Getting a mortgage after bankruptcy can be difficult, and adding a foreclosure or short sale into the mix can further complicate matters. Our mortgage consultants will try to simplify this process, and explain how your foreclosure or short sale will affect you in getting a mortgage after bankruptcy. Below are explanations of different home loan programs that are commonly available if you have gone through a foreclosure or short sale.
One important item to note is the waiting periods for foreclosure, short sale, and bankruptcy can run at the same time. Due to the fact that the waiting times can run concurrently it allows the buying process to move much faster.
Getting a Mortgage After Bankruptcy – Types of Home Loan Programs
VA Loan:
This program is a great for getting a mortgage after bankruptcy even with a foreclosure or short sale. VA loan borrowers must wait 2 years from after their foreclosure or short sale (when the property was officially removed from your name). This coincides with the waiting period for Chapter 7 bankruptcies of 2 years from discharge. Chapter 13 borrowers must either complete their bankruptcy plan or make 12 consecutive on-time payments.
FHA Loan:
FHA Loan borrowers must wait 3 years from the completion of their foreclosure before getting a mortgage after bankruptcy.
Short Sales are treated differently at the FHA. There is no waiting period to get an FHA loan, if the borrower has made 12 consecutive on time payments on their mortgage before the short sale. However, if a mortgage payment on the short sale was over 30 days late in the preceding 12 months, then the waiting period is 3 years. Additionally, in both cases borrowers must either be successfully discharged from their Chapter 13 bankruptcy or have made 12 consecutive on-time payments during their plan.
USDA Loan:
There is only one minor difference between FHA and USDA requirements. USDA borrowers must wait 3 years after their discharge from their Chapter 7 bankruptcy plan while borrowers with an FHA loan must wait 2 years. Furthermore all of the requirements for USDA Loans, are the same as the FHA Loan requirements.
Conventional Loan:
Conventional loan programs are strict concerning bankruptcies, foreclosures, and short sales. The waiting period to get a conventional loan after a foreclosure is 7 years, while the waiting period after a short sale completion is 4 years. Chapter 7 borrowers must wait 4 years from their discharge date, while Chapter 13 borrowers have to wait a minimum of 2 years from their successful discharge.
Jumbo Loan:
A jumbo mortgage is a home loan with an amount that exceeds conforming loan limits imposed by Fannie Mae and Freddie Mac. Loans that exceed these maximums must be financed under a jumbo loan package. When meeting established credit, income and down payment requirements, qualifying borrowers may be able to get a home loan as high as $2,500,000. Jumbo loans are a type of portfolio loan, as they are not packaged/sold by Fannie Mae or Freddie Mac. Therefore can have different qualification criteria depending on the particular investor.
Portfolio Loan:
Portfolio Loans are mortgages that are available to clients that may not qualify for other home loan programs. Typically a borrower hasn’t been able to qualify for other home loan programs because of a negative credit event in their past. These loans are not sold to Fannie Mae or Freddie Mac or guaranteed by other government agencies like FHA, VA, or USDA loans.
Portfolio loans are also known as “non-conforming” loans, as they do not conform to the guidelines of the other loan programs. These types of loans help to increase home ownership, by allowing clients to qualify for a long who may have had a foreclosure, short sale, or bankruptcy in their recent past. These loan products carry much better rates and terms; than they have in the past. They can also be an excellent path to purchasing a new home or refinancing your existing home.
In order to connect with one of our mortgage experts for a free consultation. Please CLICK HERE
Published (August 29th, 2018)