Secrets to Buying Sooner After Hardship
Have you been looking for home financing options that allow recent credit challenges related to Bankruptcy, Foreclosure, Deed in Lieu or Short Sale?
Or maybe you need more flexibility for Jumbo financing but are unable to find something that works for you?
Depending on your individual needs, the underwriting requirements can be a barrier to you obtaining the assistance you need.
By specializing in helping people buy after a financial hardship, I am well underwriting requirements for the different home financing vehicles available to most lenders:
Bankruptcy (Chapter 7) – 4 years from the date of discharge
Deed-in-Lieu – 4 Years from date of Title Transfer
Short Sale – 4 Years from date of Title Transfer
Foreclosure – 7 Years from date of Title Transfer**
**If the property that resulted in Deed-in-Lieu, Foreclosure or Short Sale was included AND discharged through Bankruptcy, the lender may use the Bankruptcy guideline and ignore the property disposition. This applies to properties dispositioned after the discharge of Bankruptcy, and is only allowed on Fannie Mae.
Bankruptcy (Chapter 7) – 2 Years from Date of discharge
Deed-in-Lieu/Short Sale*/Foreclosure – 3 Years from date of Title Transfer**
*If the property that was short sold was current through the time of sale, you may be eligible for FHA financing immediately.
**If the underlying loan that resulted in Deed-in-Lieu, Short Sale or Foreclosure was financed using an FHA loan, the timeline is adjusted to 3 years from the date of the FHA paid claim.
Bankruptcy/Deed-in-lieu/Short Sale/Foreclosure – 7 years
720 Minimum Credit Score
20% Down Payment
9-24 Months Reserves Required
Hard Money Options
So what can you do if you find yourself unable to meet the required guidelines and you are ready to buy again? Are you relegated to waiting the additional time, increasing your credit score or accumulating the needed reserves in order to re-enter the housing market as you watch the price of homes climb?
While the guidelines above apply to most lenders, there is a market for mortgages that do not meet these requirements. The inability to meet the standard guidelines would leave you in a position to need alternative lending options.
Hard Money lending is readily available for those who are able to meet the increased down payment requirements (30-35%), but the barrier of 30-35% down payment can prevent many from being able to take advantage of this option.
Portfolio Loan Options
Is there anything between traditional financing and hard money lending? The answer is YES!
There have been many new programs introduced to the market providing options for alternative financing. Credit scores DO matter in this environment, but generally credit scores of 680 or greater provide access to the maximum financing limits when income can be fully documented.
Here is a glimpse of what alternative financing products can provide:
1 day out of Bankruptcy/Deed-in-Lieu/Short Sale/Foreclosure
Loan Amounts up to $1,000,000
80% Loan to Value (20% Down Payment)
6 Months Reserves Required
2 Years out of Bankruptcy/Deed-in-Lieu/Short Sale/Foreclosure
Loan Amounts up to $2,000,000
80% Loan to Value or 90% Combined Loan to Value (as little as 10% down!)
6 Months Reserves Required
There are also financing options available for Self-Employed borrowers that cannot document their income through traditional means. Under these products, the waiting period for credit challenges would be 3 years with maximum financing up to 80% and loan amounts up to $2,000,000. 24 months bank statements would be required in order to establish qualifying income.
There are option out there for almost any given scenario. Knowing where to look and staying on top of the many changes within the lending industry will help uncover the opportunity. I hope you find this information helpful.