Buying a Home Again After Bankruptcy and Foreclosure

This guide covers buying a home again after bankruptcy and foreclosure. Many people think bankruptcy and foreclosure is the end of the world and  they will never be able to qualify for a mortgage ever again. This is not true. Bankruptcy is a good thing. Bankruptcy is a federal law than enables consumers discharge all of their outstanding debts and have a fresh financial start in life.  The team at GCA FORUMS Mortgage Group has helped thousands of folks reestablish their credit after bankruptcy. We have helped thousands of consumers get their credit scores over 700 FICO in less than one year after their bankruptcy discharge date. GCA FORUMS Mortgage Group has also helped many homebuyers qualify for a mortgage one day after bankruptcy and foreclosure. The team at GCA FORUMS Mortgage Group are experts in helping homebuyers qualify for a mortgage after bankruptcy and foreclosure. In the following paragraphs, we will cover  homebuyers being able buying a home again after bankruptcy and foreclosure.

Buying a Home Again After Bankruptcy and Foreclosure

Chances are, it is not a decision taken lightly for those with a bankruptcy on their credit history. Circumstances happen to people, and they exercise the option to use them to clean the slate and start over again. However, they may never have dreamed it would be so difficult to start over again. Marga Jurilla, the branch operations manager at GCA FORUMS Mortgage Group, said the following:

If a home loss occurred due to foreclosure in bankruptcy, the first reality would check on how this ordeal impacts someone may hit when they set out to rent for the first time in many years.

It can be challenging to rent, turn on utilities, purchase a car, or proceed with any financial endeavor. Suddenly a person may feel at a great disadvantage and wonder if life will ever be the same. Buying a home again after bankruptcy and after the housing event is possible for those who have re-established themselves.  Click here to buying a home again after bankruptcy and foreclosure

Re-Establishing Credit and Buying a Home Again After Bankruptcy and Foreclosure

Good news! There is life after bankruptcy! Although some lenders require a seasoning period for the bankruptcy to have been discharged for some time, loan options are available immediately after discharge, and lending options during an open bankruptcy. In certain cases, the home buyer must submit the mortgage payment to their trustee during an open bankruptcy for approval to add the debt payment to their bankruptcy plan. The rules and guidelines will vary from lender to lender. The best chance of purchasing a home during or after Chapter 13 Bankruptcy is to find a lender with no overlays.

What Are Lender Overlays

Lenders overlays are the rules of individual mortgage companies and banks that are stricter than government entities’ rules for various mortgage products. Lenders determine their own rules; thus, a lender with no overlays may accept. With 100s of possible lender overlays, they could pertain to the time of bankruptcy, debt to income ratio, minimum credit score, and loan to value.  Chad Burns, a dually licensed realtor and loan officer with GCA FORUMS Mortgage Group said the following about lender overlays:

Thus, knowing all of the guidelines for FHA loans may lead a borrower to believe they qualify for a new home loan when a lender can determine that they will require different guidelines than those stated specifically for the loan program and product selected.

Most lenders require two year waiting period after the Chapter 13 Bankruptcy discharge date to qualify for VA and FHA loans. Under VA and HUD Guidelines, borrowers can qualify for VA and FHA loans during Chapter 13 Bankruptcy one year into their repayment plan. GCA FORUMS Mortgage Group has no overlays for borrowers in a current Chapter 13 Bankruptcy Repayment Plan nor anyone with a recent Chapter 13 Bankruptcy discharge. It does need to be manual underwriting.

Re-Establishing Credit For Buying a Home Again After Bankruptcy and Foreclosure

In addition to seeking a lender with no overlays, a borrower must strive to improve the overall credit score after having a bankruptcy on record. This will increase the number of possible lending programs, the maximum loan to value, down payment options, and interest rates. The worst thing to do is not do anything; bankruptcy will lower credit and borrowing ability and affect purchasing power. The light at the end of the tunnel; it is good to know after working hard to make payments to a trustee for five years or after doing all the necessary steps to get a bankruptcy discharged, a person can qualify for a home loan without a 5-year waiting period or any seasoning of the discharge.

