Waiting Period After Mortgage Part Of Bankruptcy Guidelines

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Waiting Period After Mortgage Part Of Bankruptcy Guidelines

This BLOG On Waiting Period After Mortgage Part Of Bankruptcy Guidelines Was UPDATED On October 13th, 2018

When Is The Waiting Period After Mortgage Part Of Bankruptcy

A large percentage of our borrowers are folks with prior bankruptcy, foreclosure, short sale, or deed in lieu of foreclosure.

  • Borrowers can qualify for a home loan after a bankruptcy and foreclosure
  • This holds true as long as they meet the minimum waiting period after bankruptcy and/or foreclosure requirements
  • On this blog, we will discuss the mandatory waiting period after a bankruptcy and foreclosure on FHA Loans and Conventional Loans
  • We will be discussing FHA and Conventional since these two mortgage loan programs are the most popular home loans today
  • There are many instances where people will include their mortgage as part of their Chapter 7 Bankruptcy
  • Many folks often get confused on the waiting period after mortgage part of bankruptcy
  • Waiting periods normally start from the recorded date of the foreclosure and/or deed in lieu of foreclosure
  • Waiting period does not the day the homeowner surrendered their keys to their lender or vacated the property that the mortgage was part of their Chapter 7 Bankruptcy

Start Date On Waiting Period After Mortgage Part Of Bankruptcy

The waiting period to qualify for conventional loans after bankruptcy starts from the discharged date of the Chapter 7 Bankruptcy and not the filing date.

  • The waiting period after short sale starts from the date of the short sale date that is reflected on the HUD Settlement Statement
  • There are new changes on the Waiting Period After Mortgage Part Of Bankruptcy that was implemented and launched by Fannie Mae and Freddie Mac
  • Fannie Mae and Freddie Mac are the two mortgage giants in the United States that sets mortgage lending guidelines for Conventional Loans

Fannie Mae Guidelines On Waiting Period After Mortgage Part Of Bankruptcy

These new changes on the Waiting Period After Mortgage Part Of Bankruptcy on Conventional Loans will help thousands of home buyers:

  • New FNMA Guidelines will help folks who had a mortgage as part of their Chapter 7 Bankruptcy where the foreclosure was not recorded at a much later date to qualify for Conventional Loans
  • Under the new Fannie Mae Guidelines on the Waiting Period After Mortgage Part Of Bankruptcy, there is a four year waiting period to qualify for a Conventional Loan from the discharged date of the Chapter 7 Bankruptcy discharged date
  • Not the recorded date of the foreclosure
  • This holds true even though the foreclosure and/or sheriff’s sale happened at a much later date

Waiting Period After Mortgage Part Of Bankruptcy On FHA Loans

There is a two year mandatory waiting period after Chapter 7 Bankruptcy discharged date to qualify for a FHA Loan.

  • There is no waiting period to qualify for a FHA Loan after Chapter 13 Bankruptcy
  • However, if the Chapter 13 Bankruptcy discharge has been seasoned for less than 2 years, it needs to be a manual underwriting
  • Home buyers can qualify for FHA Loans one year into a Chapter 13 Repayment Plan with Trustee Approval
  • Needs to be manual underwriting

Waiting Period After Housing Event To Qualify For Mortgage

There is a three year mandatory waiting period to qualify for a FHA Loan after the recorded date of a foreclosure and/or deed in lieu of foreclosure.

  • There is a three year mandatory waiting period to qualify for a FHA Loan after the date of a short sale
  • There is no mandatory waiting period to qualify for a FHA Loan after a short sale
  • This holds true if and only if the homeowner was not late on his or her mortgage payments up to the date of the short sale
  • If you had a mortgage included in Chapter 7 Bankruptcy discharge, there is a three year waiting period from the recorded date of foreclosure and/or sheriff’s sale after Bankruptcy discharged date

Importance Of Deed Transfer After Housing Event

Many lenders are not in a major hurry to transfer the deed of the property out of the homeowners name into their name:

  • This is on cases where a homeowner has mortgages as part of their Chapter 7 Bankruptcy
  • Many times, it may take some time to get the homeowners name out of the deed
  • Until the deed to the property has been transferred out of the homeowners name into the name of lender or the property was sold, the 3 year waiting period clock did not start yet
  • There are cases where people cannot qualify to buy a home with a FHA Loan
  • This is because the waiting period clock did not even start ticking because the deed is still in their names
  • If you have a mortgage as part of your Chapter 7 Bankruptcy, make sure to do everything in power to get the deed out of your name into lenders name so the three year waiting period clock has started

Waiting Period After Mortgage Part Of Bankruptcy On Conventional Loans

Great news for Conventional Loan borrowers.

  • There is a four year mandatory waiting period to qualify for a Conventional Loan after a Chapter 7 Bankruptcy discharged date
  • There is a two year mandatory waiting period to qualify for a Conventional Loan after a Chapter 13 Bankruptcy discharged date
  • There is a four year waiting period after Chapter 13 dismissal date
  • There is a four year mandatory waiting period to qualify for a Conventional Loan after a deed in lieu of foreclosure
  • But the waiting period clock does not begin until the deed has been transferred out of the homeowners name into the name of lender
  • Or the date of the sheriff’s sale, or the date the property was sold
  • The waiting period does not start the day that the homeowner has surrendered the property to the lender or turned in the keys to the foreclosure to the lender
  • There is a four year mandatory waiting period to qualify for a Conventional Loan after a short sale
  • The four year waiting period clock does not start until the date of the short sale date which is reflected on the HUD Settlement Statement
  • There is a seven year mandatory waiting period to qualify for a Conventional Loan after a foreclosure
  • The seven year waiting period does not start until the actual recorded date of the foreclosure that is reflected on the county’s recorder of deeds office
  • Or the date of the sheriff’s sale, or the date the property was sold
  • The date where the homeowner turned in his keys and surrendered the property is not the start of the waiting period

Cases Where Borrowers Can Qualify For Conforming Loans But Not FHA Mortgages

Borrowers with mortgage included in Chapter 7 Bankruptcy can qualify for a Conventional Loan four years from the discharged date of Chapter 7 Bankruptcy:

  • This holds true even though foreclosure and/or housing event was not recorded and transferred out of your name until a later date after Chapter 7 Bankruptcy discharged date
  • This is great news and opens up doors to many home buyers who had a mortgage or mortgages as part of their Chapter 7 Bankruptcy
  • The foreclosure needs to have been completed and out of the homeowners name
  • The waiting period after the foreclosure and/or housing event does not matter
  • Fannie Mae will just go off the four year waiting period from the date of the Chapter 7 Bankruptcy discharged date

This is totally different than HUD’s FHA Guidelines on the waiting period to qualify for a FHA Loan if borrowers had a mortgage included in Chapter 7 Bankruptcy. If borrowers had a mortgage included in Chapter 7 Bankruptcy, all they need to do is wait four years from the discharged date of Chapter 7 Bankruptcy to qualify for a Conventional Loan.

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