Waiting Period After Foreclosure To Qualify For Mortgage

This BLOG On Waiting Period After Foreclosure To Qualify For Mortgage

For those who are planning on buying a new home and qualifying for a new residential mortgage loan but have a prior foreclosure, deed in lieu of foreclosure, short sale, and/or bankruptcy, there are mandatory Waiting Period After Foreclosure To Qualify For Mortgage.

  • Waiting Period After Foreclosure To Qualify For Mortgage depends on the mortgage loan program.
  • There are loan programs that have no Waiting Period After Foreclosure To Qualify For Mortgage.
  • The no Waiting Period After Foreclosure To Qualify For Mortgage is called NON-QM Loans.
  • The Gustan Cho Team at USA Mortgage offers NON-QM Loans where there is no Waiting Period After Foreclosure To Qualify For Mortgage.

Waiting Period After Foreclosure & Chapter 7 Bankruptcy To Qualify For Mortgage On Government Loans

Government Loans are home loans that are guaranteed by the federal government. There are three different types of government loans:

  1. FHA Loans
  2. VA Loans
  3. USDA Loans

Here are the Waiting Period After Foreclosure To Qualify For Mortgage on government loans

There are mandatory Waiting Period After Foreclosure and Bankruptcy on all loan programs besides NON-QM Loans.

  • After a Chapter 7 Bankruptcy discharged date, the waiting period is two years from the date of the discharge date of the Chapter 7 bankruptcy with FHA, VA, and USDA Loans.
  • For short sales, the waiting period clock starts the date of the HUD settlement statement. 
  • For foreclosures and deed in lieu of foreclosures, the waiting period starts from the actual date of the sheriff’s sale or the date the deed of the home was transferred out of the homeowners name into the name of the bank or mortgage lender and recorded in the county recorders office. 
  • This is so important. 
  • For deed in lieu of foreclosure, it is not the date you signed the deed in lieu of foreclosure papers and turned the keys in to the mortgage lender. 
  • That date is irrelevant. 
  • The actual date the deed was recorded in the county registry is when the waiting period clock starts ticking.
  • The waiting period is 3 years from the recorded date of foreclosure and/or deed in lieu of foreclosure to qualify for FHA and USDA Loans. 
  • The Department of Veteran Affairs (VA Loans) requires a two year waiting period after the recorded date of foreclosure/deed in lieu of foreclosure and/or short sale to qualify for VA Loans.

Mortgage Part Of Chapter 7 Bankruptcy

Many homeowners have included their mortgage loans as part of their Chapter 7 bankruptcy petition and their mortgage  was part of their Chapter 7 bankruptcy.

  • When a homeowner has a mortgage and/or mortgages as part of Chapter 7 bankruptcy, the note will get discharged and they no longer owe the mortgage.
  • Petitioners of Chapter 7 Bankruptcy will no longer owe their note as well as any deficiencies.
  • However, they need to make sure that the deed of the home is transferred out of their name and into the mortgage lender’s name. 
  • I still get countless of calls from potential mortgage loan borrowers who have waited the necessary waiting period requirement but the deed of their home that was part in their Chapter bankruptcy.
  • But the deed has yet not been transferred out of their name and is still in the mortgage lender’s name. 
  • For these folks, the waiting period has not even started yet.
  • They need to get their name out and into the mortgage lender’s name asap and have it recorded in the county recorders office as soon as possible.

Waiting Period After Foreclosure To Qualify For Mortgage Analysis

When homeowners include their mortgage as part of Chapter 7 bankruptcy, the waiting period after the discharge date of a bankruptcy is two years and it is three years from the recorded date of the foreclosure to qualify for FHA, VA, USDA Loans.

  • The three year waiting period after foreclosure will apply since it is longer than the two year Chapter 7 bankruptcy date. 
  • Many mortgage lenders are in no hurry to have the deed transferred into their names .
  • They are very aware that by not transferring the deed of the home out of the homeowners name and recording it hurts the homeowner and affects their waiting period. 
  • Maybe it might be a way of getting back to the foreclosed homeowner or just being mean.
  • But most lenders are aware that not recording the transfer affects the waiting period after foreclosure to the foreclosed homeowner and will take their time transferring the deed.

