Home Loan After Bankruptcy Mortgage Guidelines

Waiting Period Requirements To Qualify For Home Loan After Bankruptcy

The following are the waiting period requirements to qualify for a home loan after bankruptcy:

• HUD requires a 2 year waiting period after a Chapter 7 Bankruptcy discharged date
• Homebuyers can qualify for an FHA and/or VA Loans one year in a Chapter 13 Bankruptcy repayment plan
• Homebuyers can qualify for a VA Loan two years after a Chapter 7 Bankruptcy
• Buyers can qualify for a USDA Loan 3 years after Chapter 7 discharged date
• Can qualify for a Conventional Loan four years after a Chapter 7 discharged date

Homebuyers can qualify for a Conventional Loan two years after a Chapter 13 Bankruptcy discharged date:

• The waiting period is four years after Chapter 13 dismissal date

There is no waiting period after bankruptcy, foreclosure, short sale, deed in lieu of foreclosure with non-QM loans also called alternative financing.

FHA Loans Are Most Popular Home Loans

Federal Housing Administration, also known as FHA, is one of the most popular loan programs in the U.S.

• Borrowers who are one year into a Chapter 13 can qualify for an FHA Loan
• Need approval of the Bankruptcy Trustee
• There is no waiting period after a Chapter 13 Bankruptcy discharged date
• Conventional mortgage guidelines from Fannie Mae and Freddie Mac are stricter
• Waiting periods for conventional mortgages are normally a minimum of 4 years

Power Of Secured Credit Cards To Qualify For Home Loan After Bankruptcy

The most important point, according to home loan mortgage industry experts, is that consumers must re-establish their credit to show that they can manage it responsibly.

• They can do this by paying rent and utility bills on time, or perhaps by obtaining a secured credit card
• Many who got a bankruptcy discharge do not want to deal with credit anymore
• This is because credit is what got them in trouble
• This is not good for one’s credit profile
• The best way to strengthen credit and re-establish credit is by getting three secured credit cards

Letter Of Explanations To Mortgage Underwriters

If a bankruptcy filing was the result of a one-time occurrence, like the death of a spouse, divorce or illness, the waiting period to apply for a home loan may be reduced.

• Lenders will often want borrowers to write a hardship letter explaining their situation, backed by documentation like hospital bills or a court-approved divorce settlement

Chapter 7 Versus Chapter 13 Bankruptcy

Statistics show that 70 percent of personal bankruptcies are filed under Chapter 7, according to the American Bankruptcy Institute, a research organization.

• The data collected by this institute also noted that last year there were 1.362 million personal bankruptcy filings nationwide
• This is a reduction from 1.53 million in 2015
• At the end of the first quarter of this year, there were 311,975 filings
• This is 5 percent less than the first quarter of 2016

Rebuilding Credit After Bankruptcy And Foreclosure

Rebuilding credit after a personal bankruptcy will take some work.

• Methods of rebuilding credit include getting three secured credit cards and not be late with any monthly payments
• Also, make sure you pay utilities on time
• Many electric and gas companies now report consumer payment history to the credit bureaus
• Get a copy of personal credit report
• Start disputing negative items that do not belong to you

A personal bankruptcy filing will have a larger impact on a credit score than any other credit issue.

• Filing for bankruptcy protection will reduce a credit score by 200 points or more
• Foreclosures will impact a person scores by 100 to 150 points

Consumer credit will get better with time.

• It is like recovering from a major hard liquor hangover
• It heals with time

If you start rebuilding credit by reestablishing credit with secured credit cards and disputing negative credit items on credit reports, consumers should be able to qualify for a home loan 2 years from the date of the bankruptcy discharge.