Qualifying For VA Loans After Mortgage Charge Off Versus FHA Loans

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Qualifying For VA Loans After Mortgage Charge Off Versus FHA Loans

This BLOG On Qualifying For VA Loans After Mortgage Charge Off Versus FHA Loans

There are mandatory waiting period after bankruptcy, foreclosure, deed in lieu of foreclosure, and short sale to qualify for any types of government and/or conventional loans.

  • VA Loans are the best mortgage loan program in the United States
  • However, only veterans with a certification of eligibility can qualify for VA Loans
  • The United States Department of Veteran Affairs (VA) is in charge of VA Loans. VA is a little more strict when it comes to qualifying for VA Loans After Mortgage Charge Off Versus FHA Loans
  • There are times when a veteran borrower will not get an approve/eligible per Automated Underwriting System Findings on a VA Loan but will get AUS Automated Approval on FHA Loan
  • Veteran borrowers can qualify for VA Loans After Mortgage Charge Off

VA And FHA Waiting Period Requirements After Bankruptcy And Foreclosure

  • Waiting period after Chapter 7 bankruptcy is two years from the discharged date of the bankruptcy to qualify for the three government loan program:
    • VA Loans
    • FHA Loans
    • USDA Loans
  • Veteran Borrowers can qualify for VA Loans one year into Chapter 13 Bankruptcy repayment plan with the approval of the Bankruptcy Trustee
  • FHA has the same requirement with Chapter 13
  • Timely payments for the past 12 months on their Chapter 13 Bankruptcy Creditors is required for both VA and FHA Loans
  • Waiting period after foreclosure and deed in lieu of foreclosure is three years from the recorded date that is reflected on the county recorder of deed’s office and posted on the county public records to qualify for a FHA Loan
  • However, the waiting period is only two years after foreclosure, deed in lieu of foreclosure, short sale on VA Loans
  • There is a three year waiting period after the date of the short sale that is reflected on the HUD Settlement Statement to qualify for a FHA Loan

Conventional Loan Waiting Period After Bankruptcy And Foreclosure

Waiting Period after bankruptcy and foreclosure is different for conventional loans than it is for FHA Loans.

  • There is a four year waiting period after the discharge date of a Chapter 7 Bankruptcy to qualify for a conforming loans
  • There is a four year waiting period after a deed in lieu of foreclosure and short sale to qualify for a conventional loans
  • There is a two year waiting period after Chapter 13 Bankruptcy discharge to qualify for a conventional loan
  • There is a four year waiting period after a Chapter 13 dismissal to qualify for a conventional home loans
  • There is a four year waiting period after a deed in lieu of foreclosure and short sale to qualify for a conventional loan
  • There is a seven year waiting period after a foreclosure to qualify for a conventional loan

VA Loans After Mortgage Charge Off Versus FHA Loans

A mortgage charge off is when a mortgage lender has charge off the mortgage loan off their books. The lender then decided not to pursue collection activities or go through foreclosure proceedings.

  • Many homeowners who fell victims to the 2008 real estate and mortgage meltdown tried to give back their properties to their mortgage lenders
  • Reason is because they could not afford their home loan mortgage
  • But many mortgage lenders did not want the property back and decided to just charge off the mortgage loan
  • A veteran home buyer with a mortgage charge off can qualify for VA Loans after charge off after meeting minimum waiting periods after mortgage charge off
  • Veteran borrowers can qualify for VA Loans with charge off two years from the date of the charge off that is recorded on the credit reporting agencies
  • The two year waiting period on mortgage charge off waiting period applies to both a first mortgage and second mortgages
  • Veteran home buyers with a first mortgage and second mortgage and both mortgages were charged off, the latter date of the mortgage charge off will be the start of the waiting period
  • Borrowers would need to wait two years from the latter mortgage charge off date to qualify for VA Loans after charge off

With USDA and FHA Loans, borrowers can qualify for mortgage after charge offs in three years from the recorded date versus two years on VA Loans.

No Overlays On VA Loans After Mortgage Charge Off

Home Buyers who need to qualify for FHA and/or VA Loans After Charge Offs and Collections with a direct lender with no overlays, please contact The Gustan Cho Team at USA Mortgage at 262-716-8151.  We are a no mortgage lender overlays national mortgage bankers and correspondent mortgage lenders.  Minimum credit scores to qualify for a 3.5% down payment FHA Loan is 580 FICO credit scores and we have no credit score requirements on VA Loans.  Debt to income ratios are capped at 56.9% back end with FHA Loans and have no cap on debt to income ratio on VA Loans.  Charge offs and unpaid collections do not matter and do not be settled to qualify for both FHA and VA Loans.  Medical collections do not count.  Down payment can be gifted 100% by family members or close friends on FHA Loans.  Non-occupant co-borrowers can be added to qualify for those who are self-employed or have no documented income with FHA Loans. We just go off Automated Findings on government and conventional loan programs. We are available 7 days a week, evenings, weekends, and holidays. Call us or email us at gcho@usa-mortgage.com.

