Timeshare Foreclosure Waiting Period Mortgage Guidelines

Gustan Cho Associates are mortgage brokers licensed in 48 states

In this blog, we will cover and discuss the waiting period requirements after a timeshare foreclosure. One of the most frequently asked questions we get at Gustan Cho Associates is can I qualify for a mortgage after a timeshare foreclosure? Many homebuyers go to lenders to get qualified for a home mortgage with a timeshare foreclosure and are told they cannot qualify for a mortgage with a timeshare foreclosure.

Homebuyers are told they need to wait three years after a timeshare foreclosure on FHA loans, two years after a VA loan, and seven years after timeshare foreclosure on conventional loans. This is absolutely not true. There is no waiting period after timeshare foreclosure to qualify for an FHA, VA, USDA, and conventional loan.

Does a Timeshare Count as a Mortgage?

Is a timeshare foreclosure considered a mortgage foreclosure or an installment loan default? The answer to the frequently asked question of does timeshare counts as a mortgage is an absolute NO. A timeshare is not a real estate loan. A timeshare is considered an installment loan. Agency mortgage guidelines on installment loan default apply and are not a real estate foreclosure. Therefore, homebuyers have no waiting period after a timeshare foreclosure. I get this question asked several times a week.

Do Lenders Have Different Requirements for Timeshare Foreclosure?

Not all lenders have the same timeshare foreclosure requirements. Even though a timeshare is not considered a real estate property, many lenders still consider a timeshare foreclosure as a real estate foreclosure and mandate a waiting period requirement. If you get denied for a mortgage after a timeshare foreclosure, go to a mortgage lender with no lender overlays after timeshare foreclosure.

Many home buyers contact us and ask Is A Timeshare Foreclosure Considered Mortgage Foreclosure Or Installment Loan? FHA loans are the easiest loan program to get an approve/eligible per automated underwriting system with a recent timeshare foreclosure. Many folks checked HUD Guidelines on waiting periods after a timeshare foreclosure.

Can You Buy a House After a Timeshare Foreclosure?

It states that a timeshare foreclosure is an installment loan and not a real estate. Many folks get told by loan officers and many times by mortgage underwriters that timeshare foreclosure is the same as a real estate foreclosure. There is no waiting period requirement after a timeshare foreclosure to qualify for a home mortgage. Gustan Cho Associates have helped countless homebuyers after a timeshare foreclosure with no mandatory waiting period requirements.

Is Timeshare Considered a Real Estate or an Installment Loan?

Under HUD guidelines, a loan that is collateralized by an interest in a timeshare is not considered a housing obligation. Under HUD Agency Mortgage Guidelines, a timeshare is not considered real estate. A timeshare is considered an installment loan. Therefore, since it is not considered real estate, a timeshare foreclosure is nothing but a defaulted installment loan. Under HUD Guidelines on timeshare foreclosure states, there is no waiting period due to timeshare loans are considered installment loans and not a mortgage.

Waiting Period After Timeshare Foreclosure Versus Real Estate Foreclosure

Timeshare loans are loans that are secured by an interest in a timeshare is considered an installment loan. There is no waiting period after a timeshare foreclosure on government and conventional loans since timeshares are NOT real estate loans. This holds true even though the timeshare property results in a timeshare foreclosure. Therefore, borrowers with a foreclosure on a timeshare resulting in foreclosure have no waiting period after the timeshare foreclosure to qualify for FHA, VA, USDA, and conventional loans. They can qualify for government and/or conventional loans regardless of when the timeshare payments went into default.

Waiting Period After Foreclosure Versus Timeshare Foreclosure
Waiting Period After Foreclosure

There are waiting period requirements after a housing event. A housing event is a foreclosure, deed in lieu of foreclosure, and short sale. A foreclosure is when a homeowner defaults on a real estate property. A real estate property is an owner-occupant home, second home, investment home, and not a timeshare. There are mandatory waiting period requirements to qualify for government and/or conventional loans. However, there is no waiting period after a timeshare foreclosure because a timeshare is not considered a real estate loan. All government home mortgage programs consider timeshare loans as installment loans.

Mortgage Waiting Period Requirements After Foreclosure

There are mandatory after foreclosure to qualify for the following home mortgage loans:

  • FHA Loans
  • VA Loans
  • USDA Loans
  • Fannie Mae and Freddie Mac which Conventional Loans
  • Jumbo Mortgages

NON-QM Loans have no waiting period requirements after housing events and/or bankruptcy. Gustan Cho Associates offers home mortgages one day out of foreclosure and/or bankruptcy with non-QM loans.

