Mortgage After Bankruptcy And Foreclosure Waiting Period Guidelines

This Article Is About Mortgage After Bankruptcy And Foreclosure Waiting Period Guidelines Bankruptcy is not the end of the world. Actually, it is the opposite. Bankruptcy is a federal law giving consumers a second chance in their financial life. Bankruptcy will enable consumers who are deeply in debt to get those debts discharged and/or restructure them so they can rebuild and reestablish their credit and finances.

HUD, the parent of FHA, is the federal agency that is in charge of setting up the ground rules and agency mortgage guidelines on FHA loans. FHA loans are one of three government-backed home mortgage programs available in the U.S.  FHA loans is one of the most popular home mortgage programs in the United States.

HUD’s mission is to promote homeownership for hard-working Americans and have them able to be able to purchase a home. with a 3.5% down payment with a minimum of a 580 credit score. HUD makes qualifying for an FHA loan easy. FHA loans are very popular for first-time homebuyers with limited or no credit established. HUD makes it possible for homebuyers with a prior bankruptcy, foreclosure, deed in lieu of foreclosure, short sale, and period of bad credit to be able to qualify for an FHA loan.

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Chapter 7 Versus Chapter 13 Bankruptcy Mortgage Guidelines

There are two types of consumer bankruptcies that are the most common.

There are two types of consumer bankruptcies that are the most common. Chapter 7 bankruptcy enables consumers with little to no assets and little to no income to file and have all of their non-exempt debts discharged in 90 days. Chapter 7 Bankruptcy is called total liquidation. Any assets that are non-exempt are liquidated by the order of the U.S. Bankruptcy Court through a court-appointed Bankruptcy Trustee. Most filers of Chapter 7 Bankruptcy have little to no assets.

Types Of Bankruptcy

There are many different types of bankruptcies. However, the two most common bankruptcies for consumers are Chapter 7 and Chapter 13 Bankruptcy. FHA Loans After Bankruptcy Waiting Period Guidelines are different between Chapter 7 versus Chapter 13 Bankruptcy. HUD, the parent of FHA, and mortgage companies understand people can go through financial difficulties during periods of their lives. A financial crisis can happen to anyone. Poor, middle class, the rich.

It can happen to any hard-working American worker. Over 54% of consumers file bankruptcy in the United States due so because of medical debts incurred. Other common reasons for filing bankruptcy are job loss and extended unemployment, loss of business, death in the family, divorce, or other extenuating circumstances.

Bankruptcy Explained

Bankruptcy is a federal law that helps Americans eliminate and discharge debts and get a financial start. You can become a homeowner after bankruptcy. You can have great credit after bankruptcy. Capital Lending Network have helped countless people achieve credit scores over 700 FICO in less than one year after the bankruptcy discharge date. Homebuyers can qualify for an FHA loan in just two years after the Chapter 7 Bankruptcy discharge date.

People in the Chapter 13 Bankruptcy repayment plan are eligible to qualify for an FHA loan during the Chapter 13 repayment period after they have made 12 timely monthly payments. Chapter 13 Bankruptcy does not have to be discharged. There is no waiting period after the Chapter 13 Bankruptcy discharged date to qualify for an FHA loan. The team at Capital Lending Network, Inc. are experts in helping homebuyers qualify for an FHA loan during and after Chapter 13 Bankruptcy.

Types Of Bankruptcy in Mortgage

Chapter 7 Bankruptcy Explained

Chapter 7 Bankruptcy is the most common type of consumer bankruptcy. Chapter 7 Bankruptcy is also referred to as total liquidation and benefits people with no job and/or in-between jobs and little to no assets. There is a maximum income cap to be eligible to file Chapter 7. Under the U.S. Bankruptcy Code, you can keep exempt assets and a certain amount of assets and still file Chapter 7 Bankruptcy.

Chapter 13 Bankruptcy Explained

Chapter 13 Bankruptcy is a repayment plan over a course of three to five years. Chapter 13 Bankruptcy benefits people who have jobs and assets but need to restructure their debts. A trustee is assigned by the Bankruptcy Court. The trustee will restructure the petitioner’s debts.

A percentage of the petitioner’s monthly wages and allocates that portion to pay creditors. Most Chapter 13 Bankruptcy repayment plans are for 60 months. After the 60 months is over, the remaining outstanding debts of all creditors are discharged. We will discuss and cover the FHA Loans After Bankruptcy Mortgage Guidelines later in this article.

