NOTE: This page was first created in February, 2011, and is updated as new guidelines are released. This page is monitored by Boomerang Buyer experts that understand the guidelines, and have successfully guided countless families back into homeownership after significant financial hardship.
Application Date must be after the above waiting period to be eligible for FHA financing after hardship.
Application Date must be after the above waiting period to be eligible for VA financing after hardship.
Date of Credit Approval must be after the above waiting period to be eligible for USDA financing after hardship.
Credit must be re-established with a minimum 620 credit score.
Fannie Mae has reduced waiting periods in cases of extenuating circumstances – The death of a primary wage earner seems to be the only one I have been able to identify up to this point.
Date of Credit Report must be after the above waiting period to be eligible for Conventional financing after hardship.
NOTE: If hardship is the result of an extenuating circumstance, waiting periods may be reduced. Contact lender for details.
We are beginning to see more and more portfolio loans in the market that have relaxed waiting periods for bankruptcy, foreclosure, short sale and deed in lieu of foreclosure. These are not necessarily subprime loans, but they do often have higher interest rates, and higher closing costs.
Portfolio loans are offered by investors that are looking at other compensating factors, like high credit scores, low loan to value (larger down payments), and reserves.
Do not rule out a portfolio loan as a “bridge” to get you into your home until you reach your waiting period for refinancing into a loan with better terms.
You should begin looking at your credit at least six (6) months before you are ready to buy again. Quite often there are things left over on your credit report that can delay your ability to qualify. With a little head start and good advice, you can get your credit in line, qualify for financing and buy again.
We specialize in these situations so feel free to drop me an email, call or leave a question below.
@ChristineWolfe Hi Christine, which program are you referring to? The waiting period guidelines are not programs that will expire. They may change, or be modified in some way, but it's not likely.
My personal opinion is that these guidelines will not change in 2017.
So sorry for not explaining better. What I want to know is will the back to work program be extended in 2017? But it is good to know that these guidelines won't change much.
@ChristineWolfe no problem at all! I do not believe that FHA's Back to Work program will be extended.
It wasn't a very popular or effective program (in my opinion) and many lenders refused to even offer it because the burden of proof in order to get the exception was just too difficult for most people to meet.
Conventional (Fannie Mae) is much more flexible with extenuating circumstances. Before back to work, FHA required either the death of a primary wage earner, or the permanent disability of a primary wage earner in order to get an extenuating circumstances exception.
Fannie Mae has always considered lay-off, reduction of income, and even loss of income through divorce as potential circumstances worthy of consideration for an exception to the waiting periods.
I apologize if we've already had this conversation, but what was your hardship? and what are the dates/timelines? If you would like to keep it private, shoot me an email to email@example.com and let's see if we can pin down an exact timeline, and any potential opportunity to speed up that timeline.
Hope this helps?
First, thank you for investing your time and energy into helping so many with mortgage and loan questions. My husband and I foreclosed on a non-primary residence (rental property) in June 2011 (when our names were cleared from the record) and we have had a conventional mortgage with our current primary residence for 8 years (no dings, payments made on time and all current) and our credit scores are finally back up to ~725. We are looking to sell our current home and purchase a home but have been told we only qualify for a FHA loan which caps our total loan amount. We are hoping to get approval for another conventional loan but were told the foreclosure stays on our record for 7 years (what the wha???). This is a very long way around asking you is this true?? We don't have any capital to invest into our next home and are praying we would only be required to put 3% down (max). Is there any way around this 7 years?? Thank you so much!! Carly
@lifecoachcarly Hi Carly, thank you for the kind words. Unfortunately, conventional financing still carries a 7 year waiting period after a foreclosure, unless the mortgage was included, and discharged through a bankruptcy.
You mentioned two things that sounded like they may conflict a little. You said you have not capital investment for the new home, but you are also selling your current residence? Will there be any equity from that sale that you can use as a down payment?
So, FHA will not work. Conventional is still a couple of years out. The only other options are lease to own, seller carried financing, or a portfolio loan that will allow you to borrow the money to buy the home, and you can refinance into a conventional loan once you are eligible. The challenge with portfolio loans is that it requires a larger down payment (15% to 20%), with higher rates and fees.
In almost all cases, if you can come up with the down payment, it makes sense to buy with a "2 step" approach like this.
What State are you trying to buy in? If you shoot me an email to firstname.lastname@example.org, I may be able to introduce you to a creative lender that can help you explore these options.
Hope this helps?