Mortgage Waiting Period After Foreclosure Requirements 

Here is the mandatory waiting period after foreclosure for the following home mortgage loan programs:

  • HUD requires a waiting period of 3 years after a foreclosure and deed in lieu of foreclosure from the recorded date to qualify for an FHA loan
  • VA Loans has a two-year waiting period after the recorded date of the deed in lieu of foreclosure and/or foreclosure to qualify
  • USDA has a three-year waiting period to qualify for a USDA Loan after the recorded date of the foreclosure and/or recorded date of the foreclosure
  • Fannie Mae and Freddie Mac require a four-year waiting period requirement after a deed in lieu of foreclosure and/or a short sale
  • Both Fannie Mae and Freddie Mac have a 7-year waiting period after a standard foreclosure to qualify for a Conventional loan after the recorded date

However, if the borrower has a deed in lieu of foreclosure and/or short sale, the waiting period is different than a regular foreclosure on conventional loans. The waiting period after a deed in lieu of foreclosure and/or a short sale greatly reduced to a four-year waiting period to qualify for Conventional loans.

Waiting Period After Foreclosure on Conventional Loans
Fannie Mae And Freddie Mac Guidelines On Conventional Loans After Housing Event

The waiting period start clock to qualify for a Conventional Loan starts from the recorded date of the deed in lieu of foreclosure reflected on the public records. Or in the event, that it is a short sale, the actual date of the short sale is reflected on the HUD-1 Settlement Statement. Jumbo Mortgages are considered non-conforming loans. This is because they do not conform to Fannie Mae and/or Freddie Mac Conforming Guidelines.

Jumbo Loans After Foreclosure Mortgage Guidelines

Any home mortgage loans that exceed the maximum Fannie Mae and/or Freddie Mac Conforming Limit of $647,200 are considered jumbo loans. Most Lenders will set their own waiting period requirements after foreclosure to qualify for Jumbo Loans. Most Lenders will require a 7-year waiting period to qualify for a Jumbo Mortgage after foreclosure. Gustan Cho Associates has Non-QM Jumbo Mortgages with no waiting period after foreclosure, deed in lieu of foreclosure, short sale, or bankruptcy.

Why Am I Told That Timeshare Foreclosure Is A Foreclosure?

A timeshare is considered an installment loan and not real estate. If a timeshare owner forecloses on a timeshare, they are treated like they have defaulted on an installment loan. The defaulted timeshare loan will be treated like a defaulted installment loan. Mortgage borrowers are eligible to qualify for any other government and/or conventional loan with a defaulted installment loan. The defaulted installment loan does not have to be repaid and still qualifies for a home mortgage. A timeshare foreclosure is normally treated like a charged-off account by most lenders with no lender overlays.

FHA Loan After Timeshare Foreclosure

Just because you may meet FHA Guidelines On Qualifying For A FHA Loan After Timeshare Foreclosure, the lender you consulted with may have their own overlays. They may have their own Lending Requirements that are above and beyond those of the minimum FHA Guidelines. Lenders overlays are additional lending requirements imposed by lenders that are above and beyond the minimum HUD Agency Guidelines. This is perfectly legal and most lenders do have overlays. Gustan Cho Associates has zero lender overlays on government and conventional loans. Gustan Cho Associates does not have any waiting period requirements after timeshare foreclosure.

What Are Lender Overlays?

Lender Overlays are mortgage lending requirements that are above and beyond of the minimum mortgage guidelines set by :

  • FHA
  • VA
  • USDA
  • FANNIE MAE
  • FREDDIE MAC

Gustan Cho Associates is a national mortgage company licensed in multiple states with no lender overlays on government and conventional loans.

Examples of Lender Overlays On Home Loans

Let’s take case scenarios of typical overlays on FHA Loans to better explain what overlays are. We will use FHA loans in this case study since FHA loans are the most popular loan programs for first-time homebuyers, borrowers with bad credit and low credit scores, and homebuyers with a recent timeshare foreclosure. However, lender overlays applies to all government and conventional loans. We will go over case scenarios of lender overlays on FHA credit scores. Most lenders will have FHA Guidelines on Credit Scores. HUD requires to qualify for a 3.5% down payment FHA loan, the borrower needs a minimum of a 580 FICO. However, most lenders will require a minimum of a 620 FICO Credit Score while most banks will require 640 FICO Credit Score.

