Learn about your mortgage options after bankruptcy
So, things didn’t go according to plan and you filed for bankruptcy. One of the great aspects of life in America is that the law and people in general, realize that everyone deserves a second chance. The bankruptcy laws reflect that concept.
At Silver Leaf Mortgage we can help you get a reverse mortgage after bankruptcy one day after filing! Not many companies can help you jumpstart your life after a bankruptcy, but we can! We can help homeowners who are 62 and over with a reverse mortgage in which there is no mortgage payment, and we can help younger borrowers obtain a traditional mortgage. Don’t wait! Give us a call to find out your options.
Getting a conventional loan after a bankruptcy typically requires a 24-month waiting period if the bankruptcy was beyond your control. If the bankruptcy was a result of poor money management, the waiting period typically extends for 48 months.
If you put less than 20% down on a conventional loan, you will be required to purchase private mortgage insurance (PMI) which protects the lender in the event that payments are not made. Once you have 20% equity—because you have paid your loan balance down, because the value of the home has increased, or a combination of the two—you will be able to eliminate the PMI.
Buying a house after Chapter 7
Whether you filed a Chapter 7 or a Chapter 13 bankruptcy, the rule of thumb is that you need to wait for two years to get an FHA loan. This type of loan is helpful to people who prefer to put only 3.5% down. This can be a great loan for folks who are just out of college, are newlyweds, or just a little strapped for cash.
An FHA loan is insured by the federal government. There is upfront mortgage insurance (MI) and ongoing MI. At Silver Leaf Mortgage we can help you with an FHA loan if your credit score is as low as 500 FICO, or even if you have no credit!
After a bankruptcy, it is often a good idea to re-establish a good credit history by taking out a credit card or two, keeping the balances low, and making monthly payments on time. Demonstrating that you are making payments is a good way to increase your credit score.
Buying a house after Chapter 13
With a Chapter 13 bankruptcy, a payment plan is established and the whole process takes about three to five years to conclude. There may still be a possibility of purchasing a home, or refinancing if you already have a home. You will need to have permission from the court and you would typically need to have completed at least 12 months of payments in your plan. Demonstrating that the conditions that required the bankruptcy will not occur again is also an important step.
A purchase while in bankruptcy may be a hard sell because the money needed for the down payment may be seen as money that could be used to pay creditors. A refinance during a bankruptcy is an easier sell. Hopefully you have not been late on your mortgage payments because that is critical.
If you are a veteran, active duty military, selected Reserve or National Guard you may be eligible for a VA loan. At Silver Leaf Mortgage, we are very grateful for your service and we would be honored to help you. Certain U.S. citizens who served in the armed forces of a government allied with the United States in World War II and individuals with service as members in certain organizations, such as Public Health Service officers, cadets at the United States Military, Air Force, or Coast Guard Academy, midshipmen at the United States Naval Academy, officers of National Oceanic & Atmospheric Administration, merchant seaman with World War II service, and others may also be eligible. Under certain circumstances, the spouse or widow/er of a veteran may also be eligible.
You will need to provide your Certificate of Eligibility (COE) as well as your DD-214. If you are a disabled Vet, the funding fee will be waived. A VA loan is available to qualified borrowers and may be reused multiple times as long as the previous VA loan has been repaid. There is no down payment for a VA loan, so 100% of the purchase price may be financed. There is a funding fee that is required. Silver Leaf Mortgage works with lenders that will waive the underwriting fee, often around $950, for those using a VA loan.
There is a waiting period of 24 months after a bankruptcy before you are eligible for a VA loan. During that time it is advisable to re-establish a good, clean credit history by keeping the balance on the accounts low and making your payments on time.
While many lenders will require 12 to 48 months to see that you have re-established your credit, Silver Leaf Mortgage has programs for home loans for which you may be eligible as little as ONE DAY after your bankruptcy! Call or email for more information.
Foreclosure is also a very unfortunate event. Life happens and sometimes things just spiral out of control until there is no escape from the foreclosure. We can help you with a mortgage just ONE DAY after your foreclosure. You deserve a second chance, and we would like to work with you to provide it! Contact Silver Leaf Mortgage for help.
Qualifying for a conventional loan with student loan debt
Not only can you have a higher debt-to-income ratio, but you might also have an easier time qualifying if you’re carrying a large amount of student loan debt. Here are the figures the lender can choose between:
- the monthly payment amount reported on your credit report
- if you’re on an income-driven payment plan and paying $0 per month, the lender can use $0 as a qualifying payment, or
- if the borrower is in forbearance or the loan is deferred
- 1% of the loan balance, or
- a monthly amount that would fully pay off the balance under the loan terms (amortized payment).
If your fully-amortized payment is less than 1% of the total loan balance formula, you can use the lesser number.
Example: Suppose that you owe $100,000 in student loan debt. Using the 1% of the balance criteria, you’d be attributed a payment of $1,000 per month. However, $100,000 amortized over 30 years at 5% interest is $537 per month—an amount significantly less. You’ll be in a better position to receive a mortgage approval under the second scenario.
Many lenders don’t understand these rules completely. With 100 years of mortgage experience, the team at Silver Leaf Mortgage does! (For reference, see the guidelines on the Fannie Mae website.)