My husband and I filed chapter 7 which was discharged in January 2014. In our BK we included both homes that we had VA loans on. We were able to sell one at full value, but had to short-sell the other. Both closed in May 2014. The short sale one was recorded June 2, 2014 and our names taken off title.
I work for a mortgage company and our underwriter was advised by VA that we are not eligible until June 2, 2017 for another VA loan. From what I read above, you say different. How can it be different between lenders?
@Dixylady12 Lenders will absolutely add "layers" of guidelines over VA guidelines, these are called "overlays". VA actually does not recognize a short sale as a hardship, and with a waiting period of 2 years from the BK, you should be eligible now.
I would say that probably 9 out of 10 lenders and underwriters I talk to are either not familiar with these guidelines, or are unwilling to try to figure it out.
If you would like an introduction to a lender that can do this loan, shoot me an email to email@example.com and I will see who I know in your State that can help.
Last thought on this is that if you had a VA loan on the home that was short sold, that may affect the amount of your eligibility if you are trying to use your VA housing benefit to buy the new home That's very strange that your UW said that VA told them 3 years. That's FHA guidelines, not VA.
Hope this helps?
I was relocated by my employer in December 2013 and had to sell my home that was upside down. We finally closed on a Short Sale in June 2015. My credit score is built back up and want to buy a home. One lender told us the waiting period is 4 years. Are there any options to get a mortgage loan now? When would these waiting period rules change, if they do?
Matt in Florida
@mtate10 Hi Matt, the timeline for buying again is determined by the type of financing you're using. If there is only a short sale, and no bankruptcy, then the waiting periods are as follows:
You can buy using Conventional financing 4 years from the date that your name was removed from title.
You can buy using FHA financing 3 years from the date that your name was removed from title.
You can buy using USDA financing 3 years from the date that your name was removed from title.
You can buy using VA financing now. VA does not recognize a short sale as a financial hardship, however, you must be eligible for VA benefits for this option.
Hope this helps?
As far as when these waiting period rules will change? I wouldn't count on any changes anytime soon. The last major update was for Conventional financing only, and that change was made in August 2014.
Quick question Scott, how can I find out the date that I was removed from the title on a short sale? Is it just the closing date for the short sale, or does it take longer to have your name removed?
@ch5520 It should be the day of the close of escrow of your short sale. As soon as the new deed is recorded, you are officially not on title, and your waiting period begins. If you included the mortgage in a bankruptcy, that may change the start date of the waiting period.
Hope this helps?
Hi Scott. Our chapter 7 bankruptcy was discharged on July 3, 2008, 8 years ago, and our B of A mortgage loan was included in the bk. Bank of America did a short sale on the same property April, 2016, and we were finally removed from title. Our question is . . . is a short sale considered the same as a foreclosure in order to fit into the Fannie Mae guideline to use the waiting period date of the bankruptcy rather than the short sale date?
@MLAMF Thank you, Scott. I just emailed you.
@MLAMF The quick answer to your question is Yes, short sale is considered the same as a foreclosure and will fit into the Fannie Mae guideline.
That said, the Fannie Mae guideline you're referring to only specifically mentions foreclosure, and does not mention short sale. The challenge is, unless a lender specifically fights to understand this guideline, they will tell you that you do not qualify.
It sounds like you are eligible now to buy using a Conventional loan. If you would like an introduction to a lender that understands the guideline, shoot me an email to firstname.lastname@example.org and I can point you in the right direction.
Hope this helps?
Hi Scott. I owned two properties were included in a Chapter 7 BK which discharged march 21, 2013. I lost my job, lived on savings in 2015 and this year 2016 I have been self employed as a consultant. My income is over 80,000 on my tax returns for the past two years but not for my consulting work. My credit score is 685.
My current residence is included in the BK but is still underwater and I'm in default on the a private lien on the 2nd mortgage. I would like to buy a home somewhere else and walk away from the house but I have been told I don't quality for a mortgage.
Can I qualify for a mortgage in my situation?
Would it benefit me to enter into a deed in lieu with the 2nd? If I foreclose or do a died in lieu now will it affect my ability to get a mortgage in a year or two?
@PDV The waiting period for when you are able to buy again will depend on the type of financing you are applying for, and the current disposition of that 2nd mortgage. The "soonest" you would be able to buy would be 4 years from the discharge of the bankruptcy, which would put you out to March 2017.
You will have to address that 2nd lien. You would not be eligible to buy a new home if you have a defaulted mortgage on your current residence. If you foreclose, or do a deed in lieu, that would allow you to buy in March 2017.