Not All Lenders Have The Same Lending Requirements

HUD allows borrowers with under 580 credit scores and down to a 500 FICO to qualify for an FHA loan. However, borrowers with under 580 credit scores require a 10% versus a 3.5% down payment.  Although HUD, the parent of FHA, requires only a 580 credit score on a 3.5% down payment FHA loan, lenders can require a higher score due to their own overlays. This higher credit score requirement to qualify for an FHA Loan is called Overlays On Credit Scores. Overlays are when borrowers do qualify for an FHA loan but do not qualify with the particular lender they have consulted with. Gustan Cho Associates Mortgage Group has no overlays on government and conventional loans.

Typical Investor Overlays From Mortgage Lenders
Typical Lender Overlays

FHA Guidelines On Collection Accounts:

  • Most lenders will have overlays on collection accounts
  • They will require borrowers to pay off outstanding collection accounts to qualify
  • Under FHA Guidelines On Collection Accounts outstanding collection and charged-off accounts do not have to be paid
  • HUD Guidelines on Collections state that borrowers do not have to pay off outstanding collections to qualify for FHA Loans
  • However, most lenders will have overlays on collection accounts with outstanding balances
  • They will require borrowers to pay off all of their outstanding collections with balances or may have a maximum limit on outstanding balances on unpaid collection accounts
  • Gustan Cho Associates does not have any overlays on outstanding collection accounts

This holds true no matter how much the unpaid outstanding balances on their collections are.

HUD Guidelines Versus Overlays On Charged Off Accounts

FHA Guidelines On Charge Off Accounts:

  • Most lenders have lender overlays on charge off accounts
  • They will require Borrowers to pay off outstanding charge off accounts in order to qualify for FHA Loans
  • FHA Guidelines On Charge Offs does not require that Borrowers pay off outstanding charge off accounts to qualify
  • Borrowers can qualify for an FHA Loan with an outstanding charge off accounts no matter how much the outstanding charge off account balance is
  • Gustan Cho Associates does not have any overlays on charge offs

This holds true no matter how large the outstanding charge off account balance is.

HUD Guidelines on Debt To Income Ratio

FHA Guidelines On Debt To Income Ratio:

  • Most lenders will have overlays on debt to income ratio
  • They will limit the maximum debt to income to 45% DTI to 50% DTI due to their overlays
  • HUD allows maximum allowable debt to income ratio is 56.9% DTI to get an approve/eligible per AUS
  • Gustan Cho Associates has no overlays on debt to income ratios

The maximum debt to income ratio allowed to get an approve/eligible per automated underwriting system on FHA loans is a 46.9% front end and 56.9% DTI back end debt to income ratio.

VA Guidelines on Debt To Income Ratio

VA Guidelines On Debt To Income Ratio:

  • VA Loans does not have a maximum cap on debt to income ratios as long as the borrower can get an approve/eligible per automated underwriting system (AUS)
  • Most lenders have a debt to income ratios on VA overlays capped at 43% DTI to 50% DTI
  • Gustan Cho Associates does not have overlays on debt to income ratios on VA Loans

Gustan Cho Associates will just go off the findings of the Automated Underwriting System. We do not have any other lender overlays on government and conventional loans.

VA Loans For Bad Credit With Low Credit Scores
VA Credit Scores Agency Mortgage Guidelines On Timeshare Foreclosure

There is no mandatory waiting period after timeshare foreclosure on VA loans. There is no minimum credit score requirements on VA loans.

VA Guidelines On Credit Scores :

  • One thing that most folks, including many loan officers, is that VA does not have minimum credit score requirements along as the borrower can get an approve/eligible per AUS
  • Credit score requirements are determined by VA lenders
  • Most lenders will require a 620 FICO due to their lender overlays

However, Gustan Cho Associates does not have a minimum credit score requirement on VA Loans as long as the borrower can get an approve/eligible per automated underwriting system (AUS). Gustan Cho Associates just go off the automated findings from the AUS and has no other overlays on VA Loans.

Qualifying For Mortgage With Timeshare Foreclosure

The above bullet points are examples of overlays set by lenders and this applies to qualify for government and conventional loans after a timeshare foreclosure. Again, FHA, VA, USDA, Fannie Mae, Freddie Mac considers a timeshare secured by a loan as an installment loan and not real estate loan. There is no waiting period after a timeshare foreclosure to qualify for government and/or conventional loans. If told buyers do not qualify for government and/or conforming loans due to timeshare foreclosure, give us a call at 262-716-8151 or text us for a faster response. Or email us at [email protected] Gustan Cho Associates is a five start national Lender licensed in multiple states with no lender overlays on FHA, VA, USDA, Conventional loans. We have a solid 5-star national reputation for its no overlays and being able to close loans in 21 days or less. The Team at Gustan Cho Associates Mortgage Group is available 7 days a week, evenings, weekends, and holidays.