How to qualify for FHA loans after bankruptcy

Benefits Of Filing Bankruptcy

There are maximum income caps on those who can be eligible to file Chapter 7 Bankruptcy The maximum threshold is determined through the Chapter 7 Bankruptcy Means Test. Chapter 13 Bankruptcy is for consumers who have assets and a steady source of income. It is also called restructuring and/or reorganization. Consumers who file Chapter 7 Bankruptcy will be appointed a Bankruptcy Trustee. The Bankruptcy Trustee will structure a repayment plan for creditors. A percentage of the filer’s monthly wages will be set aside to pay creditors at a discounted rate over a payment term. Most payment terms in Chapter 13 Bankruptcy is 36 to 60 months.

Chapter 13 Bankruptcy Process

After the consumer pays the repayment to creditors over the 36 to 60 month repayment period, the remaining debts will be discharged by the U.S. Bankruptcy Court. What this means is any balance left from creditors is discharged and the consumer is debt-free. In this article, we will discuss and cover qualifying Mortgage After Bankruptcy And Foreclosure for homebuyers. Yes, you can qualify for a mortgage after bankruptcy. VA and FHA loans allow borrowers to qualify for a mortgage during the Chapter 13 Bankruptcy repayment plan. We will also discuss Capital Lending Network’s non-QM mortgages one day out of bankruptcy and/or foreclosure program with a 30% down payment.

Mortgage After Foreclosure Lending Guidelines

There are still people who had their homes foreclosed during the 2008 real estate and credit meltdown but the waiting period after foreclosure time clock did not start. Lenders look at the start date of the waiting period after foreclosure from the date the housing event has been finalized.

Mortgage After A Housing Event

A housing event is either a foreclosure, a deed in lieu of foreclosure, or a short sale. The waiting period after the short sale is the date the short sale happened and can be proven by the closing disclosure. However, the waiting period after foreclosure and/or deed in lieu of foreclosure is when the deed was changed over either to the new owner and/or the lender and/or the date of the sheriff’s sale. Just because you and the lender agree to surrender the home and surrender the keys is not the date of the foreclosure.

Waiting Period Start Date After A Housing Event

Once the homeowner surrender’s the home to the lender, the lender is not in any hurry to change over the deed from the foreclosed homeowner to the lender’s name. Until the deed has been changed over to the lender’s name and out of the borrower’s name, the waiting period has not started on the housing event. There are instances where the foreclosure waiting period time clock did not start for years.

This holds true even though the homeowner surrendered the home over 10 years ago. The waiting period after bankruptcy is straightforward. The borrower needs to just wait out the waiting period after the bankruptcy discharged date. However, this is not the case with a foreclosure and/or other housing events.

Mortgage After Bankruptcy And Foreclosure Waiting Period

Government and Conventional mortgage programs have mandatory waiting period requirements after bankruptcy and/or a housing event. Every mortgage program is different with regards to the waiting period requirements after bankruptcy, foreclosure, deed in lieu of foreclosure, and short sale.

Capital Lending Network, Inc. are Experts in Mortgage After Bankruptcy and Foreclosure

Non-QM Mortgage Options

The housing market is hot. Home prices have been skyrocketing for the past seven years with no sign of any housing correction.

As mentioned earlier, Capital Lending Network, Inc. has non-QM mortgages one day after bankruptcy and/or a housing event with a 30% percent down payment. The housing market is hot. Home prices have been skyrocketing for the past seven years with no sign of any housing correction. Non-QM loans allow homebuyers to purchase a home sooner than later during a booming housing market. Mortgage rates are at historic lows. The rate is expected to remain low for the next 18 to 24 months. In the next paragraph, we will discuss the waiting period requirements for government and conventional loans.

Waiting Period Requirements For Government And Conventional Loans

Government and conventional loans require mandatory waiting period requirements after bankruptcy and/or a housing event. Here are the waiting period requirements for the following mortgage loan program: HUD Agency Guidelines On FHA Loans After Bankruptcy And Foreclosure:

  • There is a two-year waiting period after the Chapter 7 Bankruptcy discharge date to qualify for an FHA loan.
  • There is a three-year waiting period after foreclosure, deed in lieu of foreclosure, and/or short-sale to qualify for an FHA loan.

