2016 Buy Again After Bankruptcy, Short Sale, Foreclosure or DIL

by on 1.6.16 in Boomerang Buyers

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.

2016 FHA Guidelines

  • Bankruptcy – You may apply for a FHA insured loan after your bankruptcy has been discharged for TWO (2) years with a Chapter 7 Bankruptcy.  You may apply for a FHA insured loan after your bankruptcy has been discharged for ONE (1) year with a Chapter 13 Bankruptcy
  • Foreclosure – You may apply for a FHA insured loan THREE (3) years after the sale/deed transfer date.
  • Short Sale / Deed in Lieu – You may apply for a FHA insured loan THREE (3) years after the sale date of your foreclosure. FHA treats a short sale the same as a Foreclosure for now.
  • Credit must be re-established no late payments in past 12-24 months, depending on hardship

Application Date must be after the above waiting period to be eligible for FHA financing after hardship.

Click Here To Get PRE-APPROVED Now

2016 VA Guidelines

  • Bankruptcy Ch 7 – You may apply for a VA guaranteed loan TWO (2) years after a chapter 7 Bankruptcy
  • Bankruptcy Ch 13 – If you have finished making all payments satisfactorily, the lender may conclude that you have reestablished satisfactory credit.
    • If you have satisfactorily made at least 12 months worth of the payments and the Trustee or the Bankruptcy Judge approves of the new credit, the lender may give favorable consideration.
  • Foreclosure / Deed in Lieu – You may apply for a VA guaranteed loan TWO (2) years after a foreclosure
  • Short Sale – VA does not recognize a short sale as a derogatory event.  If you are able to credit qualify for a VA loan, a short sale would not prevent you from being eligible for VA financing. – Updated 4/2016
  • Credit must be re-established with a minimum 620 credit score

Application Date must be after the above waiting period to be eligible for VA financing after hardship.

Click Here To Get PRE-APPROVED Now

2016 USDA Guidelines

Date of Credit Approval must be after the above waiting period to be eligible for USDA financing after hardship.

Click Here To Get PRE-APPROVED Now

2016 Conventional (Fannie Mae) Guidelines

  • Bankruptcy – You may apply for a Conventional, Fannie Mae loan after your Chapter 7 bankruptcy has been discharged for FOUR (4) years, TWO (2) years from the discharge of a Chapter 13
  • Foreclosure – You may apply for a Conventional, Fannie Mae loan SEVEN (7) years after the sale date of your foreclosure.  Additional qualifying requirements may apply,
  • Short Sale / Deed in Lieu of Foreclosure –
    • UPDATED – Effective 7/29/2014:  Waiting period for subsequent foreclosure that was included in Bankruptcy is waived.  If mortgage is included in Bankruptcy, waiting period defaults to FOUR (4) from the discharge date.
    • UPDATED – Effective 8/16/2014:  Short Sale or Deed in Lieu of Foreclosure not included in a Bankruptcy has a new Waiting Period of FOUR (4) years from date your name is removed from title.  This replaces the ability to buy in 24 months with 20% down payment and minimum 680 credit score.
    • SEVEN (7) Years above 90% Loan to Value | with less than 10% Down Payment – Subject to Private Mortgage Insurance underwriting guidelines.

Credit must be re-established with a minimum 620 credit score.

Click Here To Get PRE-APPROVED Now

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.

2016 Jumbo Mortgage Guidelines

  • Bankruptcy – You may apply for a Jumbo mortgage loan once any chapter of bankruptcy has been discharged for FOUR (4) years, FIVE (5) years if multiple bankruptcy occurs on credit profile.
  • Foreclosure – You may apply for a Jumbo mortgage loan SEVEN (7) years after the sale date of your foreclosure.  Additional qualifying requirements may apply,
  • Short Sale / Deed in Lieu of Foreclosure – You may apply for a Jumbo mortgage loan:
    • SEVEN (7) Years from Short Sale or Deed in Lieu of Foreclosure with Maximum 80% Loan to Value
    • NOTE: There are investors out there that will allow you to buy again in FOUR (4) years after a short sale, but expect higher rates, higher fees, and possibly larger down payment requirement.  Jumbo lenders have not yet loosened up the qualifying guidelines for buying after a hardship.
    • It may make financial sense to consider a portfolio Jumbo lender that offer high rates, so that you can take advantage of today’s market.  Once your short sale is seasoned, refinance into a more favorable, longer term loan.

