Waiting Period Requirements After Bankruptcy And Foreclosure

Waiting Period Requirements After Bankruptcy And Foreclosure To Qualify For Mortgage

There are mandatory waiting period requirements after bankruptcy and foreclosure to qualify for government and conventional loans.

  • If someone had a prior bankruptcy, foreclosure, deed in lieu of foreclosure, or short sale, federal mortgage lending guidelines require mandatory waiting period before a mortgage loan borrower can qualify for either government and/or conventional loans
  • Qualifying for a mortgage loan and getting an approval on a mortgage loan are totally 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 to see 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 that has been seasoned for at least one year
  •  Rental verification is a important compensating factor
  • Manual Underwriting requires verification of rent

Importance Of Verification Of Rent

Verification Of Rent is mandatory on manual underwriting such as cases on VA and FHA Loans where the discharged date has not been seasoned two years from the Chapter 13 Bankruptcy discharged date. Or VA Loans and FHA Loans where borrowers need to 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 12 months cancelled checks or bank statements
  • If 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 does not count towards rental verification

Waiting Period Requirements After Bankruptcy And Foreclosure For FHA Loans

  • Bankruptcy: 
    • There is a two year mandatory waiting period from the discharge date of the bankruptcy to qualify for FHA and VA Loans
    • Home Buyers 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 Loans and VA Loans after Chapter 13 Bankruptcy dismissal date
    • Four year waiting period to qualify for conventional loans
    • Two year waiting period to qualify for conforming loans after Chapter 13 Bankruptcy discharged date
    • Four year waiting period to qualify for conventional loans after Chapter 13 Bankruptcy dismissal date
  • Foreclosure: 
  • There is a three year mandatory waiting period from the recorded date of the foreclosure or the date of the sheriff’s sale to qualify for FHA Loans and USDA Loans
  • Two year waiting period to qualify for VA Loans after foreclosure
  • Seven year waiting period to qualify for conforming loans (Conventional Loans)
  • Deed in lieu of foreclosure: 
    • 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 DIL
  • Short sale: 
    • There is a three year mandatory waiting period from the date of the short sale to qualify for FHA Loans and USDA Home Loans
    • There is a two year waiting period to qualify for VA Loans after short sale
    • There is a four year waiting period to qualify for conventional loans after short sale
    • Date of the HUD’s settlement statement date is the date the waiting period starts

Limited To No Waiting Period Requirements After Bankruptcy And Foreclosure

The Gustan Cho Team at USA Mortgage is a direct lender with no mortgage overlays on government and conventional loans. We are also correspondent mortgage 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

There is a one year waiting period after Chapter 7 Bankruptcy discharged date. 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 24 month bank statement mortgage loan program for self employed borrowers enables self employed home buyers to qualify for mortgage loans without having to turn in their tax returns
  • Two years bank statement deposits are averaged and the monthly average over 24 months bank statements is used as monthly income
  • It can be business and/or personal bank statements. 50% of the deposits is used on business bank statements. 100% of the deposits is used with personal bank statements

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