Waiting Period Requirements After Bankruptcy And Foreclosure Guidelines

This BLOG On Waiting Period Requirements After Bankruptcy And Foreclosure Guidelines Was UPDATED On January 23rd, 2019

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 a 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 is 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 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

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 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 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 a short sale
• There is a four-year waiting period to qualify for conventional loans after a short sale

The date of HUD’s settlement statement date is the date the waiting period starts.

Limited To No Waiting Period Requirements After Bankruptcy And Foreclosure

Gustan Cho Associates is a national lender with no overlays on government and conventional loans. We are also 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 After Bankruptcy On Non-QM Loans

There is no waiting period after Chapter 7 Bankruptcy discharged date.  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 having to turn in their tax returns
• Either one or two years bank statement deposits are averaged and the monthly average over 12 or 24 months bank statements are used as monthly income
• It can be business and/or personal bank statements
• 50% of the deposits are used on business bank statements

100% of the deposits are used with personal bank statements.