Buying a Home Again After Bankruptcy and Foreclosure With Non-QM Loans

It is possible buying a home again after bankruptcy and foreclosure without a waiting period with non-QM loans. Non-QM loans are alternative financing program that do not have to meet the Qualified Mortgage Guidelines of the CFPB. Non-QM loans does not have a waiting period after bankruptcy and foreclosure. However, non-QM loans does require a 10% to 30% down payment and mortgage rates are higher than traditional government and conventional loans. The down payment and mortgage rates is dependent on the how long the borrower has filed bankruptcy or had a housing event. For more information, or questions, you can ask on GCA FORUMS or contact us at gcho@gustancho.com. Or call 262-627-1965. Text us for a faster response.  Click here to buying a home again after bankruptcy and foreclosure

Finding a Lender For Bad Credit Buying a Home Again After Bankruptcy and Foreclosure

If you are considering qualifying and getting pre-approved for a mortgage with bad credit with a lender with no lender overlays, please get in touch with us at GCA FORUMS Mortgage Group at 262-627-1965 or text us for a faster response. Or email us at gcho@gustancho.com. GCA FORUMS Mortgage Group, powered by NEXA Mortgage, LLC, are mortgage brokers licensed in 48 states including Washington, DC, Puerto Rico, and the United States Virgin Islands with a lending network of 250 wholesale mortgage lenders. The team at GCA FORUMS Mortgage Group is available seven days a week, evenings, weekends, and holidays. The team at GCA FORUMS Mortgage Group has extensive real estate and lending and has been in the mortgage industry for over ten years. We have extensive experience in both commercial and residential lending and have been in the mortgage business during and after the 2008 Sub Prime Mortgage & Real Estate Meltdown.

FAQs on Buying a Home Again After Bankruptcy and Foreclosure

Here’s a list of Frequently Asked Questions that can help regarding owning property once again after letting go or reaching the bankruptcy option:

When is The Earliest to Get a Home After Debt Discharge or Losing One By Foreclosure?

• Chapter 7 Bankruptcy: Usually, it needs a waiting period of 2-4 years post-discharge, which needs to be varied with the loan category.
• FHA Loans: Discharge waiting period of 2 years.
• VA Loans: Discharge waiting period of 2 years.
• Conventional Loans. Discharge waiting period of 4 years.
• Chapter 13 Bankruptcy: You could even buy a house while on Chapter 13 after the court approves, making timely payments for 12 months on FHA and VA loans.
• FHA and VA loans: If given the court’s permission after one year of on-time payments or 2 years following discharge.
• Conventional loans:  2 years after exaction or four years after the case is dismissed.
• Foreclosure: Depending on the type of mortgage, you have to wait three to seven years.
• FHA Loans: 3 years after the closure through the service.
• VA Loans: 2 years after the service has been closed.
• Conventional Loans: 7 years from service closure, three years with extenuating circumstances.
• Non-QM Loans: No waiting period after bankruptcy but requires a 10% to 30% down payment.

Am I Eligible For a Mortgage Buying a Home Again After Bankruptcy and Foreclosure?

Yes, but it might be more difficult. They will check your credit, income stability, and down payment amount. Government-backed loans like FHA and VA loans are less opinionative about credit scores, but conventional loans are strict. Non-QM loans or other financing products may be offered despite bad credit.

How Low Can One’s Credit Score be for Buying a Home Again After Bankruptcy and Foreclosure?

• FHA Loans: A minimum credit score of 500-580 is required depending on the down payment amount.
• VA Loans: The VA does not set a minimum credit score. However, most lenders require at least a credit score of 580 to 620+.
• Conventional Loans:  Minimum credit of 620.
• Non-QM Loans: There is no set credit score, as the lending is quite lenient, but the down payments are high.

What Steps Should I Take to Increase My Chances of Buying  a Home Again After Bankruptcy and Foreclosure?

• Rebuild Credit: Timely bill payments, pay down debts, and check your credit files for mistakes.
• Save for a Down Payment: At least ten percent (10%) to thirty percent (30%) of the home price as a down payment increases the level of approval for the applied loan.
• Get Pre-Approval: This will help you estimate your borrowing capacity as suspected, contact lenders, and ask for pre-approval.
• Work with a Specialist: Contact a loan officer or a mortgage broker who has helped borrowers who have had bankruptcy or foreclosures in the past.

Will I Be Expected to Make a Bigger Down Payment Buying a Home Again After Bankruptcy and Foreclosure?

