Mortgage Bankers That Accept Bankruptcy
The four largest government backed mortgage providers disagree on how long someone should wait after a bankruptcy before buying a new home. They all do agree that bankruptcy qualifies as major derogatory credit and the borrower should prove their ability to pay their bills for years once the bankruptcy discharges. Prior to the mortgage industry meltdown in 2008, many lenders offered sub-prime loans with high interest rates to homeowners with recent bankruptcies. Many of these companies did not survive the meltdown.
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Mortgage Lenders and Mortgage Investors
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As of 2011, very few mortgage lenders keep the mortgage notes they originate. The largest banks in the United States sell their conventional loans to Fannie Mae or Freddie Mac, the two largest mortgage investors in America. They also provide Federal Housing Administration (FHA) loans and Veterans Affairs (VA) loans to the public. Neither FHA nor VA actually lend money, they insure or guarantee the lender against losses. Lenders often sell these loans to the Government National Mortgage Association (GNMA) commonly called Ginnie Mae. Unless the lender plans to fund the loan with their own money and keep the loan on their books, the lender underwrites and approves the loan according to the investor, insurer or guarantor guidelines.
Fannie Mae and Freddie Mac
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Fannie Mae and Freddie Mac set the base guidelines for all conventional mortgage loans. They determined borrowers who filed for Chapter 7 bankruptcy must wait at least four years after the bankruptcy discharged before obtaining a new conventional mortgage unless extenuating circumstances exist. The waiting period for Chapter 13 bankruptcy is 24 months from the discharge date. Extenuating circumstances must have been out of the control of the borrower such as job loss. Satisfactory credit must have been present prior to the event to qualify. Both companies offer loans on one- to four-unit homes, which may be owner occupied, second homes or investment properties.
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Federal Housing Adminstration
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FHA lenders allow homebuyers a mortgage after only 24 months. Extenuating circumstances may allow the homebuyer to obtain an FHA after only 12 months. The homebuyer must reestablish a satisfactory credit history and provide a minimum middle credit score of 580 to qualify for a 3.5 percent down payment loan. FHA only lends on owner occupied homes but allows financing on one-, two-, three- and four-unit properties. Home buyers may also purchase condominiums, townhomes, modular and manufactured homes as well.
U.S. Department of Veterans Affairs
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The VA allows veterans and their surviving spouses access to mortgage benefits if their bankruptcy discharges were more than 24 months old when the applications are signed. Bankruptcy under 12 months disqualifies the veteran completely. Bankruptcy between 12 and 24 months old may be considered if credit has been re-established and the bankruptcy was caused by something outside the veterans control like injury illness or job loss. Veterans may purchase the same types of home with a VA loan as they could with an FHA loan.
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