VA Agency Guidelines On VA Mortgage After Bankruptcy And Foreclosure:

  • There is a two-year waiting period after the Chapter 7 Bankruptcy discharge date to qualify for a VA loan.
  • There is a two-year waiting period after foreclosure, a deed in lieu of foreclosure, short sale to qualify for a VA loan.

USDA Agency Guidelines On USDA Loans After Bankruptcy And Foreclosure:

  • There is a three-year waiting period after the Chapter 7 Bankruptcy discharge date to qualify for a USDA loan.
  • There is a three-year waiting period after a foreclosure, a deed in lieu of foreclosure, short sale to qualify for a USDA Loan.

FHA And VA Loans During And After Chapter 13 Bankruptcy Discharged Date

Mortgage During Chapter 13 Bankruptcy And After Chapter 13 Bankruptcy Discharged Date. FHA and VA are the only two mortgage programs that allow borrowers to qualify for a mortgage during the Chapter 13 Bankruptcy repayment plan without the Chapter 13 being discharged. It needs to be a manual underwrite and Trustee approval is needed.

There is no waiting period after the Chapter 13 Bankruptcy discharge date. However, if the discharge has been seasoned for less than two years, it needs to be a manual underwrite. You need two years of timely payments during the repayment plan prior to the discharge date of Chapter 13 Bankruptcy.

Fannie Mae And Freddie Mac Guidelines After Bankruptcy And Foreclosure On Conventional Loans

Here are the Fannie Mae and Freddie Mac Agency Guidelines on the waiting period requirements after bankruptcy and/or a housing event:

  • There is a four-year waiting period after Chapter 7 Bankruptcy to qualify for conventional loans.
  • There is a four-year waiting period after a deed in lieu of foreclosure and/or short sale to qualify for conventional loans.
  • There is a seven-year waiting period after a standard foreclosure to qualify for a conventional loan.
  • There is a two-year waiting period after the Chapter 13 bankruptcy discharge date.
  • There is a four-year waiting period after the Chapter 13 bankruptcy dismissal date.

FHA Loans After Chapter 13 Bankruptcy 

How soon after Chapter 13 discharge can I get an FHA loan?

  • There is no waiting period after the Chapter 13 Bankruptcy discharged date to qualify for an FHA loan.
  • Can I qualify for an FHA loan while in Chapter 13?
  • Yes, you can. You can qualify for an FHA loan after you have been on the repayment plan for 12 months.

Qualifying For FHA Loans After Bankruptcy

FHA loans is the most popular home mortgage program in the nation. HUD’s mission is to make homeownership affordable for hard-working Americans. This is why HUD created very lenient agency mortgage guidelines. FHA loans are perfect for first-time homebuyers who have little to no credit established, borrowers with lower credit scores and prior bad credit, borrowers with a prior bankruptcy and/or foreclosure.

FHA-insured loans are also good for homebuyers with little money for the down payment and closing costs on a home purchase. Many people go through financial difficulties where they file for bankruptcy. There is life after bankruptcy.

HUD Guidelines On FHA Loans After Chapter 7 Bankruptcy

Per HUD Handbook 4000.1, mortgage borrowers are eligible to qualify for an FHA loan after two years from the discharge date of Chapter 7 Bankruptcy discharged date. Just passing the two-year waiting period does not guarantee an FHA loan approval. Both the automated underwriting system (AUS) and lenders want to see borrowers have rebuilt and reestablished and rebuilt their credit. Late payments after bankruptcy and/or foreclosure are frowned upon and will present a problem. Borrowers should get three to five secured credit cards after the Chapter 7 Bankruptcy discharge date. Secured credit cards are the easiest and fastest way of rebuilding and re-establishing your credit after bankruptcy.

