After you have had a Chapter 7 or are in a Chapter 13 Bankruptcy, getting a mortgage is not always so easy, especially if you are 62 years and older. Even if you have plenty of money to put into a down payment.
Did you know…
There are no waiting periods after you have discharged a Chapter 13 bankruptcy for traditional HECM loans. HECMs used to Purchase a home require a 2 year wait period after a Chapter 7, but like most Government loans you can get that reduced to 1 year.
And on Chapter 13, with Government loans (like a HECM) assuming you have explainable “Extenuating Circumstances” and have made 12 months of on-time payments to the trustee, you can get a mortgage after that 1 year.
However, in all forward Government and Conventional mortgages you must also have re-established good credit; meet a minimum credit score; and, of course, have up to 4X the monthly payment in current income, usually with job stability (though many mortgage lenders are showing flexibility in this requirement).
So how is a HECM helpful?
Aside from no waiting period after any Bankruptcy (other than 2 years after a Chapter 7 if buying a home with a HECM) it is in the last 3 requirements that HECMs can really help.
There is no minimum Credit Score requirement with a HECM. None.
In income level requirements, the minimum income is much less. HECMs use the VA Minimum Residual Income Tables, which basically make sure you have sufficient income left over to live on (and of course exclude any mortgage payments as this is optional with a HECM) after you meet all your property charge and other financial obligations. The income needed is a fraction of what you need on a forward loan.
While it is probably unlikely if you have had a bankruptcy, if you do have savings, they can be dissipated (i.e. the principal, not the yield) over your estimated remaining life to meet the residual income requirements.
All other things being equal, this is sometimes the hardest thing to satisfy with the lender. This is “Character Underwriting” in lieu of a perfect payment history. The HECM program was originally designed for borrowers who themselves already may need help in getting through retirement on their income. Underwriters have more discretion with the HECM program to evaluate this aspect of the requirement.
Would you like to learn more?
- Click here for eBrochures, eBooks, FAQs and Videos!
- If you would like to know how much you potentially qualify for, and whether you possibly have adequate monthly cash flow, go to the HECM WIZARD and input your information.
- If you would like to reach out and talk with me, fill out the information on Contact Me or email at st.john.bannon@JMCapGroup.com