Non QM Loans After Bankruptcy or Foreclosure – Home prices have been climbing at very quick rates over the last few years, especially in 2021. They are expected to increase and the housing market to remain strong for at least the next year.
This coupled with an increase in mortgage interest rates has led some buyers to be priced out of the current market. But they are still lower as compared to just five years ago. This has led more homebuyers to become interested in applying for a mortgage loan to purchase a dream home.
But what if you are currently recovering from a previous financial hardship like bankruptcy or foreclosure? How can you take advantage of low mortgage rates when you are not yet at the time minimum where it no longer impacts your credit report?
Non QM Loans After Bankruptcy or Foreclosure
Waiting periods for traditional and government-backed mortgages
When you have filed for bankruptcy or gone through a foreclosure process or a deed in lieu of foreclosure or maybe even a short sale the most traditional means of mortgage applications will have a required time period before they will consider lending you money.
In most scenarios, this waiting period is anywhere from 2 to 4 years depending upon the applicant. In some scenarios, it can be longer. The exact waiting period is going to depend on the specific type of mortgage loan program.
If an applicant has filed chapter 13 bankruptcy they do not need to wait until the bankruptcy has been discharged to apply for a VA or FHA loan. This does however require some manual underwriting that some lenders may be unwilling to go through. And in most cases, the borrower needs to have been within the chapter 13 bankruptcy repayment plan for a minimum of one year.
A USDA loan will require a three-year waiting period after a chapter 7 bankruptcy has been discharged to the date. This also is a requirement for foreclosure, deed in lieu of foreclosure, and short sale.
For the most traditional of loans called conventional loans, the entities of Fannie Mae and Freddie Mac set the required guidelines for the loans to be picked up and backed. The standard guidelines when it concerns bankruptcy or foreclosure include a four-year waiting period after Chapter 47 bankruptcy discharge. A two-year waiting period after a chapter 13 bankruptcy discharge. A waiting period of four years after a deed in lieu of foreclosure, or a short sale. There is a seven-year waiting period after a standard foreclosure.
Borrowers in this financial situation could benefit from approval on a non-QM loan instead of a traditional or government-backed loan
There is good news for those who are recovering from financial hardship for whatever reason when it comes to mortgage loans. There are some non-QM mortgage loans out there that could qualify an applicant even if they are only one day out of their bankruptcy or foreclosure program. There is no 4 to 7-year waiting period once something has been dismissed.
There are some non-QM mortgage products out there that have extended this requirement beyond government and Fannie Mae and Freddie Mac guidelines but there are some that allow for a more manual underwriting process that looks into finer details of your ability to repay a loan.
These programs may require a higher down payment, but it could be a means of getting into a home while mortgage rates are still very low. It could be a way to get into today’s booming housing market before home prices climb too high and mortgage rates go back up.
For more information on non-QM mortgage options in Mission Viejo in California please contact me anytime.
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