VA Loan After Bankruptcy

Can I use my VA loan after bankruptcies?
  • VA Loans also allow Veterans and active military to be able to qualify for a VA loan after bankruptcy as long as the borrower meets the waiting period requirements.
  • Two years after the Chapter 7 Bankruptcy discharged date
  • There is a two year waiting period after foreclosure, deed in lieu of foreclosure, short sale

VA Loans Chapter 13 Bankruptcy Requirements

How long after a Chapter 13 bankruptcy can I get a VA loan?
  • Borrowers can qualify for a VA loan one year after filing Chapter 13 Bankruptcy.
  • There is no waiting period after the Chapter 13 Bankruptcy discharge date to qualify for VA loans

HUD Guidelines On FHA Loans After Chapter 13 Bankruptcy Discharged Date

Mortgage loan applicants can qualify for an FHA loan after the Chapter 13 Bankruptcy discharge date with no waiting period requirements. There are no waiting period requirements after the Chapter 13 Bankruptcy discharge date. However, any borrowers with Chapter 13 Bankruptcy discharge that has not been seasoned for at least two years need to be manually underwritten. Borrowers need to meet all other HUD Agency Mortgage Guidelines.

Timely payments during and after Chapter 13 Bankruptcy will be closely looked at by mortgage underwriters. Late payments during Chapter 13 repayment and/or after the discharged date may disqualify borrowers. One or two late payments during and/or after Chapter 13 Bankruptcy is not always a deal killer.

Two Year Waiting Period For VA Mortgage After Bankruptcy and Foreclosure

VA Mortgage After Bankruptcy and Foreclosure Requirements

Can I get another VA home loan after foreclosure?

Can I get another VA home loan after foreclosure?

According to Mike Gracz of Capital Lending Network, Inc. You can get another VA loan after foreclosure after two years from the recorded date of foreclosure, deed in lieu of foreclosure, or short sale. Here is what Mike Gracz said:

You can determine your remaining entitlement by subtracting the entitlement you’ve already used from the maximum entitlement amount. Your remaining entitlement is the maximum amount the VA will guarantee on your loan.Jul

How do I restore VA entitlement after foreclosure?

Mike Gracz answers the question of how do I restore VA entitlement after foreclosure as follows:

Your VA home loan benefits are a lifetime benefit. Eligible service members and veterans can seek to have their full entitlement restored once the original loan is repaid in full or use their remaining entitlement to rent out their first home and purchase again with no down payment.

Impact Of Credit Scores With A Foreclosure On Your Credit Report

How many points will my credit score increase when a foreclosure is removed? (I googled answer: Foreclosures: 30-75 points – Foreclosures look very bad on a credit report because it usually means the company holding the loan lost a lot of money.) 

Qualify For A Mortgage After Bankruptcy and Foreclosure

Reestablished Credit After Bankruptcy And A Housing Event

HUD and lenders realize and fully understand people can have periods of a financial crisis. It can be for many reasons. People can lose their jobs, have medical issues, go through a divorce, have a death in the family, or have other extenuating circumstances. People can go through bankruptcy and/or foreclosure due to the economy, loss of business, or loss of jobs. However, eventually, people recover. Hardworking Americans will recover stronger than ever and most will want to purchase a home for their family.

The Role Of HUD 

HUD wants to make homeownership possible for people who had prior financial issues, a prior bankruptcy and/or foreclosure, or other extenuating circumstances. HUD and mortgage lenders want to see people have rebuilt and reestablished their credit after a period of bad credit. Timely payments in the past 12 months are key in getting an approve/eligible per automated underwriting system (AUS). People can qualify for an FHA loan after bankruptcy and/or a housing event. However, FHA Loans After Bankruptcy Waiting Period Guidelines state borrowers need to meet the minimum waiting period requirements.

In this article, we will discuss and cover FHA Loans After Bankruptcy Waiting Period Guidelines And Requirements.

FHA Chapter 13 Bankruptcy Repayment Plan

Mortgage loan applicants are eligible to qualify for FHA loans during the Chapter 13 Bankruptcy repayment plan. However, in order to qualify, the borrower needs to have been in the repayment plan for at least 12 months and have made 12 timely payments to the bankruptcy trustee. Chapter 13 Bankruptcy does not have to be discharged. The bankruptcy trustee needs to sign off the new home purchase and mortgage which is never a problem.

The team at CLN never had an issue with a bankruptcy trustee not signing off on a home purchase and/or mortgage on a home purchase and/or a refinance. All FHA loans being processed during the Chapter 13 Bankruptcy repayment plan are manual underwrites. HUD Manual Underwriting Guidelines apply. Capital Lending Network, Inc. are experts in helping borrowers qualify for FHA loans during Chapter 13 Bankruptcy repayment plan. CLN is one of the very few national mortgage companies with no lender overlays on government and conventional loans.

