Update On Mortgage Part Of Bankruptcy Guidelines

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Update On Mortgage Part Of Bankruptcy Guidelines

This BLOG On Update On Mortgage Part Of Bankruptcy Guidelines Was UPDATED On July 14th, 2018

Many consumers who file bankruptcy have their mortgage part of bankruptcy because they could no longer afford their monthly housing payment or because they cannot liquidate and sell their home because their mortgage balance is higher than the value of their home.

  • Those who include their mortgage part of their Chapter 7 Bankruptcy need to realize that there are waiting periods after bankruptcy and foreclosure in order to qualify for a home loan
  • The waiting period after bankruptcy and foreclosure depends on the type of loan program the home buyer qualifies for

Update On Mortgage Part Of Bankruptcy Guidelines On FHA Loans

FHA Loans has a two year mandatory waiting period after the discharge date of a Chapter 7 Bankruptcy in order to qualify for a mortgage home loan.

  • A consumer who has filed a Chapter 13 Bankruptcy can qualify for FHA Loans one year into the Chapter 13 Bankruptcy with the approval of the Bankruptcy Trustee
  • Borrowers can qualify as long as they have made their payments on time since the start of the Chapter 13 Bankruptcy re-payment plan timely

There is a three year waiting period after the recorded date of a foreclosure or the recorded date of a deed in lieu of foreclosure to qualify for a FHA insured home loan.

  • There is a three year waiting period after the date of a short sale to qualify for a FHA Loan
  • The waiting period after a short sale starts from the date of the HUD Settlement Statement of the short sale date

Waiting Period Update On Mortgage Part Of Bankruptcy

Home buyers with a prior mortgage part of bankruptcy, the waiting period starts two years from the discharge date of the bankruptcy. Or after three years of the recorded date of the foreclosure after the bankruptcy discharge date, or whichever date is later to qualify for FHA Loans.

  • For example, if a homeowner had mortgage part of bankruptcy in January 2010 but the mortgage was not foreclosed on and recorded until January 2015, the three year waiting period will start on the recorded date of January 2015 of the foreclosure
  • Home buyers will not qualify for a FHA Home Loan until January 2018

Waiting Period Update On Mortgage After Bankruptcy And Housing Event On Conventional Loans

There is a four year waiting period after bankruptcy, deed in lieu of foreclosure, and short sale to qualify on conventional loans.

  • The 4 year waiting period after bankruptcy starts from the discharge date of the Chapter 7 bankruptcy
  • The 4 year waiting period after a deed in lieu of foreclosure does not start until the recorded date of the deed in lieu of foreclosure which is reflected on public records
  • The four year waiting period after short sale to qualify for conventional loan starts from the date of the short sale which is reflected on the HUD Settlement Statement

Update On Mortgage Part Of Bankruptcy On Conventional Loans

Those who had a mortgage part of bankruptcy, they can qualify for a conventional loan four years after the discharge date of bankruptcy.

  • This only applies as long as they have surrendered home in the bankruptcy
  • The petitioner cannot have reaffirmed the mortgage after Chapter 7 Bankruptcy
  • The foreclosure can be recorded on public records at a later date after the date of bankruptcy and the housing event date does not matter
  • The housing event needs to have been finalized as a foreclosure, deed in lieu of foreclosure, short sale
  • The waiting period clock starts from the discharge date of the bankruptcy

Waiting Period After Chapter 13 Bankruptcy: Conventional Loans

Home buyers with a Chapter 13 Bankruptcy, can qualify for a conventional loan two years after the discharged date of the Chapter 13 Bankruptcy.  If Chapter 13 Bankruptcy was dismissed, there is a four year waiting period after the Chapter 13 Bankruptcy dismissal date to qualify for conforming loans. Although the waiting period to qualify for conventional loans after Chapter 13 Bankruptcy is two years per Fannie Mae and Freddie Mac Guidelines, many lenders require a four year waiting period. The reason many lenders require a four year waiting period versus a two year period after Chapter 13 Bankruptcy dismissal and/or discharged date is because they have lender overlays. Gustan Cho Associates represents a national mortgage banking firm with no overlays on government and conventional loans.

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