Buying Or Refinancing A Home After Bankruptcy, Short Sale Or Foreclosure

Buying or Refinancing A Home After Bankruptcy, Short Sale or Foreclosure.
The guidelines below explain the waiting periods for bankruptcy, foreclosure and short sales when obtaining a new CONVENTIONAL LOAN.

Bankruptcy (Chapter 7 or Chapter 11)

A four-year waiting period is required, measured from the discharge or dismissal date of the

bankruptcy action.

Exceptions for Extenuating Circumstances

A two-year waiting period is permitted if extenuating circumstances can be documented, and is measured from the discharge or dismissal date of the bankruptcy action

Bankruptcy (Chapter 13)

A distinction is made between Chapter 13 bankruptcies that were discharged and those that were dismissed. The waiting period required for Chapter 13 bankruptcy actions is measured as follows:

• two years from the discharge date, or

• four years from the dismissal date.

The shorter waiting period based on the discharge date recognizes that borrowers have already met a portion of the waiting period within the time needed for the successful completion of a Chapter 13 plan and subsequent discharge. A borrower who was unable to complete the Chapter 13 plan and received a dismissal will be held to a four-year waiting period.

Exceptions for Extenuating Circumstances

A two-year waiting period is permitted after a Chapter 13 dismissal, if extenuating circumstances can be documented. There are no exceptions permitted to the two-year waiting period after a Chapter 13 discharge.

Note:The purchase of second homes or investment properties and cash-out refinances

(any occupancy type) are not permitted until a seven-year waiting period has elapsed.

Deed-in-Lieu of Foreclosure and Preforeclosure Sale

These transaction types are completed as alternatives to foreclosure. A deed-in-lieu of

foreclosure is a transaction in which the deed to the real property is transferred back to the

servicer. A preforeclosure sale or short sale is the sale of a property in lieu of a foreclosure

resulting in a payoff of less than the total amount owed, which was pre-approved by the servicer.The following waiting period requirements apply:

Waiting Period Additional Requirements

Two years 80% maximum LTV ratiosa

Four years 90% maximum LTV ratiosa

Seven years LTV ratios per the Eligibility Matrix 
The maximum LTV ratios permitted are the lesser of the LTV ratios in this table or the maximum LTV ratios for the transaction per the Eligibility Matrix.

Extenuating Circumstances

Extenuating circumstances are nonrecurring events that are beyond the borrower’s control that result in a sudden, significant, and prolonged reduction in income or a catastrophic increase in financial obligations. If a borrower claims that derogatory information is the result of extenuating circumstances, the lender must substantiate the borrower’s claim. Examples of documentation that can be used to support extenuating circumstances include documents that confirm the event (such as a copy of a divorce decree, medical reports or bills, notice of job layoff, job severance papers, etc.) and documents that illustrate factors that contributed to the borrower’s inability to resolve the problems that resulted from the event (such as a copy of insurance papers or claim settlements, property listing agreements, lease agreements, tax returns (covering the periods prior to, during, and after a loss of employment), etc.).

Per Fannie Mae selling guide 2013 more info for BK and FCL. 
*(reference: https://www.fanniemae.com/content/guide/sel011713.pdf)

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Can A Person Have More Than 1 FHA Mortgage Loan?

More Than 1 FHA Mortgage Loan?

There are instances where a homeowner can have more than one FHA mortgage. Typically, FHA generally will not insure more than one mortgage for any borrower (transactions in which an existing FHA mortgage is paid off and another FHA mortgage is acquired are acceptable). Any person individually or jointly owning a home covered by a mortgage insured by FHA in which ownership is maintained may not purchase another principal residence with FHA mortgage insurance except under the situations described below. 


A. Relocations. If the borrower is relocating and re-establishing residency in another area not within reasonable commuting distance from the current principal residence, the borrower may obtain another mortgage using FHA insured financing and is not required to sell the existing property covered by a FHA-insured mortgage. The relocation need not be employer mandated to qualify for this exception. Further, if the borrower returns to an area where he or she owns a property with an FHA-insured mortgage, it is not required that the borrower re-establish primary residency in that property in order to be eligible for another FHA insured mortgage. 

B. Increase in Family Size. The borrower may be permitted to obtain another home with an FHA-insured mortgage if the number of legal dependents increases to the point that the present house no longer meets the family's needs. The borrower must provide satisfactory evidence of the increase in dependents and the property's failure to meet the family's needs. The borrower also must pay down the outstanding FHA mortgage (secondary liens do not need to be paid off or paid down) on the present property to a 75 percent or lower loan-to-value (LTV) ratio. A current residential appraisal must be used to determine LTV compliance. Tax assessments, market analyses by real estate brokers, etc., are not acceptable as proof of LTV compliance. 

C. Vacating a Jointly Owned Property. If the borrower is vacating a residence that will remain occupied by a co-borrower, the borrower is permitted to obtain another FHA-insured mortgage. Acceptable situations include instances of divorce, after which the vacating ex-spouse will purchase a new home, or one of the co-borrowers will vacate the existing property. 

D. Non-Occupying Co-Borrower. A non-occupying co-borrower on property being purchased with an FHA-insured mortgage as a principal residence by other family members may have a joint interest in that property as well as in a principal residence of their own with a FHA-insured mortgage. (See HUD Handbook 4155.1 for additional information). Under no circumstances may investors use the exceptions described above to circumvent FHA's ban on loans to private investors and acquire rental properties through purportedly purchasing "principal residences".