Conventional Loan Requirements Waiting Period After Bankruptcy And Foreclosure

There is a mandatory waiting period to qualify for a conventional loan after bankruptcy and foreclosure. Waiting periods to qualify on conforming are different for government loans after bankruptcy and foreclosure.

  • Conventional Loans are often called Conforming Loans
  • This is because they need to meet and conform to Fannie Mae or Freddie Mac guidelines
  • Fannie Mae and Freddie Mac are the two government-sponsored enterprises
  • The two mortgage giants that set conventional mortgage guidelines
  • In order for banks and mortgage companies to be able to sell the residential mortgage loans to Fannie Mae and/or Freddie Mac, those loans need to conform to the standards and guidelines set by Fannie Mae and/or Freddie Mac
  • Borrowers can qualify for a conventional loan after bankruptcy and foreclosure as well as a deed in lieu of foreclosure and short sale by meeting mandatory waiting period requirements
  • Lenders expect re-established credit after bankruptcy, foreclosure, deed in lieu of foreclosure, and short sale

Qualifying For Conventional Mortgage After Bankruptcy And Bankruptcy

Borrowers can qualify for a conventional loan after a Chapter 7 Bankruptcy four years from the discharge date. A minimum of a 620 credit score is required. Lenders expect to see re-established credit after the Chapter 7 Bankruptcy. No late payments after the Chapter 7 Bankruptcy and/or housing event.

Borrowers can qualify for a conventional loan after a Chapter 13 Bankruptcy two years after the discharge date. Four years after a Chapter 13 dismissal date. Minimum of 620 credit score. Re-established credit after the Chapter 13 Bankruptcy. No late payments after the Chapter 13 Bankruptcy discharge and/or Chapter 13 Bankruptcy dismissal date.

Learn More About Qualifying For Mortgage After Bankruptcy and Foreclosure

Qualifying For Conforming Loan With Mortgage Included In Bankruptcy

For borrowers with mortgages included in a bankruptcy, the waiting period to qualify for a conventional loan is four years from the discharge date of Chapter 7 Bankruptcy. Foreclosure can be recorded after the discharge date of your Chapter 7 Bankruptcy discharge date. However, the recorded date of the housing event does not matter, and the housing event needs to be finalized.

Waiting Period Requirements on Mortgage After Bankruptcy and Foreclosure

The four-year waiting period starts on the discharge date of Chapter 7 Bankruptcy. This rule is only for conventional, VA, and USDA Loans. Do not apply for FHA Loans. With FHA Loans, for borrowers with mortgage part of bankruptcy, the waiting period of three years starting from the recorded date of the foreclosure Not the discharge date of Chapter 7 Bankruptcy  Re-established credit and no late payments after the bankruptcy is required. 620 credit score minimum is required.

Qualifying For Conventional Loan After Deed In Lieu Of Foreclosure And Short Sale

Borrowers can qualify for a conventional loan after a deed in lieu of foreclosure and short sale after four years. 3% to 5% down payment is required:

  • The minimum credit score required is 620 credit scores and re-established credit is required
  • Lenders do not want to see any late payments after the deed in lieu of foreclosure and/or short sale

Qualifying For Conventional Mortgage After Bankruptcy and Foreclosure

Borrowers can qualify for a conventional loan seven years after foreclosure with re-established credit and no late payments after the foreclosure. The seven-year waiting period after the foreclosure time clock starts from the date of the Sheriff’s sale. Or the date where the deed of the property was transferred out of their names into the name of either the lender or another home buyer.

Apply For A Mortgage After Bankruptcy and Foreclosure

Process of Qualifying For a Mortgage With No Lender Overlays

The team at Capital Lending Network, Inc. have helped thousands of borrower during and after Chapter 13 Bankruptcy. Rebuilt and reestablished credit is very important for those who went through Chapter 13 Bankruptcy. Get three to five secured credit cards with at least $500 credit limits.

Secured credit cards are the easiest and fastest way to rebuild and re-establish credit after bankruptcy. Get one or two installment loans on top of the three to five secured credit cards to maximize your credit profile. CLN has credit guides to help you achieve this goal.


Peter has 7+ years of experience in residential lending. He is a licensed Realtor in the Chicagoland area.

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