Waiting Period Mortgage Guidelines After Housing Event And Bankruptcy

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Waiting Period Mortgage Guidelines After Housing Event And Bankruptcy

This BLOG On Waiting Period Mortgage Guidelines After Housing Event And Bankruptcy Was UPDATED On May 15th, 2018

Home buyers who had a prior bankruptcy, foreclosure, deed in lieu of foreclosure, or short sale have mandatory waiting period in order to qualify for a mortgage.

  • For FHA, VA, USDA loan programs, there is a waiting period of 2 years after Chapter 7 bankruptcy
  • Waiting period time clock starts from the discharge date of Chapter 7 bankruptcy
  • There is a three year waiting period after the recorded date of a foreclosure or deed in lieu of foreclosure to qualify for FHA and USDA Loans
  • There is a three year waiting period to qualify after a short sale for a FHA and USDA loans after the short sale date which is reflected on the settlement statement
  • The U.S. Department Of Veteran Affairs (VA) has a two year waiting period after Chapter 7 Bankruptcy, short sale, deed in lieu, and foreclosure to qualify for VA Home Loans

Conforming Waiting Period Mortgage Guidelines

For conventional loans, there is a four year waiting period after Chapter 7 bankruptcy, deed in lieu of foreclosure, and short sale to qualify for a conventional loan. Minimum down payment required is 5% on home purchases. Fannie Mae and Freddie Mac has 3% down payment conforming loan programs for first time home buyers. First time home buyers are defined as a home buyer who had no ownership on a home for past three years.

  • There is a 7 year waiting period after standard foreclosure to qualify for conventional loans
  • However, if borrowers had mortgage included in Chapter 7 bankruptcy here are the Waiting Period Mortgage Guidelines:
    • if deed to the property did not transfer out of homeowners name until after discharged date
    • conforming waiting period mortgage guidelines state that the four year waiting period starts from the discharged date of Chapter 7 Bankruptcy
    • housing event needs to have been finalized as foreclosure, deed in lieu of foreclosure, short sale
    • the date of housing event does not matter and only the discharged date of Chapter 7 is what counts
    • mortgage included in Chapter 7 Bankruptcy cannot have been reaffirmed
  • This is a brand new Fannie Mae Guideline just launched on August 15th, 2014

Alternatives To Home Purchase Waiting Period Mortgage Guidelines

Consumers who recently have gone through a bankruptcy, foreclosure, deed in lieu of foreclosure, or short sale and are ready to purchase a home and do not want to wait until waiting period is over there are options.

  • Gustan Cho Associates Mortgage Group offers non-qm loans
  • There is no waiting period mortgage guidelines after housing event and/or bankruptcy
  • 10% to 20% down payment is required on home purchase
  • The amount of down payment on home purchase required depends on borrowers credit scores
  • There is no private mortgage insurance required on non-qm loans
  • There are no loan limits on non-qm loans

Waiting Period Mortgage Guidelines On Chapter 13 Bankruptcy

Home Buyers who are in a current Chapter 13 Bankruptcy Repayment Plan can qualify for FHA and VA Home Loans one year into their repayment plan.

  • Trustee approval is required
  • Most Chapter 13 Bankruptcy Trustees will sign off on a home purchase during Chapter 13 Bankruptcy Repayment Periods
  • There is no waiting period to qualify for FHA and VA Loans after Chapter 13 Bankruptcy discharged date
  • Most lenders will require a two year period after Chapter 13 Bankruptcy discharge date
  • However, there is no waiting period requirement after discharged date after Chapter 13 Bankruptcy
  • Lenders requiring waiting period after Chapter 13 is because they have their own lending requirements called mortgage guidelines

There is a two year waiting period to qualify for conventional loans after Chapter 13 Bankruptcy discharged date. There is a four year waiting period to qualify for Conforming Loans after Chapter 13 Bankruptcy dismissal date.

Owner Financing On Home Purchase

There are other alternatives home buyer can purchase and/or refinance home after after bankruptcy, foreclosure, deed in lieu of foreclosure, or short sale without meeting the waiting period mortgage guidelines:

  • The first and most favorable option is to get owner financing, or seller financing
  • This is where the home sellers act as the lender
  • Owner financing is when buyers give the home seller a down payment
  • Monthly housing payment is made to the home seller
  • Seller financing is short term bridge loans until they are able to get regular traditional financing
  • After meeting the traditional waiting period mortgage guidelines, homeowners would refinance the home with a government and/or traditional home loan
  • Waiting period after bankruptcy and foreclosure does not prohibit buyers from owning a property
  • Waiting period mortgage guidelines just prohibits buyers from qualifying for government and/or conforming loans until the waiting period requirements are met
  • Owner financing also offers benefits for the home seller
  • This is because if they have a home that is not selling and has been listed in the market for quite some time, they get to unload the property
  • Also make positive cash flow from the monthly payments
  • A home seller does not need to have the property free and clear to sell their home via owner financing
  • Make sure both parties have attorneys representing them so both parties are protected

Married Home Buyers With Only Once Spouse With Housing Event Or Bankruptcy

Another option is if spouse was on title but not on the note of the mortgage loan, home buyers can purchase a new home. Have the mortgage under spouse’s name. As long as they qualify with debt to income ratios both husband and wife does not need to be on the mortgage.  Married folks do not necessarily always have both folks file bankruptcy and/or have a housing event. As long as the other spouse was not on title, and had a bankruptcy, foreclosure, deed in lieu of foreclosure, or short sale, that spouse can be on the mortgage loan as the other spouse can go on title.

  • Same with bankruptcy
  • If one spouse had a bankruptcy and the other spouse did not, spouse is not under the waiting period mortgage guidelines requirement
  • If spouse does not have income, spouse can have a non-occupant co-borrower
  • Non-occupant co-borrowers can be added on FHA Loans
  • The non-occupant co-borrower will go on the mortgage note but not on title

Straw Buyers

Home buyers with relative who is willing to do the home purchase for them as an investment property can be an option.  Straw Buyers is illegal but there are ways of making it legal if a family member is willing to purchase property as an investment property. Do not lie on mortgage loan application.

  • It is illegal for a non-occupant home buyer to state they will be an owner occupant for purposes of buying a home for another person
  • Stating they will be an owner occupant occupying the property as their main residence is totally illegal if they have no intention to
  • It is considered a straw buyer
  • Straw buyer home purchase strategies is considered mortgage fraud
  • It is classified as felony where it is punishable up to 30 years in federal prison
  • However, a relative or family member can purchase the property as an investment property
  • Resident can go on title and make the mortgage payments
  • After waiting period has passed, you can qualify for a refinance mortgage loan
  • Refinance family member and/or relative off

Non-QM Portfolio Loans

Portfolio loans are loan programs where the mortgage lender will hold the mortgage note and not re-sell it to Fannie Mae and/or Freddie Mac.

  • Portfolio lenders are banks, credit unions, and mortgage companies that offer adjustable rate mortgages
  • Mortgage is amortized over 30 years
  • Do not need to follow HUD or Conventional waiting period mortgage guidelines

Gustan Cho Associates Mortgage Group offers non-qm loans for home buyers who cannot meet the waiting period mortgage guidelines after housing event and/or bankruptcy. There is no waiting period to qualify for non-qm mortgages after housing event and/or bankruptcy. 10% to 20% down payment is required to qualify for non-qm loans. Down payment requirements depends on borrowers credit scores. No maximum loan limit. There is no private mortgage insurance requirements. Contact us at 262-716-8151 or text us for faster response.

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