Friday, February 18, 2011

Bankruptcy seasoning requirements for FHA and Conventional loans


Even with my 20 years in the mortgage business, I double check all guidelines because they are continually changing.  I had a call from someone yesterday who had just passed his 2 year anniversary since a Chapter 7 Bankruptcy and did the following research and thought it was good info for a Blog post.  It’s a crazy mortgage world right now…

FHA: CHAPTER 7 BANKRUPTCY At least two years must have elapsed since the discharge date of the borrower and / or spouse's Chapter 7 Bankruptcy, according to FHA guidelines. This is not to be confused with the bankruptcy filing date. A full explanation will be required with the loan application. In order to qualify for an FHA loan, the borrower must qualify financially, have re-established good credit, and have a stable job.

Since my client is beyond the 2 years now (2 years in February, 2011), he will qualify for FHA financing. 

Conventional Loan Policy: Fannie Mae and Freddie Mac requirements:
Can I get an Conventional Mortgage Loan after bankruptcy? (question posed on a info forum online)
Criteria for Conventional loan approvals state that if you have been discharged from a Chapter 7 bankruptcy for four years or more, you are eligible to apply for an Conventional mortgage. If you have had a Chapter 13 bankruptcy, it must be documented that the your credit reputation has been re-established for at least two years to be eligible for a Conventional Loan Application.

Because my client had not reached his 4 year anniversary since discharge, Conventional financing is not an option.  MAYBE we will see different qualification criteria in the future, but the recent changes in Conventional criteria have made the seasoning time LONGER (it was 3 years since BKR discharge 3 months ago). 

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1 comment:

Roy Bush said...

I had a buyer that wanted to buy a home in Arizona, but he had a Chapter 7 bankruptcy 7 months ago. After researching the web I found a loan program at http://www.cfsflex.com, they allow a mortgage after a foreclosure, short sale, or bankruptcy. There is only a six month waiting period. Good to see lending options coming back.