Qualifying for Hard Money Loan with Bankruptcy
How do Hard Money Lenders view Borrowers with Bankruptcy
Hard Money Lenders view Bankruptcy differently than traditional mortgage lenders. If you are qualifying for a residential mortgage loan or conventional investment property mortgage loan with a prior bankruptcy there is a mandatory waiting period. For a owner occupied FHA Loan there is a mandatory two year waiting period after the discharge date in order to qualify for a residential FHA Loan. There is a mandatory 4 year waiting period to qualify for a conventional loan after bankruptcy . There is a three year waiting period to qualify for a FHA Loan after a foreclosure, deed in lieu of foreclosure, or short sale. There is a 7 year waiting period to qualify for a conventional loan after a foreclosure. The waiting period shortens to 4 years after short sale and/or deed in lieu of foreclosure. The reason for these mandatory waiting periods after foreclosure, deed in lieu of foreclosure, short sale, and bankruptcy is because residential mortgage lenders use their warehouse lines of credit to fund these residential loans and need to re-sell these residential mortgage loans to Fannie Mae and/or Freddie Mac so they can clear their warehouse lines of credit and re-use them so they can originate more loans. In order for Fannie Mae and Freddie Mac to buy these loans from mortgage companies, they require minimum federal lending guidelines and these guidelines on waiting periods after bankruptcy and foreclosure is part of the federal lending guidelines.
Portfolio Mortgage Lenders
Portfolio Lenders are private mortgage lenders where they do not sell the mortgage loans they originate to the secondary market. They keep the loans they originate in their books until the borrower pays it off. Portfolio mortgage lenders have their own lending guidelines and can budge or make exceptions to them since they do not have to worry about federal lending guidelines. Hard Money Mortgage Lenders are classified as portfolio mortgage lenders because all Hard Money Lenders keep their loans in their books. You can qualify for Hard Money Loan with Bankruptcy with no waiting period if the Hard Money Mortgage Lender allows it.
How can I get a Hard Money Loan with Bankruptcy?
Many Hard Money Mortgage Lenders actually prefer to lend to a hard money loan borrower with a prior bankruptcy who has re-established their credit and not be overwhelmed in debt because they cannot re-file bankruptcy until 7 years after the first bankruptcy discharge date. A Hard Money Lenders worst nightmare is when a hard money loan borrower files for bankruptcy. A hard money loan borrower who borrows hard money from a hard money lender and files bankruptcy because he or she is overwhelmed with debts will be exempt from ever paying the hard money loan and the hard money lender is out of luck. However, if a hard money loan borrower borrows money from a hard money lender one year after bankruptcy, the borrower cannot file bankruptcy again until 7 years from the original bankruptcy discharge date because you can only file one bankruptcy once every 7 years. The waiting period after bankruptcy to qualify for a hard money loan is dependent upon each Hard Money Lender and not by any mortgage lending guidelines.
Guidelines on Hard Money Loans
Hard Money Loans are not regulated by any state or federal lending guidelines so there are no mandatory waiting periods in qualifying for a Hard Money Loan after Bankruptcy. It is up to the Hard Money Lender on any waiting period to qualify for a hard money loan after bankruptcy.