This article will cover buying home again after bankruptcy and foreclosure. Many people think bankruptcy and foreclosure are the ends of the world and will never be able to qualify for a mortgage ever again. This is not true. Bankruptcy is a good thing.
The team at Gustan Cho Associates 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. Gustan Cho Associates has also helped many homebuyers qualify for a mortgage one day after bankruptcy and foreclosure. The team at Gustan Cho Associates are experts in helping homebuyers qualify for a mortgage after bankruptcy and foreclosure. In the following paragraphs, we will cover buying a home again after bankruptcy and foreclosure.
The Dream of Homeownership 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 Gustan Cho Associates, 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 home again after bankruptcy and after the housing event is possible for those who have re-established themselves.
Re-Establishing and Buying Home Again After Bankruptcy
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. 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. Marga Jurilla of Gustan Cho Associates explains lender overlays as follows:
Often, loans fall apart during or close to closing because the borrower is surprised by and declined due to lender overlays. Most Lenders do not accept any home buyers while they are in a Chapter 13 Bankruptcy due to their lender overlays.
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. Gustan Cho Associates 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 After Bankruptcy and After Housing Event
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. Eric Jeanette, the Chief Financial Officer at Gustan Cho Associates, advises the following on rebuilding credit after bankruptcy:
One of the best things to do after filing for bankruptcy is to be proactive immediately after and begin to rebuild credit. Secured credit cards are one of the first steps to take in re-establishing credit.
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.
Finding a Lender For Bad Credit Buying Home Again After Bankruptcy
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 Gustan Cho Associates at 262-627-1965 or text us for a faster response. Or email us at gcho@gustancho.com.
Gustan Cho Associates, 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 210 wholesale mortgage lenders.
The team at Gustan Cho Associates is available seven days a week, evenings, weekends, and holidays. The team at Gustan Cho Associates 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.