FHA financing is going to require a 3 year waiting period from the date that your name is removed from title, so that's probably not a great option.
Since you included those mortgages in your bankruptcy, and default, foreclosure, short sale or deed in lieu will not affect your credit report, or credit score. It is still a matter of public record, however it will not affect your credit report.
Lastly, is extremely difficult to find a lender that understands these guidelines, so if you need an introduction, shoot me an email to email@example.com and I will try to point you in the right direction.
Hope this helps?
@PDV Technically, a deed in lieu is considered not as bad as a foreclosure, but in terms of waiting periods, there is no difference since the mortgage was included, and discharged in the bankruptcy. A deed in lieu is going the best option in terms of having control over the process, however, there is a lot more paperwork for you if you go that route.
The self employment income is going to be a challenge. You must have a minimum 2 years experience being self employed, and your qualifying income is your most recent 2 years net taxable income from your tax returns.
I filed chapter 7 and was just discharged this Feb of 2016, I know, very recent. I own a two family home with plenty of equity and need to take cash out.. I can't find a bank or credit union that will touch me with a cash out refinance. I don't want to sell my home. My intent is to buy a single family and use this as an investment property when I can. Do you have any suggestions?
@loulou68 There are definitely options for doing this, but they are really expensive. What State are you trying to buy in?
@loulou68 @ScottSchang I do have portfolio lenders that will lend up to 80% of the value of the home. The rates are in the 8% range. The challenge might be that the money to take cash out of the duplex and to buy the new home will be in the 8% range for both transactions.
You would need to hang on to the loans until your respective waiting periods are up. You would be able to refinance the duplex using conventional financing in 4 years from the discharge of the BK (if you're using it as a rental).
You could refinance your primary residence using a FHA mortgage in 2 years from the discharge of the BK.
If you would like an introduction to a creative lender in your area, shoot me an email to firstname.lastname@example.org and I can make an introduction.
Hope this help?
Yes this helps. I will email you for the introduction. I have another question, maybe a better scenario. Should I wait to purchase and just refinance with cash out at the 8% and put the cash into a cd to gain interest while remaining here as my primary until the 2 years after BK is up? At that time my credit will be better and I could do an FHA on my new purchase and a conventional with a better interest rate on this property as a secondary. This way I would save on interest while making interest income from the cd. Could that work?
Thanks in advance,
@loulou68 great questions here. I'm not sure if borrowing money at 8% to park in a CD is a great idea. The yield on a short term CD is most likely much less than the 8% cost. You're better off leaving your equity in your home until you're ready to buy the new home. Did I understand your question correctly?
No, either way I need to to a cash out refinance due to an emergency situation. However, I could wait on the purchase until I qualify for a conventional or FHA. I would be saving in the meantime towards a down payment. If not a CD would you suggest a savings account with a higher interest rate such as FNBO?
Please forward the introduction to me.
@loulou68 any savings vehicle would work. My only concern was if you were going to borrow that money at 8% just to put into a savings account, that doesn't make sense. If you're just putting away pay checks to save up for your down payment, anything is better than having it sitting in a non-interest bearing checking account.
Hi Scott, due to financial stress and poor financial outlook my wife and I short-sold our home in order to move to a job with a livable wage. The short sale was completed in August of 2012. I am gainfully employed (past 4+ years). My home is provided by my employer as a requirement of employment. (I have to live at the location I work and they furnish the home and pay all utilities) We are now 100% debt free and have minimum 10% down for a second home/ vacation property/ investment property in the area where our family lives (about 10 hours away). Am i eligible for any type of loan under this scenario? FICO 769 at this time.
@campforlife Yes, you would be eligible for Conventional financing as of August, 2016. The differentiation between a second home and an investment property is substantial. It's important to discuss with your lender what your living situation intentions are, so that you do not have any last minute surprises due to occupancy questions.
If you would like an introduction to a lender that is experienced with this fannie mae guideline, shoot me an email to email@example.com - if you include the State you're buying in, and the address to the property that was short sold, I can nail down an exact date for you too.
Hope this helps?
Hi Scott, My husband and I both lost our jobs during the Great Recession back in 2009. We were on unemployment and struggled with low paying jobs for a few years afterwards. We were forced to file ch 7 bankruptcy and we included our mortgage in it, it was discharged in March of 2015. Our old home did not go to sheriffs sale until June 2016. Since last year we've made a huge rebound with our job situation, and we were able to do a lease with a purchase option home. We put $4k down on the house we live in and it has a purchase option of March of 2017. I'm not sure what to do? Our bankruptcy will have been discharged 2 years at this point but not the foreclosure. Do we have any options to get a mortgage in March or do you know of any lenders that could help? Any suggestions or guidance would be greatly appreciated.
