Waiting Period After Bankruptcy And Foreclosure Start Date On Mortgages
This BLOG On Waiting Period After Bankruptcy And Foreclosure Start Date On Mortgages Was UPDATED And PUBLISHED On June 6th, 2020
Waiting Period After Bankruptcy And Foreclosure Start Date:
The waiting period after bankruptcy and foreclosure start date depends on the type of bankruptcy and the type of foreclosure and the type of mortgage loan program. There are two types of bankruptcies.
The first is Chapter 7 Bankruptcy which is also known as total liquidation:
- Chapter 7 Bankruptcy is normally for consumers who have little to no assets and with little to no income where the bankruptcy courts will normally discharge most debts except for certain debts such as income taxes, government back debts such as student loans, and child support payments
- A Chapter 7 Bankruptcy enables consumers to wipe out most or all of their debts and have a fresh financial start in life
The second type of bankruptcy is a Chapter 13 Bankruptcy:
- To qualify for Chapter 13 Bankruptcy, the consumer needs to be employed
- This is because Chapter 13 Bankruptcy is a debt restructuring plan based on the consumer’s gross income
- A portion of the consumer’s gross income is allocated to pay the restructured debts of creditors
- This is normally done between three to five years
- Creditors will get a portion or percentage of borrowers paycheck monthly
- When the repayment period, which is set by the Chapter 13 Bankruptcy Trustee, is over, the remaining balance of the creditor’s debts gets discharged
Consumers will then be debt-free and have a new financial start in life.
Waiting Period After Bankruptcy And Foreclosure Start Date After Bankruptcies
There is a mandatory waiting of two years from the discharged date of a Chapter 7 Bankruptcy to qualify for an FHA Loan.
- Lenders will not go by the filing date but rather the waiting period starts the date of Chapter 7 and/or Chapter 13 Bankruptcy
- The Federal Housing Administration has a mandatory one-year waiting period to qualify for an FHA Loan after Chapter 13 Bankruptcy to qualify for FHA Loans
- In order to qualify for FHA Loans during the repayment period of a Chapter 13 Bankruptcy, borrowers need to show 12 months consecutive on-time payment history to creditors
- Cannot have a single late payment
- Borrowers also need the approval of the Chapter 13 Bankruptcy trustee
- All Chapter 13 Bankruptcy mortgage loan applications are all manual underwriting
Verification Of Rent is required on all manual underwrites.
Mortgage Guidelines On Verification Of Rent
The only way verification of rent is valid is if renters can provide 12 months of canceled checks and/or bank statements showing that they have made timely payments in the past 12 months to their landlord:
- Renters renting from a property management company, a verification of rent form provided by the lender and completed and signed by the property manager can be used in lieu of 12 months canceled checks and/or bank statements
- If the Chapter 13 Bankruptcy was discharged, then there is no waiting period after the Chapter 13 Bankruptcy discharged date
- Borrowers can qualify for an FHA Loan the date the Chapter 13 Bankruptcy is discharged
- However, this will be a manual underwriting file
- This is because the Automated Underwriting System will not render an approve/eligible per Automated Underwriting System right after a Chapter 13 Bankruptcy discharge
- Manual Underwriting submissions require verification of rent
The U.S. Department of Veterans Affairs (VA) has exactly the same mortgage guidelines as FHA Loans when it comes to qualifying for VA Home Loans during Chapter 13 Bankruptcy Repayment Plan and there is no waiting period after the discharged date of Chapter 13.
Fannie Mae And Freddie Mac Guidelines On Conventional Loans
Fannie Mae and Freddie Mac require a mandatory waiting period of 4 years after a Chapter 7 Bankruptcy Discharge.
- The waiting period start date begins the date of the Chapter 7 Bankruptcy discharged date and not the Chapter 7 Bankruptcy filing date
- Fannie Mae and Freddie Mac require a two-year waiting period to qualify for a Conventional Loan after a Chapter 13 Bankruptcy discharged date
- The waiting period start date begins from the actual discharged date of the Chapter 13 Bankruptcy
There is a four-year waiting period to qualify for Conforming Loans after Chapter 13 Bankruptcy dismissal date.
Waiting Period After Bankruptcy And Foreclosure Start Date Guidelines
HUD requires a mandatory waiting period of three years from the recorded date of a foreclosure and/or deed in lieu of foreclosure to qualify for FHA Loans:
- The waiting period start date is not the day keys were turned in but the actual date of the sheriff’s sale or the date that the deed was transferred out of homeowners name into the name of the lender and recorded on public records
- HUD requires a mandatory three-year waiting period to qualify for an FHA Loan after a short sale
- The short sale waiting period start date is the date that the property was sold and changed hands that is reflected on the HUD-1 Settlement Statement
VA requires a two-year waiting period after Chapter 7 Bankruptcy, short sale, foreclosure, deed in lieu of foreclosure to qualify for VA Home Loans.
Fannie Mae And Freddie Mac Guidelines On DIL And Short Sale
Fannie Mae And Freddie Mac require a mandatory four-year waiting period to qualify for a conventional loan after a deed in lieu of foreclosure and/or short sale.
- The waiting period after a deed in lieu of foreclosure start date is the date that the deed was transferred out of the name of the homeowner into the lender’s name
- Not the date the keys were surrendered to the lender
- With a short sale, the waiting period after short sale start date is four-year after the date the property was sold which is reflected on the HUD-1 Settlement Statement
Fannie Mae And Freddie Mac have a mandatory waiting period of seven years after a foreclosure to qualify for a conventional loan.
- The waiting period after foreclosure start date is seven years from the date of the sheriff’s sale or the recorded date of the foreclosure
- It is not the date where the homeowner moved out of the home and/or surrendered the property
Mortgage Part Of Bankruptcy
Homeowners with a prior mortgage or mortgages part of Chapter 7 Bankruptcy, then there is a four-year waiting period to qualify for a conventional loan from the date of the Chapter 7 Bankruptcy discharged date.
- As long as the mortgage and/or mortgages were part of the Chapter 7 Bankruptcy, the foreclosure can be recorded after the Chapter 7 Bankruptcy discharged date and will not affect the waiting period
- Mortgage cannot be reaffirmed after Chapter 7 Bankruptcy
- Housing event needs to be finalized as a foreclosure, deed in lieu, short sale
- This mortgage guidelines apply to VA Home Loans as well
HUD has different requirements with the mortgage part of bankruptcy in qualifying for FHA Loans. If you had a mortgage and/or mortgages part of bankruptcy, then the waiting period to qualify for FHA Loan is three years after the recorded date of the foreclosure and/or foreclosures. The discharge date of Chapter 7 Bankruptcy is not the start date of the waiting period. The waiting period start date depends on when the deed was transferred out of the homeowner’s name to the lender’s name or the date of the sheriff’s sale.
Gustan Cho Associates are also experts in originating and funding non-QM loans. Non-QM mortgages have no waiting period after housing events and/or bankruptcy. 10% to 20% down payment is required. There is no private mortgage insurance required on non-QM loans. The amount of down payment and mortgage rates are dependent on borrowers’ credit scores.