  1. Alicia Paulon says

    Can loan be denied due to previous mortgage charge off?
    I was preappoved for a home loan and had a home built but now the underwriter wants to deny the loan because I had a previous mortgage that was charged off in 2012. In 2012 I tried to get the lender to modify the loan because it was underwater. They gave me the run around for almost a year. In April 2013 I received a letter from the lienholder in which held the mortgage that the lien was being released and that I could keep or sell the property. In July county records were update to reflect the lien was released and I fully owned the property. I never received any correspondence from the lienholder after the letter they sent in April 2013. In Oct 2013 I sold the home. Now the underwriter is sayting that I need to wait 3 years from April 2013 before I would be eligible for an FHA loan. The home was not sold in a short sale and I gave them proof of that by providing my HUD settlement statment that was done in closing. Is the underwriter correct or should I seek another lender? I am supposed to close next week.

    1. Gustan Cho says

      The underwriter in this case is correct. FHA guidelines state that the three year waiting period on a foreclosure starts from the date the deed was transferred out of your name and into the name of the lender and/or new home buyer. Even though the mortgage note was charged off in 2012, the actual transfer of the deed did not occur until October 2013 so the three year waiting period will start on October 2013. Your loan officer should have caught this prior to issuing a pre-approval. This rule is not a mortgage lender overlay and are FHA guidelines so seeking another mortgage lender will not help you. You may have some options and you are welcome to call me at 262-716-8151 to discuss.
      Was the mortgage note just under your name or was it under you and your spouse? If you were the one only on the note, your spouse may qualify for the mortgage and both you and your spouse can go on title.

      1. Alicia Paulson says

        I just looked at my credit report and this mortgage was included in my bankruptcy. On my credit report it reads: ” settlement accepted on this account; settled/paid in full less than full balance; chapter 7 bankruptcy; chapter 7; included in bankruptcy. Closed 6/08″

        Does the waiting period still apply?

        1. Gustan Cho says

          There are new Fannie Mae lending guidelines that got into effect last year where if you have a mortgage part of your bankruptcy, the waiting period to qualify for a conventional loan is 4 years from the discharged date of the Chapter 7 Bankruptcy and the actual recorded date of the foreclosure is waived. So if you had a mortgage part of your bankruptcy in January 2011 and the bankruptcy discharge date was January 2011 but your foreclosure was not recorded until January 2014, you will still qualify for a conventional loan since the waiting period started from your discharge date of January 2011. This is for conventional loans only and does not apply to FHA Loans. Here is a link that may help you:

          http://gustancho.com/2015-update-on-mortgage-part-of-bankruptcy

          1. Alicia says

            Thank you. I have sent you an email to follow up and possibly apply for a conventional mortgage through you.

          2. Gustan Cho says

            Thank you for the opportunity to help you get your home loan closed. We can do it via Conventional loan, Alicia, no problem. I received your online application. Kay Tassapat Sripetcharakool will be your assigned mortgage loan originator and Trish Mangiaracina will be your mortgage loan coordinator and processor. We will try to have this close in a few weeks, less than 30 days. Everybody is on alert. Have a great evening and we will be talking. I am available all weekend so please feel free to contact me if you have any questions.

            Kind regards,

            Gustan Cho

  2. Cheryl says

    I will be making my final Chapter 13 payment during the next 30 days. I know that FHA says a new loan can be obtained after 1 year of timely Chapter 13 payments and court approval which I assume is for a refinance. I cannot, however, find anything on the waiting period for a purchase after a Chapter 13.

    All Chapter 13 payments were made on time and I paid my mortgage on time outside of the BK for the past 3 years. Can I obtain a new purchase FHA loan one day after receiving my discharge?

    1. Gustan Cho says

      Good afternoon Cheryl,

      Here are the rules to qualify for a FHA Loan with a Chapter 13 Bankruptcy which I will cover and answer your question:
      A home buyer can qualify for a 3.5% down payment home purchase FHA Loan with a minimum credit score of 580 FICO one year into the Chapter 13 Bankruptcy as long as they have been timely with all of their payments to their creditors and the approval of the trustee of their Chapter 13 Bankruptcy. In your case, your Chapter 13 Bankruptcy is almost over so in 30 days you will not be needing your Bankruptcy Trustee’s approval. You can qualify for a 3.5% down payment FHA Loan as long as you have been timely with all of your payments and have a 580 FICO minimum credit score. It will most likely be a manual underwrite and you should have no problem. One thing with manual underwriting is that the underwriter may ask you for verification of rent.
      The answer to your question is YES, you will definitely qualify for a FHA Loan one day after your Chapter 13 discharge date without no problem. Many lenders may have mortgage lender overlays where you may have to wait two years but I can help you no problem . If you have any questions please feel free to post them here or you can always call me at 262-716-8151 or email me at GLCProperties@aol.com. Best of luck to you 🙂

      Gustan Cho NMLS 873293
      http://www.gustancho.com
      262-716-8151

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