@WendyAshley Traditional financing, namely Conventional or FHA will not be available until 3 years from the foreclosure for FHA, or 4 years from the BK discharge for Conventional.
There are portfolio programs available that can help, and will require a minimum 20% down payment. If you're interested in a program like that, shoot me an email to firstname.lastname@example.org and let me know what State you're buying in. I can make an introduction to a lender that may be able to help you explore these options.
Hope this helps?
Hi Scott. My husband and I are going to buy a home in the next several months. His chapter 7 was final October 2013 and did not include our home. We have a lot of equity in our home and want to put 20 to 25% down and avoid FHA and the high expense of PMI but it won't be quite 4 years. We are under contract to close our new home in March 2017. What are our options to avoid paying PMI? We are in Washington State. Thank you!
@TriciaDelgado There are no inexpensive ways to avoid mortgage insurance if you're under the 4 year waiting period for conventional financing. While there are portfolio programs that will allow this, the rates and fees are so high, it's cheaper to get in using FHA, and refinance at the end of the year to remove mortgage insurance.
Another thing to remember is that mortgage insurance is tax deductible for 2016. Take the FHA loan. That is the lowest rate you're going to be able to find, even lower than conventional financing.
Then, review your situation at the end of the 2017 year.
If you don't have a lender that you know and trust, I can introduce you to someone that can help?
Hi Scott. My Chapter 7 Bankruptcy was discharged September 18, 2012. Included in the bankruptcy was my old FHA mortgage which was going into foreclosure. The FHA claim for that mortgage was paid on June 10, 2013; however, the certificate of title was not transferred until September 14, 2014. I've been told that I am not eligible for a new FHA loan until 3 years from the transfer of certificate of title, no matter what. However, I've been reading some updates for conventional loans show that I am eligible for a conventional loan FOUR years from my bankruptcy date and I saw one update sheet on FannieMae (derogatory credit event fact sheet) that shows the FOUR years has been reduced to TWO years with extenuating circumstances as of September 2014. My FICO credit score is currently 671; however, it fluctuates amongst the three major bureaus between 670-705. The reason for my bankruptcy, and subsequent foreclosure, was due to my divorce (had to refinance the home out of her name after the divorce and not able to afford the home by myself due to the loss of her income). I thought I saw this was an acceptable extenuating circumstance.
I have the 5% down for a down payment, which the fact sheet states I need, but do I have to have a certain Loan to Value with that program or will I be good with just the 5%?? Does it look like I should be able to get a conventional loan?
@mws2300 You are absolutely correct on both counts. If the defaulted mortgage was a FHA loan, then your waiting period begins from the date that the subsequent mortgage insurance claim is settled, and 36 months has elapsed.
And yes, Conventional guidelines allow you to buy again 4 years from the discharge of your bankruptcy, as long as the foreclosure (or any other form of pre-foreclosure solution) occurred AFTER the discharge. The date of the transfer of title is not a factor in determining the date that you are eligible to buy using a fannie mae or freddie mac loan. 5% is enough for a conventional loan. Both fannie and freddie offer a 3% down program if your income does not exceed the limits in your county.
Going for an extenuating circumstances exception can potentially be a very intrusive, paperwork heavy, low chance of success effort. It is absolutely possible, as long as your circumstances meet the description of "A one time event, completely outside the control of the borrower, and you can show that it is unlikely to occur again" - it's literally that "vague". Different lenders interpret "extenuating circumstance" in a different way depending on their tolerance for portfolio risk. Some lenders choose not to entertain this exception at all.
If you would like an introduction to a lender that is familiar with these guidelines, shoot me an email to email@example.com and with the State that you're buying in. I've met some really cool lenders along the way that are able to help anyone outside of my home state of California.
Hope this helps?
Hi Scott. I had a foreclosure on my home that was final in Dec 2013. I was laid off my job in 2010 and subsequently out of work for 2 years. I was single with no other source of income. My unemployment benefits were about equal to my mortgage payment. I kept up the mortgage payments for a year after the layoff but couldn't continue as my savings was depleting fast. My credit was good great prior to the foreclosure and had been good since then. I have no delinquencies on my credit report and a score over 700. I have been retired since April 2013 and my income is SS and a small IRA distribution. I have no debt. I am 4 months short of the FHA 3 year penalty period but have found a small place I want to buy that will not till be available in 4 months. Am I a candidate for the Back to Work Extenuating Circumstances mortgage? Or something else?
