How to buy a Home in Denver after a bankruptcy
Mortgage Loans That Help People Who?ve Had A Bankruptcy
Just because you?ve had a personal bankruptcy doesn?t mean you can?t a mortgage loan to purchase a new home or refinance an existing one. What is important to know is the type of bankruptcy you?ve had and how long it has been since it was discharged or time in your repayment plan.
There are two types of personal bankruptcy, the Chapter 7 & Chapter 13.
- A Chapter 7 bankruptcy is where certain debts are discharged or are eliminated and no longer due.
- A Chapter 13 bankruptcy is reorganization and/or a restructure of the debts that are due. Typically the balances, interest rates and payments can be reduced. The individuals are then put on a payment plan for a certain amount of time. They pay the court each month that then pays their creditors. Once the plan is finished the bankruptcy is discharged. If the plan is not repaid it is dismissed.
Most Common Loans Types Offered Today
In today?s lending environment, there are four main mortgage loan types being offered which are Fannie Mae, Freddie Mac, FHA and VA. There are other loans that you may qualify for, but for the most part these loans are it.
Fannie Mae/Freddie Mac
Fannie Mae and Freddie Mac are two government sponsored entities that create mortgage guidelines by which conforming mortgages are approved. These mortgage loans conform to a specific set of guidelines that typically follow formulas using income, credit, equity or down payment and assets.
FHA or the Federal Housing Administration was formed by the government in 1934 to improve housing standards and conditions. FHA does not lend money, it simply insures that the lender will be paid if the buyer defaults. FHA mortgages are much more forgiving when compared to conventional mortgages. It?s always the decision of the private lender (Investors, banks, credit unions, etc.) to determine whether or not to lend money.
Our country is indebted to veterans of the armed forces, and VA mortgages are one way we can help reward them for their contributions. Guaranteed by the Veterans Administration, these loans have helped countless Americans who served in the armed forces enjoy home ownership.
Bankruptcy Guidelines For Mortgage Financing
Fannie Mae/Freddie Mac
With a Chapter 7 bankruptcy you will need to wait for a period of 4 years from the discharge date before being eligible for mortgage financing. If the bankruptcy was due to extenuating circumstances beyond your control the waiting period is just 2 years. Examples of circumstances beyond your control would be death of a spouse, serious illness with medical bills, accidents that cause a loss of job, etc.
With a Chapter 13 bankruptcy you will need to wait 2 years from the discharge date or 4 years if the plan was dismissed. If the plan was dismissed and it was due to extenuating circumstances beyond your control this can be reviewed after 2 years from the dismissal.
With a Chapter 7 bankruptcy you will need to wait for a period of 2 years from the discharge date. If it was due to extenuating circumstances it can just 1 year.
With a Chapter 13 bankruptcy you will need to have been in the program for 1 year with all payments made on time. The courts will approve the mortgage loan so that it doesn?t stress the program.
A critical piece to the puzzle is that you will be evaluated on your prior 12 months of credit history when applying for mortgage financing. Your credit report will have to show you have been using credit and have paid it on time. Let me say it another way, you cannot have any late payments, collections, judgments or anything else derogatory in the previous 12 months when your credit is pulled.