Mortgage Bankruptcy Waiting Period | Foreclosure Waiting Period
Looking for the conventional, VA, USDA, and FHA foreclosure waiting period and bankruptcy waiting period? The mortgage waiting period depends on the type of mortgage loan program. There are portfolio and non-QM loan programs that do not require seasoning on derogatory events that are covered later in the article.
There are three different types of government loans: FHA, VA, and USDA. Mortgage bankruptcy and foreclosure guidelines are set by Fannie Mae and Freddie Mac for conventional loans. Conventional and government loans both have a waiting period after a foreclosure and bankruptcy.
Mortgage Bankruptcy Waiting Period
FHA bankruptcy waiting period:
- For a chapter 7 bankruptcy, the waiting period is two years from the date of discharge.
- In order to apply for a FHA mortgage while in a chapter 13 bankruptcy:
- Requires manual underwriting.
- The one year payout period under the chapter 13 bankruptcy needs to be elapsed.
- Need written permission from the bankruptcy court in order to enter into a FHA mortgage transaction.
When the originator and underwriter get automated approval underwriting findings, the loan will be downgraded to a manual underwrite if the discharge date is less than two years.
VA bankruptcy waiting period:
- VA loans require 24 months after discharge of chapter 7.
- Chapter 13 bankruptcy requires satisfactory pay history for 12 months and court permission to enter into transaction.
USDA bankruptcy waiting period:
- USDA has a 3 year waiting period for chapter 7 bankruptcy discharge.
- Chapter 13 does not require a credit exception for plans that are completed for 12 months or greater.
Conventional bankruptcy waiting period:
- There is a four year waiting period after a chapter 7 or 11 bankruptcy for a conventional loan.
- The waiting period for a bankruptcy (chapter 13) is two years from the discharge date or four years from the dismissal date.
- There is a four year waiting period for a borrower who was unable to complete the chapter 13 bankruptcy plan.
Foreclosure Waiting Period, Deed-in-Lieu, Preforeclosure, and Charge Off
- FHA foreclosure waiting period and short sale is three years.
- USDA has a 3 year waiting period for foreclosure, short sale, and pre-foreclosure.
- VA loans require greater than 2 years from the trustee’s date for a foreclosure or deed-in-lieu.
- Conventional loans have a seven year waiting period for foreclosure and a four year waiting period for deed-in-lieu, preforeclosure, charge off.
Conventional Foreclosure Mortgage Waiting Period Discharged Through Bankruptcy
When a mortgage debt was discharged through a bankruptcy, the bankruptcy waiting period applies when:
- Appropriate documentation to verify the mortgage was discharged in the bankruptcy.
- If appropriate documentation cannot be verified, the greater of the bankruptcy or foreclosure waiting period applies.
Loan Program with No Seasoning on Derogatory Events
The non-QM or portfolio mortgage loan program allows borrowers who had a recent derogatory event, such as a foreclosure, short-sale, deed-in-lieu, mortgage loan charge off, chapter 7 or chapter 13 bankruptcy to purchase a home, cash out, or refinance. There is no seasoning required for derogatory events, but the derogatory event must be completed prior to the application date.
- 30 year fixed rates, 5/1 and 7/1 ARMS.
- Low minimum FICO of 500 required.
- The maximum loan-to value is 90%, minimum down payment 10%, and loan amounts of up to $2,000,000 for a purchase transactions.
- The down payment is determined by the credit score (FICO) and the amount of reserves.
- Bank statement program available.
- Gift funds from a family member are permitted.
- No mortgage or rental payment history required.
- Seller contribution of up to 6%.
Cash out and debt consolidation options available up to 80% and maximum loan amount of $750,000. The maximum loan-to-value is determined by credit score (FICO) and reserves.