Keep On Top Of Having Deed Transferred

Homeowners who had a prior foreclosure or a deed in lieu of foreclosure, make sure that the deed has been transferred out of their name into your mortgage lender’s name.

  • Make sure the deed has been fully recorded because the waiting period after foreclosure will not start until this task has been fully executed.
  • Also, never assume that the deed is transferred out of their name if a mortgage was part of Chapter 7 bankruptcy. 
  • Remember that the waiting period after foreclosure does not begin until the deed is out of the homeowners name even if the foreclosure was part of bankruptcy. 
  • Many bankruptcy attorneys did not follow up with their bankruptcy clients on having the deed out of their names and transferred into the mortgage lender’s name. 
  • Contact the mortgage lender and plead with them to get it transferred asap and follow up with it.

What If Lender Does Not Transfer Deed Out Of Your Name?

There are cases where a person’s filed bankruptcy and their mortgage was part of their bankruptcy. But the mortgage lender will not cooperate in getting the deed transferred and recorded to their name.

  • I have seen cases where it was many years after the fact and the deed is still not transferred and recorded.
  • If a bankruptcy petitioner included mortgage part of bankruptcy, the mortgage note and deficiencies are totally wiped out.
  • The petitioner technically owns the home free and clear. 
  • In a way, it is stupid for the mortgage lender not to transfer the deed into their name. 
  • If the mortgage lender does not cooperate, mail them a certified letter stating the fact that they have 48 hours from the receipt of their certified letter with the intent on selling the home and keeping the proceeds if they do not transfer and record the deed into their name. 
  • This will shake them up and I am confident that the bank or mortgage lender will get their lazy butts in gear and have the deed transferred and recorded into their names asap. 
  • Technically, homeowners have the deed to their home but no mortgage so they can sell the property and transfer and record the deed to the home out of their name to the name of the new buyer.
  • This tactic will not get finalized because the lender still has a lien on the property.

Waiting Period With Mortgage Part Of Chapter 7 Bankruptcy Qualify For Mortgage On Conventional Loans

Conventional Loans have different guidelines on Waiting Period Requirements if one has mortgage/mortgages part of their Chapter 7 Bankruptcy.

  • The waiting period is four years from the discharged date of the Chapter 7 Bankruptcy.
  • The borrower cannot reaffirm the mortgage after the Chapter 7 Bankruptcy. The foreclosure/deed in lieu/short sale needs to be finalized.
  • However, there is no waiting period requirements after the foreclosure, deed in lieu of foreclosure, or short sale.
  • The waiting period clock starts from the discharged date of the Chapter 7 Bankruptcy discharged date.
  • The foreclosure/deed in lieu/short sale can be recorded several years later and has no impact with the waiting period.

Due to this special Fannie Mae/Freddie Mac guidelines on Waiting Period with Mortgage/Mortgages Part of Chapter 7 Bankruptcy, there are many times where a mortgage borrower may qualify for a conventional loan but not government loans.

Late Payments After Foreclosure And Bankruptcy

Over 75% of our borrowers at The Gustan Cho Team at USA Mortgage are folks who either got a last minute mortgage loan denial or are stressing over their mortgage process with their current lender. The number one reason why borrowers get last minute mortgage loan denials or stress during the mortgage process is because they were not properly qualified by their loan officers. There is no reason why borrowers should get a loan denial or stress over the mortgage loan process. The pre-approval stage of the mortgage process is the most important phase. It is better to wait and get properly pre-approved then get a rushed pre-approval letter.

