A mortgage loan borrower can obtain home loan after the second mortgage charge off after completing a certain waiting period. The duration depends upon the mortgage loan program they prefer. However, before proceeding on further as to whether a home loan seeker can get the loan, you have to know what charge off and foreclosure means and how they may or may not impact your decisions regarding home loan.
Charge off is also known as write off which creditors use when they dispose of a debt into a bad debt. The creditor waits between 180 and 240 days from the date of the last payment. It needs to be mentioned here that doing that does not mean that the creditor will not collect the debt later.
Foreclosure is the right of the loan lenders to sell your collateral property to compensate for its loss i.e. foreclosing.
Home Loan After Second Mortgage Charge Off and Foreclosure
It is good news for those having Second mortgage charge off that they are still eligible for the home loans. Not only the Federal Housing Administration (FHA) allows you to take loan but also the Department of Veteran Affairs (VA) also gives loan after second mortgage charge off. Nonetheless, the requirements for loans I the latter case is that only if you are a veteran.
The waiting period of FHA after bankruptcy is two years from the date of the bankruptcy after which a person becomes eligible for this government loan program. However, the person becomes qualified for the loan within one year if he/she opts for the Bankruptcy repayment plan after getting approval from the Bankruptcy Trustee.
Conventional Loan Waiting Period
The conventional loan waiting period is different from the FHA Loan waiting period. It is seven years of waiting after the discharge date of Bankruptcy. Only after that a person becomes qualified for the loan.
There is good news that lenders never want to foreclose as it is costly and troublesome for them. They just do it as a last resort in order to secure their losses on the defaulted money. If a person runs short of resources to pay his/her dues, the lender may be willing to help them to get through this difficult time in order to avoid a tiring and costly task.
Thus, be open with your lender and discuss all the possibilities and worst-case scenarios so that both of you make an informed decision. Make a loan workout plan i.e. an agreement between a lender and the borrower to escape the loss of a home. But, you need to be honest and clear with your lender regarding when and how you will be back on your foot and redeem the loan. A good loan workout plan includes certain deadlines obliging what the foreclosure can be prevented. The buyer and the lender can also make repayment plan which is chalked to ascertain that the loan is paid in installments on the specified date.