REFERENCE
HUD Handbook 4155.1: 4.B.2.c-d

DISCLAIMER

DISCLAIMER: All policy information contained in this post is based upon the referenced HUD policy document. Any lending or insuring decisions should adhere to the specific information contained in that underlying policy document.

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Understanding Credit Scores

Do you know what factors contribute to your credit score? Maybe not, but I bet you do know how important your credit score is when it comes time to apply for any type credit — especially a home mortgage or refinance. I’m here to answer common questions on credit scores, including:
-What is a credit score?
-Where you can find your credit score?
-What is the minimum credit score when applying for a mortgage?
-Which factors affect my credit score?
-And more

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Mortgage Pre-Approval

Mortgage Pre-Approval Basics
Mortgage pre-approval is a process in which the mortgage lender reviews your financial background (credit score, income, debts, etc…) in order to find out whether or not you're qualified for a mortgage loan in order to buy a home. Mortgage lenders will also tell you how much they are willing to lend you.

Getting pre-approved for a home loan, prior to shopping for a home, is absolutely essential and it benefits you in several ways. First, it helps you find a real estate agent. Most agents will only work with buyers who have been "vetted" by a lender -- and who can blame them? This process also helps you identity any financial problems that need to be fixed. If your credit score is too low, or you have too much debt, you'll find out about it during pre-approval. Last but not least, sellers will be more inclined to accept your offer.

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GFE Disclosure vs TILA Disclosure

GFE Disclosure vs. TILA Disclosure
When you apply for a mortgage refinance or purchase loan, the mortgage lender is required by law to provide upfront disclosures. In the upfront disclosures package, you will find, among other disclosures, the GFE (Good Faith Estimate) and the TILA (Truth in Lending Act).

The GFE Disclosure provides an estimate of settlement charges, a summary of the loan terms, and escrow account information while the TILA Disclosure provides information regarding the APR (Annual Percentage Rate), Finance Charge, Amount Financed and Total of Payments. Both the GFE and the TILA disclosures help protect consumers by illustrating the complete terms of a mortgage refinance or purchase transaction.

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Direct Lender vs Bank for Mortgage Refinance / Purchase & Selecting the right loan officer

Refinance/Purchase: Direct Lender vs. Bank & Selecting The Right Loan Officer.
Making a decision, regarding the right mortgage professional to help you with your home loan, is not the easiest thing that someone can do. In fact, it can be quite difficult. There are so many options, so many places to get a mortgage, so many banks out there, credit unions, direct lenders, mortgage brokers and so on.

In this post I’ll help you understand some of the differences between applying for a mortgage loan through a regular bank and through a direct lender as well as help you understand how to identify the right mortgage loan officer to work with.

A regular Bank is fairly self-explanatory, a one-stop shop for all things financial. You can get a car loan, a credit card, a personal loan, a student loan, open a checking or savings account, and apply for a mortgage loan. In other words, the bank’s resources are allocated towards many facets of the bank’s business. On the other hand, a Direct Lender specializes in mortgage loans only; therefore 100% of its resources are allocated towards mortgage lending related initiatives.

So what are the most important things to consider when it comes to refinancing your mortgage or getting pre-approved to buy a home? Turn times, interest rates, closing costs, mortgage loan options, and customer service experience are among the top items to consider when making the decision as to who you select to handle your mortgage refinance or purchase loan transaction.
In general, direct lenders can provide homeowners a more personalized experience with much faster turn times and better customer service than Banks, while also achieving lower interest rates and lower closing costs at the same time.

Banks are currently averaging 75 - 120 days to process and close a mortgage refinance or purchase loan transaction while Direct Lenders are averaging 20 - 45 days.

Personalized Service and Customer Service experience are very important. While a Loan Officer at a regular bank works with 30 – 50 clients at a time, a Direct Lender’s Loan officer works with 10 - 15 clients at a time. It makes a big difference for a homeowner being 1 of 15 clients as opposed to 1 of 30+ clients. When your mortgage loan officer can focus on a smaller group of clients, it allows for the loan officer to customize all options available as opposed to providing only 1 option and moving on to the next client. Also, the number 1 complaint that homeowners have while refinancing or buying their homes is that they can’t get their loan officer to return their calls in a timely manner… if you are 1 of 15 clients as opposed to 1 of 30+ clients, then receiving a returned call timely is not an issue.

So with many direct lenders out there, how do you select the right one to work with?

This is where the individual mortgage professional makes the difference. Most reliable direct lenders have access to very similar mortgage programs such as FHA, VA, Conventional and portfolio loan products. It's in your best interest to contact and request customized mortgage loan options from at least 3 direct lenders in order to make an informed decision regarding who to work with and what particular mortgage loan option to go with as well. It's important that you feel 100% confident and comfortable with the loan officer you choose to work with. Based on your phone interactions with different loan officers, you will find that some loan officers are far more knowledgeable and trustworthy than others. Ultimately, you should choose the loan officer with the highest level of integrity who you feel the most comfortable working with and who you trust to guide you successfully throughout the mortgage refinance or the purchase loan process without many headaches.

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