How quickly can a Non-QM loan allow me to purchase a home if I have a past foreclosure or bankruptcy

Even when the minimum seasoning period is met, Non-QM lenders impose stricter underwriting standards to mitigate the perceived risk of a recent derogatory event:

1. Down Payment and LTV: Borrowers with recent credit events will face higher down payment requirements, as the Loan-to-Value (LTV) ratios are significantly reduced. For example, 2 years of seasoning on a credit event results in a maximum LTV of 70% under the Horizon Standard/Expanded guidelines.
2. Higher Interest Rates: Non-QM mortgage rates are typically higher than traditional loans because they cater to borrowers who do not meet conventional criteria, thus posing a higher risk to the lender. The rate will depend heavily on the borrower’s credit score and the longevity of the credit event.
3. Clean Housing History: Regardless of the credit event seasoning, the borrower generally must demonstrate timely payment history in the immediate past. For instance, the Edge Elite program requires the borrower to have 0×30×12 (no 30-day lates in the most recent 12 months) if the credit event is seasoned less than four years.
4. Letter of Explanation (LOE): A Letter of Explanation (LOE) is typically required for any recent credit event, often for those seasoned less than four years, confirming the nature of the event(s) that led to the bankruptcy or foreclosure action.
5. Completion/Settlement Required: Foreclosure, Short Sale, Deed in Lieu, and Loan Modification must be settled at the time of closing. Cash-out proceeds cannot be used to settle a bankruptcy; the BK must have been settled prior to application.
6. Bankruptcy Chapter 13: For a Chapter 13 bankruptcy, seasoning is calculated from the discharge or dismissal date. Borrowers who are still under a repayment plan in a bankruptcy are generally not eligible for the Prime Non-QM Series.