Posts Tagged ‘when can I purchase a home after a bankruptcy’

Using government loans after a derogatory credit event

February 21, 2017

blog-author-clayjeffreys3

Last week, we focused on using conventional loans to purchase a home after a major derogatory credit event such as a bankruptcy, short sale, foreclosure, etc. This week, we will focus on VA and FHA loans offered by the government.

In every instance, a government loan has a shorter waiting period after one of these events. It is the loan of choice to use if it will fit your needs. Let’s discuss the waiting periods:

  • Chapter 7 bankruptcy: requires a 2-year wait
  • Chapter 13 bankruptcy: requires a 1-year wait from the beginning of the payout period
  • Multiple bankruptcy filings: VA requires only 2 years, but FHA is a case-by-case basis
  • Foreclosure: VA once again is only 2 years, but FHA is 3 years.
  • VA Specific: in order the qualify for a VA loan (in addition to being a veteran), there must be a 1 year minimum of re-established after the judgement dates and other derogatory events paid/resolved
  • FHA Specific: If HUD has a claim against a borrower for a foreclosed/short sold home (and that home was financed using an FHA loan), a borrower isn’t eligible for a new FHA loan until after 3 years from the date of the claim being paid.

As anyone can read here, government loans have a much shorter waiting period than conventional loans. As low as one year, but mostly just a 2-year wait. An FHA or VA loan would be the preferred method for buying a home after one of these major events. That said, there a couple of situations that make conventional loans the way to go:

  • the borrower is not eligible for a VA loan (so you go FHA unless….)
  • the loan needed to purchase a home will exceed the maximum FHA allowed loan amount
  • there is a claim against the borrower from HUD
  • a borrower is not eligible for an FHA loan due to CAIVRS (a government credit monitoring tool to ensure people who take out government loans pay them back)

The last two on the list are not that common, so buying a home within the FHA maximum loan limits would be the way to go. In addition to a shorter waiting period, the interest rate tends to be better than conventional loans, the borrower only needs a 3.5% down payment, and the monthly mortgage insurance rate is lower. A borrower’s credit score will confirm those items, but in general, those are all reasons why FHA loans are the best way to go after a derogatory credit event.

Completed a bankruptcy two years ago, and ready to buy a home in Georgia? If so, we can get started today in the process. Contact me and we’ll make sure you qualify for a loan, and then send you out looking for your next home.

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