Not necessarily, but it can be of assistance. With a 580 or above credit score, FHA loans still allow a borrower to put a 3.5 % down payment even after bankruptcy or foreclosure. For most conventional homebuyers, a minimum of 5-20% of the total cost must be paid towards the cost of the house, depending on the borrower’s credit score and other considerations. The bigger the down payment that is given, the better the loan conditions will normally be.

What Kind of Interest Rates Should I Expect Buying a Home Again After Bankruptcy and Foreclosure?

Due to the type of credit they possess, very few people expect the interest rates to be low. However, due to the nature of competition, the lender, the kind of loan, and the prevailing market may determine the rates. Loans funded by the government, such as FHA and VA, offer a lower interest rate for borrowers like those with a bankruptcy or foreclosure. Therefore, I expect a forward rate if I purchase other areas with other lenders.

Do I Have to Defer Home Purchase Until Bankruptcy or Foreclosure Has Been Cleared From Credit Report?

No, some people do not have to wait for such events as bankruptcy or foreclosure to be cleared on their reports before purchasing a house. However, the consequences of these events will diminish, especially if you are working on your credit recovery. Most lenders look at the waiting periods from discharge or foreclosure, which is ineffective for waiting to remove a foreclosure from the credit record.

Is it Possible to Take an FHA Loan After Bankruptcy or Foreclosure?

Yes, an FHA loan is the best option for a borrower with a looming bankruptcy or foreclosure. You can become eligible two years post Chapter 7 Bankruptcy Discharge and three years post-foreclosure. For Chapter 13, after one year of making timely payments and court taking on the application.

Buying a Home Again After Bankruptcy and Foreclosure With Non-QM Loans

Non-qualified mortgages cater for greater accommodation on credit risk for borrowers with impaired credit recent. There is no waiting period buying a home again after bankruptcy and foreclosure. However, a 10% to 30% down payment is required.

Buying a Home Again After Bankruptcy and Foreclosure with Down Payment Assistance Programs

The state very often provides further assistance with downpayment, which is useful for rehabilitation after bankruptcy or foreclosure. GCA FORUMS Mortgage Group has down payment assistance programs that is forgiveable and non-forgiveable.

Am I eligible for a VA loan Buying a Home Again After Bankruptcy and Foreclosure?

VA mortgages are provided to qualified veterans, active duty service members, and surviving spouses, even after filing for bankruptcy or being foreclosed upon. The general waiting term is around two years after being discharged from bankruptcy or after a foreclosure sale.

What Happens if Credit Score Worsens While Obtaining a Mortgage?

If your credit score drops substantially during the mortgage process, your chances of getting the loan will be slashed, or in most cases, you will have to pay higher rates. To avoid this situation, you should avoid acquiring new credit cards, making large purchases, or missing payments during the mortgage application.

Is it Possible to Obtain a Mortgage While Undergoing a Chapter 13 Proceeding?

Yes, a mortgage application can be made after 12 months of satisfactory payments in Chapter 13 bankruptcy for those who qualify for certain loan types, such as FHA or VA. Lenders will need the bankruptcy court to approve the restructuring and ensure adequate income.

How Much Debt is Too Much Buying a Home Again After Bankruptcy and Foreclosure?

Lenders will look into your debt-to-income ratio (DTI). It is best if your total debt (new plus existing mortgage) does not exceed 43-50% of the gross income per month. Lowering the existing debt before seeking a mortgage may be prudent to enhance the chances of approval.

Do I Have to Include Additional Documents When Buying a Home Again After Bankruptcy and Foreclosure?

Of course, additional documents should be provided. In particular, the lenders will likely ask for bankruptcy discharge papers, a letter explaining the event of bankruptcy/foreclosure, and supporting materials of financial stability since the event occurred.

What Happens When Mortgage Application is Denied After I Have Declared Bankruptcy or Gone Through Foreclosure?

In case of a denial, inquire about the reason for denial from the lender and attempt to enhance your credit, reduce the amount due, or save for a better advance. You can also look for non-QM loans or consider looking for another lender.

Yes, purchasing a house after bankruptcy and foreclosure is feasible, though one needs to be responsible and plan their finances strategically. The focus should be on restoring credit, accumulating a budget for a ‘homie,’ and finding suitable companies that will listen to her side of the story. The best affordable housing options for borrowers with financial difficulties in the past are usually government-sponsored loans, such as VA and FHA loans, because they are not very strict when assessing applicants.

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