NOTE:  If hardship is the result of an extenuating circumstance, waiting periods may be reduced.  Contact lender for details.

Click Here To Get PRE-APPROVED Now

Portfolio Loans

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.

Preparing to Buy Again

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.

1412 comments
Tmark
Tmark

I am looking to get a home loan and had some questions I called FindMyWayHome and spoke to Scott. He was very nice, professional and informative even after realizing that he wouldn't be able to help me. Thank you so much Scott!

vicsicily
vicsicily

If you sold a home by way of short sale due to Military move, credit showing only 1 mortgage late because home did not close as scheduled.  Do you have options ? 

ScottSchang
ScottSchang moderator

@vicsicily Yes, you would have options.  A lot of it depends on how long ago this happened, and how the rest of the credit activity looks.  VA does not recognize short sale as a hardship, especially if you were re-located during active duty.

What State are you trying to buy in?

vicsicily
vicsicily

@ScottSchang @vicsicily The only negative on our credit is this one mortgage late.. Nothing else. :(  This was last June and we were moved from NJ to MD. 

vicsicily
vicsicily

@ScottSchang We are dealing with a lender but they are telling us we have to be past one year mark to do anything.  But everything I read says that is not true, any suggestions? 


ScottSchang
ScottSchang moderator

@vicsicily @ScottSchang That lender is looking at FHA guidelines, not conventional.  And the waiting period of 1 year is from the discharge of the BK.  Using FHA financing, it's a 3 year wait from the foreclosure.

Conventional will allow you to buy 2 years from the discharge.

You say the mortgage late is showing up on your credit?  It shouldn't be if the mortgage was discharged through the bankruptcy.  I would consult your BK attorney, and contact the credit bureaus with your BK discharge paperwork and let them know that this account was discharged.  It should not be reporting.

If for some reason the mortgage is not included in the BK, then you would have a waiting period following the foreclosure, and would not be able to use the BK waiting period.

ScottSchang
ScottSchang moderator

@vicsicily @ScottSchang You should be ok - The challenge might be finding a lender that understands the guidelines.  What State are you in?  I might be able to point you in the right direction.

Chynas17
Chynas17

If you gave the home back to the bank- Foreclosure and they sold it. Are you due to pay the income taxes for the property if the bank owned it and sold it?


ScottSchang
ScottSchang moderator

@Chynas17 This is a question for a licensed tax preparer, and I am not one, so I would just verify this information  If you have a foreclosure, and the mortgage is not discharged through bankruptcy, the bank can report the "losses" they incur as income in the form of a 1099-C for cancellation of debt.  Here is more information from the IRS website - https://www.irs.gov/uac/Home-Foreclosure-and-Debt-Cancellation

There are many circumstances that would prevent the lender from issuing a 1099-C, which you would need to consult a licensed tax professional for more information about.

Hope this helps?

Chynas17
Chynas17

I will review more...thank you for this information. Very helpful.

Rn_jeeper
Rn_jeeper

Do you need to wait the full 2 years after chapter 7 to place a contract on house for a VA loan or just ensure that settlement is a full 2 years post bankruptcy discharge? Thanks

ScottSchang
ScottSchang moderator

@Rn_jeeper for a VA loan, the Application date must be after the 2 year waiting period.  Was there a mortgage discharged through the BK?  If so, there could be a separate waiting period in addition to the BK discharge date.