  • Most mortgage lenders will automatically disqualify borrowers who had late payments after bankruptcy and/or foreclosure/deed in lieu of foreclosure/short sale.
  • They consider anyone who had late payments after a bankruptcy and/or significant housing event (foreclosure/deed in lieu/short sale) as a second offender.
  • However, late payments after bankruptcy and/or foreclosure is does NOT disqualify a borrower from qualifying for government or conventional loans.
  • Late Payments After Bankruptcy and/or Foreclosure is allowed per mortgage lending guidelines but it may be overlays on the particular lender.
  • Lender Overlays are mortgage guidelines that are above and beyond those of FHA, VA, USDA, Fannie Mae, or Freddie Mac.
  • The Gustan Cho Team at USA Mortgage are direct lenders licensed in multiple states with no lender overlays on government and conventional loans.
  • We just go off the automated findings of the Automated Underwriting System.

Main Reason Of Mortgage Process Blowup

This section is geared for loan officers. All Loan Officers should not just review the income and credit scores but thoroughly go through borrowers credit reports.

  • I have seen countless of times where loan officers just assume a borrower qualifies for mortgage and issue pre-approvals because the borrower gets an Approve/Eligible per Automated Underwriting System.
  • BIG MISTAKE.
  • Loan Officers need to thoroughly review borrowers credit report and look for any credit disputes.
  • The Automated Underwriting System does not pick up credit disputes.
  • Credit Disputes on non-medical collections, charge off accounts, and late payments are not allowed and the file will get SUSPENDED during the mortgage process.
  • Reason Credit Disputes During Mortgage Process is not allowed is because the three credit reporting agencies AUTOMATICALLY negate the derogatory tradelines in credit disputes.
  • For example, if a borrower disputes a recent collection account on their credit bureaus, the disputed recent collection account will automatically be disregarded by the credit bureaus.
  • Since the derogatory item is disregarded by the credit bureaus, the consumer credit scores will go up.
  • The derogatory item will remain but the verbiage that consumer disputes will sky rocket the borrowers credit scores because credit bureaus automatically take out the negative factor from the consumer credit scoring model during the dispute process.
  • Retracting that credit dispute can plummet the borrowers credit scores where they no longer qualify.

Loan Officers should not issue pre-qualifications and/or pre-approvals when borrowers have pending credit disputes. If Loan Officers needs to get a few extra points on borrowers credit scores can do so by disputing recent medical collections and/or zero balance non-medical collections. This practice does work but how long is the key questions. Credit Bureaus normally catch up when loan officers try creative ideas to boost client’s credit scores.

Click This Link On Instructions On How To Retract Credit Disputes To Qualify For Mortgage

Exempt From Credit Disputes

There are special instances where credit disputes are allowed.

Here are the exemptions:

  • Medical Credit Disputes are okay and exempt from credit dispute guidelines on all loan programs
  • Non-Medical credit disputes with zero balances are exempt from credit disputes
  • If a mortgage borrowers has credit disputes on non-medical collections and the total outstanding balance of all of his or her collections are under $1,000 balances, then it is exempt and they do not have to retract those disputes.

In the event if loan officers know that the borrowers credit scores will plummet by retracting credit disputes, then do not have borrowers retract them and downgrade the file to a manual underwrite.

Qualifying With Mortgage Lender With No Overlays

As long as the borrower can get an approve/eligible per Automated Underwriting System Findings and the borrower can meet all conditions of the AUS, The Gustan Cho Team at USA Mortgage can do the loan.

Mortgage Borrowers who are interested in getting qualified with a direct lender with no lender overlays on FHA, VA, USDA, Fannie Mae, Freddie Mac home loans, please contact us at 1-800-900-8569 or text us at 262-716-8151 for faster response. We are available 7 days a week, evenings, weekends, and holidays via phone or email us at gcho@usa-mortgage.com.

Gustan Cho NMLS ID # 873293

The information contained on Gustan Cho Associates website is for informational purposes only and is not an advertisement for products offered by The Gustan Cho Team @ Gustan Cho Associates or its affiliates. The views and opinions expressed herein are those of the author and/or guest writers of Gustan Cho Associates Mortgage & Real Estate Information Resource Center website and do not reflect the policy of Gustan Cho Associates Lenders Network, its officers, subsidiaries, parent, or affiliates.

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