Waiting Period Bankruptcy or Foreclosure Guidelines

Waiting Period Bankruptcy or Foreclosure Guidelines

Gustan Cho Associates are mortgage brokers licensed in 48 states

This guide covers the waiting period bankruptcy or foreclosure guidelines on government and conventional loans. There are mandatory waiting periods for bankruptcy or foreclosure to qualify for government and conventional loans. Suppose someone had a prior bankruptcy, foreclosure, deed-in-lieu of foreclosure, or short sale. In that case, federal mortgage lending guidelines require a mandatory waiting period before a mortgage loan borrower can qualify for either government or conventional loans. John Strange, a senior loan officer at Gustan Cho Associates, explains the waiting period bankruptcy or foreclosure guidelines on government-back and conforming mortgages:

Qualifying for a mortgage loan and getting approval for a mortgage loan are different. Someone can qualify for a mortgage loan after passing the mandatory waiting period. Just waiting out the waiting period will not guarantee a mortgage loan approval.

Mortgage lenders want re-established credit during the waiting period—no late payments after a prior bankruptcy, foreclosure, deed-in-lieu of foreclosure, or short sale. Mortgage lenders do not want to see any overdrafts in the prior 12 months. At least three credit tradelines have been seasoned for at least one year.  Rental verification is an important compensating factor. Manual Underwriting requires verification of rent.

Importance of Verification of Rent on Manual Underwriting

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Verification Of Rent is mandatory on manual underwritings, such as in VA and FHA loan cases where the discharge date has not been seasoned two years from the Chapter 13 Bankruptcy discharge date. Or VA and FHA loans where borrowers must qualify one year into a Chapter 13 Bankruptcy Repayment Plan. These are manual underwrites. The only way to use rental verification is by providing the mortgage lender with 12 months of canceled checks or bank statements. If the renter is renting from a property management company, a VOR form completed and signed by the property management company is sufficient. Cash rent payments with receipts from the landlord do not count toward rental verification.

Waiting Period Bankruptcy or Foreclosure Guidelines on FHA Loans

In this section, we will cover the waiting period requirements after bankruptcy. There is a two-year mandatory waiting period from the discharge date of the bankruptcy to qualify for FHA and VA loans. Homebuyers can qualify for FHA and VA loans one year into their Chapter 13 Bankruptcy repayment plan. There is no waiting period to qualify for FHA and VA loans after the Chapter 13 Bankruptcy dismissal date. Four-year waiting period to qualify for conventional loans. Two-year waiting period to qualify for conforming loans after the Chapter 13 Bankruptcy discharge date. Four-year waiting period to qualify for conventional loans after the Chapter 13 Bankruptcy dismissal date.

What Is The Waiting Period Requirements After Foreclosure

This section will cover the waiting period requirements after a foreclosure. There is a three-year mandatory waiting period from the recorded date of the foreclosure, a deed-in-lieu of foreclosure,  or the date of the sheriff’s sale to qualify for FHA and USDA loans. There is a  two-year waiting period to qualify for VA loans after foreclosure, a deed-in-lieu of foreclosure, or a short sale. A seven-year waiting period exists to qualify for conforming loans (Conventional Loans).

Waiting Period After Foreclosure, and Deed-in-Lieu of Foreclosure on Government Versus Conforming Loans

As mentioned, a waiting period after a deed-in-lieu of foreclosure, short sale, or standard foreclosure on conventional loans differs from government-backed loans. There is a three-year mandatory waiting period from the recorded date of the deed-in-lieu of foreclosure to qualify for FHA and USDA loans. There is a four-year waiting period to qualify for Conventional loans after the deed-in-lieu of foreclosure.

Waiting Period After a Short Sale

There is a three-year mandatory waiting period from the short sale date to qualify for FHA and USDA loans. After a short sale, there is a two-year waiting period to qualify for VA loans. After a short sale, there is a four-year waiting period to qualify for conventional loans. HUD’s settlement statement date is when the waiting period starts.

Limited To No Waiting Period Bankruptcy or Foreclosure Guidelines

Gustan Cho Associates is a national lender with no overlays on government and conventional loans. We are correspondent lenders on non-qm loans, bank statement loans for self-employed borrowers, and alternative financing. Non-QM Loans are portfolio home loan programs where there is no waiting period after the following:

  • Foreclosure
  • Deed-in-lieu of Foreclosure
  • Short Sale

No Waiting Period Bankruptcy or Foreclosure Guidelines on Non-QM Loans

There is no waiting period after the Chapter 7 Bankruptcy discharge date.  A 10% to 20% down payment is required, and mortgage rates are slightly higher than traditional government and conventional loans. Many home buyers can use our non-qm loan programs until they have met the mandatory waiting period requirements after bankruptcy and foreclosure. Our 12 and 24-month bank statement mortgage loan program for self-employed borrowers enables self-employed home buyers to qualify for mortgage loans without turning in their tax returns. One or two years of bank statement deposits are averaged, and the monthly average over 12 or 24 months of bank statements is used as monthly income. It can be business or personal bank statements. 50% of the deposits are used on business bank statements. 100% of the deposits are used with personal bank statements.

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