foreclosure

Waiting Period After Bankruptcy And Foreclosure

Qualifying For Home Loan After Bankruptcy And Foreclosure

If you had a prior bankruptcy, foreclosure, deed in lieu of foreclosure, or a short sale, there is a mandatory waiting period before you can qualify for a mortgage loan.  Waiting period for a bankruptcy is two years from the discharge date of the bankruptcy.  Waiting periods for foreclosure, deed in lieu of foreclosure, and short sales are 3 years mandatory waiting period from the recorded date on foreclosure and deed in lieu of foreclosure and the date of the HUD on short sales.  Waiting period is one year after bankruptcy, foreclosure, deed in lieu of foreclosure, and short sale if you qualify for the new HUD’s Back to Work Extenuating Circumstances FHA mortgage program as long as you can document that you had an economic event that caused your bankruptcy, foreclosure, deed in lieu of foreclosure, or short sale that was a result from being unemployed or getting an income reduction of your wages of at least 20% for six months prior and it was beyond your control.

Cannot Get Home Loan Until After Waiting Period

While you are going through the waiting period, you are not allowed to offer on a home until after the waiting period is officially over.  You cannot start an official mortgage application until after you have a signed official real estate purchase contract by the seller and your mortgage loan originator has run an official mortgage credit report.

Are there things I can do during my waiting period?

If you recently went through a bankruptcy, foreclosure, deed in lieu of foreclosure, or short sale, there are plenty of things you can do while you wait out your waiting period to qualify for a residential mortgage loan.  First thing you should do is to consult with a mortgage lender you would like to work with and have him create a soft file.  Although a mortgage lender cannot process and underwrite your mortgage loan application, most professional mortgage lenders will have you apply for a mortgage application and run a credit report on you and create a soft file like he or she is processing your mortgage loan to see what to prepare you for and what mortgage loan program you will qualify for.  Use this waiting period to make changes to your credit and financial profile.  Your mortgage lender might want you to establish more credit by advising you to get secured credit cards to establish the necessary required credit tradelines required by many lenders.  He will probably advise you to pay your rental payments with checks so rental verification can be verified.  If you have outstanding judgments, he might want you to get a payment agreement with your judgment creditor and get a payment plan.  Same goes for any outstanding tax liens.  You can qualify for a mortgage loan with judgments and tax liens but need to have a payment agreement and a payment plan in force.

FHA Back To Work Mortgage Program Shortens Waiting Period To One Year

 HUD’s new Back to Work program mandates that you need 12 months of timely payments and rental verification as well as re-established credit.  If you have no credit tradelines, you will be advised to establish new credit via secured credit cards.  Rental verification is one of the most important factors a mortgage lender will require.  Cash rental payments do not count.  Always make your monthly rental payments with checks because the only way you can prove timely rental payments is by providing 12 months of cancelled checks to the mortgage lender.

Start Getting Documents In Order And Monitor Your Bank Accounts

Bank statements is one of the most scrutinized documents that a mortgage underwriter will look at.  All deposits must be sourced.  If you make a large deposit and you want to use that deposit as part of your down payment or closing costs in your mortgage application, the mortgage lender will want to know where that money came from.  If they are payroll checks, it can easily be documented.  However, any out of the ordinary items over $200 must be sourced.  For example, if you deposited a $5,000 check to your bank account and it was from a sale of a vehicle, the copy of the check, deposit slip, copy of bill of sale, all will be required.  If you had a side job and you deposited a check from a customer, then the invoice, deposit slip, and work order needs to be documented and provided to the mortgage lender.

Another note with bank statements is that most mortgage lenders will disqualify you if you had any bank overdrafts in the past twelve months.  In the event if you did have an overdraft or two, it is not a deal killer but your mortgage loan originator needs to be very creative in providing a letter of explanation to the mortgage loan underwriter.  Multiple blatant overdrafts will be a deal killer.

If you had a foreclosure, you will be required to provide the copy of the deed of the property that vests your name out of the deed.  If you do not have this important document in your possession, you will need to contact the recorder of deeds office in the county where your property was foreclosed on in order to get this document.

Waiting Period After Short Sale

If you had a short sale, the date on the HUD Settlement Statement or the recording date of the vesting deed that is transferring the title out of your name into the buyer’s name are the dates that the clock starts ticking for the waiting period.  In the event if you do not have the HUD Settlement Statement from the short sale,  you can contact this paperwork from the attorneys office handling your short sale or from the title company that did the short sale.

If you filed for bankruptcy, you will need to provide your bankruptcy papers to your mortgage lender.  Every single page of your bankruptcy  and discharge papers needs to be provided.

Counting Down The Waiting Period

Once you have chosen a mortgage lender you want to work with, he or she will be able to pre-qualify you and tell you the maximum price range of the home you should start shopping for.  Your mortgage lender will be able to predict what mortgage amount you will get approved for and what your overall monthly housing expenses and budget will be.

Back to Work Extenuating Circumstances FHA One Year Waiting Period after bankruptcy, foreclosure, deed in lieu, short sale

The Back to Work Extenuating Circumstances FHA One Year Waiting Period after bankruptcy, foreclosure, deed in lieu, short sale will be an extremely popular extenuating circumstances program for those who have lost their jobs or had a 20% or more in household income reduction.  Mortgage loan borrowers who feel they qualify for HUD’s new Back to Work Extenuating Circumstances FHA mortgage loan after a one year waiting period after a bankruptcy, foreclosure, deed in lieu of foreclosure, or short sale need to be able to document that they were out of work or they had a income reduction of at least 20% or more of their household income for a minimum of 6 months prior to the economic event.  Certain types of documentation that is allowed include layoff notices, termination notices, pay check stubs that show the before and after income, and public or other notices that the company they used to work for is in no longer in existence.  Other forms of proof include tax returns, and unemployment income.

Housing Counseling

Housing counseling is a mandatory requirement for those mortgage loan borrowers who want to participate in the Back to Work Extenuating Circumstances FHA mortgage loan program.   The mortgage loan borrower needs to complete a one hour HUD approved housing counseling program at least 30 days prior to them applying for a formal application and the housing counseling certificate cannot be older than 6 months old to the mortgage application or real estate purchase contract date.

Do You Qualify For FHA Back To Work Extenuating Circumstances Due To An Economic Event?

If you think you qualify for HUD’s Back to Work FHA mortgage loan program after a one year waiting period after a bankruptcy, foreclosure, deed in lieu of foreclosure, and short sale, please contact me at 262-716-8151 or email me at gcho@gustancho.com.  You can always visit me at www.gustancho.com.

Gustan Cho NMLS ID # 873293

Related> 2015 FHA Back To Work Mortgage Lending Guidelines

Related> Do You Qualify For The FHA Back To Work Program In California?

Related> FHA Back To Work Extenuating Circumstances Due To An Economic Event

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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