@GailVW with a large down payment (15%+), you can use a portfolio loan. This type of financing will typically have an interest rate about 2% higher than market, or more. All lender fees are also paid by you, which results in higher closing costs.
Here's the conversation I have with everyone that asks this question..Yes, there is an upfront investment in the form of down payment, but it's not gone, it's equity. It's in the bank. All this to say, that if you set aside the larger down payment, the cost of one of these loan programs almost always pencils out and makes sense financially. Opportunities don't always come along. When they do, you have to act, right?
Consider this Plan B. A strong plan B, but a plan B just the same. Your question was about the FHA Back to Work exception. That's a tough question. It definitely sounds like it would be worth the extensive documentation process to attempt qualifying for this program. It might take a few calls to find a lender that offers this program. Many lenders simply chose not to offer the program because FHA was really strict about proving the extenuating circumstance, and the approval level was very low.
Armed with FHA Back to Work as your Plan A, work with a lender that also is experienced with portfolio loan options, and can give you a "worse case scenario" as Plan B.
If you don't already have a lender that you trust, shoot me an email to firstname.lastname@example.org with a copy of this conversation, and the State you're trying to buy in. I have a really good network of lenders that I know and trust to help anyone from our site.
Hi Scott...chap 7 discharged 12/11-mortgage included. DIL. 9/14....fico 697. Spoken with countless brokers who say no way conventional for 3 more years. .just had deal fall through days before closing eith Quicken. I'm in NJ
Hi Scott. I have a bankruptcy discharge date of 1/2009. Property included in bankruptcy has a clear title as of 7/2014. Do you know of any brokers or lenders near Cleveland, Oh that are familiar with programs I could qualify for?
@Bella187 Hi Melinda, you would be eligible for conventional financing four years from the discharge of the bankruptcy. When you say "clear title", was it a foreclosure, short sale or deed in lieu of foreclosure?
Send me an email to Scott@Findmywayhome.com and I can introduce you to someone that can help in OH :)
Foreclosed on a home in MI and mortgage was discharged in 2011. I also had a home equity loan (not line of credit) that was not discharged until September of 2014. Fico score is 740. Looking to finance a $110,000. mortgage in OH. Do you think a portfolio loan would be an alternative to waiting an extra year to go FHA on a loan? Would you have any other suggestions to secure a mortgage now, instead of in 2017?
@DapperDi I am unclear about the events and the timelines from your description. When you say "discharged" are you talking about a bankruptcy or just the fact that the foreclosure happened? Also, was the home equity loan on the same home that was Foreclosed and mortgage.
IF the mortgage was discharged through a bankruptcy, did the foreclosure happen before or after the bankruptcy?
Sorry for all the questions. I'm trying to wrap my head around all of the events and timelines so I can provide you with accurate options.
Good afternoon, I had a Chapter 7 bankruptcy that was discharged in June 2011, in that bankruptcy I included my home which went in foreclosure August 2015. Am I able to get a conventional loan? My credit score is in the low 700's.
@mininat Yes, you would be eligible for Conventional financing with a minimum of 3% down (with income limits), or 5% down (with no income limits).
What State are you in? If you would like an introduction to a lender in your area that is familiar with these guidelines, shoot me an email to email@example.com and I will try to point you in the right direction.
Hope this helps?
Looking to purchase a new home, had a bankruptcy discharged in March of 2012. Still maintained current home, lender is saying title needs to be out of my name for 3 years to apply for new loan? Sort of confused with that answer. Not sure if it is right. Any help is appreciated.
@ejhilbert When you say "still maintained current home", does that mean that you've continued to make payments on-time on the mortgage that was included in the bankruptcy? It's not necessarily true that you have to get rid of the current home, but it might be necessary in order to afford the payments on the new home. The 3 year wait is not accurate necessarily.
What State are you trying to buy in? It sounds to me like this lender simply doesn't understand your situation. I might be able to introduce you to someone that knows the guidelines and can help.
@ejhilbert ok, that should be ok. It sounds like you're eligible to buy now using Conventional financing. I have a great lender in PA that is familiar with these guidelines and can help you run those numbers.
If you would like an introduction, shoot me an email to firstname.lastname@example.org