Rn_jeeper
Rn_jeeper

@ScottSchang @Rn_jeeper the mortgage was discharged through the bk. We never reaffirmed the mortgage and then ended up short selling the house. We have been talking to veterans united mortgage and they keep saying we can't settle before the 2 year mark but want to prequalify us. I can't understand why they ant us to prequalify if we can't do anything for 2 more months. 

zsprague15
zsprague15

Hi Scott,


I had a chapter 7 BK in Dec of 2012 it was discharged in Mar 2013 it included our home and a notice to the creditor was sent to them which I have. Bank of America dint foreclose on the home until June of 2014. Is there any programs I would qualify for now with only putting down 5%. I'm relocating for work in a month and a half and already have an accepted offer on a home, but Quicken called me today and told me, my loan wouldn't go through because of this. I've seen programs like the Back to work FHA program that I believe I would qualify for, or is their different ones? I really don't want to lose out on this house as I got a really good deal on it.

whitebow04
whitebow04

HI Scott, 

I had a chapter 7 BK in June 2010 which included our FHA mortgage. The mortgage was never reaffirmed. We lived in the house and paid the monthly payments every month until Feb 2014. At this time we were given false information, told we could purchase a new home and was advised by a real estate agent (who was also family) to simply stop making the monthly payments and let the home go into foreclosure. We actually got to the day before settlement, and thousands of lost dollars later, until we were told we could not get a mortgage. We were heartbroken and very confused. At this point we were now 6 months behind in our mortgage payments and we considered a short sale, however we were advised by our lawyer that if we did short sale my husband would then assume the difference of the debt which was estimated at minimal $60,000 since the home value dropped significantly. He said this would happen because the mortgage was in both our names but the BK was just mine, so he was still liable. Our lawyer advised us to just let the home go into foreclosure to avoid this. He also advised my husband to claim BK. So in July 2014 we moved into a rental and have been here ever since. Since then my husband claimed BK in June 2015 and the mortgage was included in his. Our house sold at auction about a month ago, March 2016. 


So here we are, paying $2300 a month in rent. I make $116000 a year, my credit score is almost at 712 and my only debt is student loans, and we want to move forward to purchase a home. Everyone we call gives us difference advice... The next mortgage would be only in my name... do we count from my bankruptcy in 2010, or from the date the deed was out of my name during the foreclosure auction which was a month ago? Thank you for your advice. We live in NJ now but our home was in PA. Planning to buy in NJ. 

ScottSchang
ScottSchang moderator

@whitebow04 Oh boy, you really did get bad advice throughout this process.  No problem though, you're in a good position now, this is an easy answer, and I promise you that it's 100% accurate.

If you are purchasing in your name only, using your income only, you can buy using a conventional mortgage now, with a minimum 5% down payment.  Conventional guidelines will allow you to disregard the foreclosure date as long as the mortgage was discharged through the BK, and use the BK waiting period, which is 4 years from Discharg.

If you do not have a lender that you trust in NJ, I can introduce you to someone I know.  If you would like an introduction, shoot me an email to scott@findmywayhome.com

dimplz18
dimplz18

Hi Scott, I had a chapter 7 BK discharged in 10/2005. My house was included but was listed under Chapter 7 Individual Debtor's Statement of Intention but I never "officially" reaffirmed the mortgage. The house was sold in a short sale 6/15 and my credit score is 712. Would I qualify now for a mortgage or do I need to wait?

ScottSchang
ScottSchang moderator

@dimplz18 You would qualify for a Conventional loan if we can show that the mortgage debt was discharged through the Bankruptcy.  What State are you trying to buy in?

dimplz18
dimplz18

@ScottSchang I am trying to buy in Connecticut. I have all the bankruptcy paperwork and the house is on there but because it is listed under the Statement of Intention, I am being told that I cannot get a mortgage. I never signed a reaffirmation agreement and from what I have read elsewhere, just because it was under the Statement of Intention, that it was not the same as a reaffirmation. Is that true?

ScottSchang
ScottSchang moderator

@dimplz18 @ScottSchang You have stumbled into the single biggest hurdle that most folks run into when working with inexperienced or uninformed lenders.  You have to contact your attorney, or the court, and get the Notice to Creditors.  This is a list of creditors that the court notified that their debts were discharged.  The consumer normally would not get this document, you have to ask for it.  Even then, you will have to find someone that understands these loan programs.

Shoot me an email to scott@findmywayhome.com, I may be able to introduce you to a lender that can help.

dimplz18
dimplz18

@ScottSchang I am going to email you soon!! I actually have the Notice to Creditors so any help you can give me would be greatly appreciated!!! Thank you!!

emillz1967
emillz1967

Hi Scott, my husband and I had a deed in lieu on Commercial property that was recorded 7/2013.  We sold our primary residence and purchased land now we want to build.  What is the waiting period in Connecticut for a construction loan.  Different banks give me a different answer. Our credit score is 740.  We own another rental property with a lot of equity.

ScottSchang
ScottSchang moderator

@emillz1967 Thank you for your question.  Ny experience is that construction loans do not necessarily follow traditional loan guidelines.  While the permanent loan may be a FHA or Fannie Mae Loan, the construction loan is much higher risk and the lender will determine what their guidelines are.

Unfortunately, because construction loans are temporary financing, you're likely not going to find a lot of consistency between lenders.

Hope this helps?

confused vet
confused vet

Hi Scott, I am a active duty and am unexpectedly transferring this summer.  My husband and I did a short sale in july of 2013, Quicken told me today that I am not eligible until july to start the home buying process, 3 years.  I wondered where you found the information above on the va not considering a short sale a deliquency any longer.


Thanks for your help.

Confused vet

ScottSchang
ScottSchang moderator

@confused vet I am so sorry you are being lied to. It is not uncommon to receive inaccurate advice from this type of a high volume lender.  FHA requires a 3 year wait after a short sale, VA only considers a foreclosure, or deed in lieu as derogatory, and even then will typically approve a Veteran after 24 months of re-established credit.

Another challenge may be that many investors will have "overlays", which means that they will have additional guidelines that are more strict than those established by VA.  As far as the short sale rule, it does not say in the guidelines that there is no waiting period, it simply fails to identify it as a derogatory event at all. You would still have to qualify for the loan, and most likely receive an approve/eligible from the automated underwriting engine.

What State are you in?  I will introduce you to a professional loan officer that knows the underwriting guidelines and can give you more accurate advice.

Thank you for your service,  I am so sorry that people like this are in my industry.

confused vet
confused vet

@ScottSchang @confused vet


We are moveing to Portland, but wanted to look at buying on both the WA and the OR sides of the river.  


The whole thing upsets me because we paid out of pocket for 8 yrs as landlords on the property because of the market crash, hoping it would recover enough to sell.  We finally couldn't afford it anymore in 2013.  And now it haunts us.  Had we done a short sale when we transferred from that location we would be free and clear from it.  


Thanks for your help!

ScottSchang
ScottSchang moderator

@confused vet @ScottSchang if you send me an email to scott@findmywayhome.com, I will introduce you to a very good friend of mine that is a lender in WA/OR.  She will take very good care of you.

dwasicki73
dwasicki73

Hi Scott,  my husband and I had a foreclosure in 2009, due to financial hardship. However our names were not removed from the title until March of 2010. Since then we have had great credit and have even had an FHA loan. We want to sell our current home in Colorado and move back to Washington state. Would we qualify for a conventional home loan now? Our credit scores are about 715-720.

ScottSchang
ScottSchang moderator

@dwasicki73 Thank you for the great question!  Unless the mortgage was discharged in a bankruptcy prior, the Conventional waiting period is 7 years from a foreclosure.  That only puts you out to March of next year, 2017.

I would recommend that you use another FHA loan just to get you into the home, then refinance into a Conventional as soon as you are able.  Do not be discouraged by FHA financing.  The interest rates are significantly lower than Conventional rates right now, and you easily qualify to make the move now.

Hope this helps?

AmieG
AmieG

One more question.... My husband wants to know if there is a better chance of building or are those guidelines stricter?

AmieG
AmieG

Hi Scott, we live in KY and filed CH 7 BK in 3/2013 and our house was included. We had mostly medical bills and had a substantial loss of income and our BK clearly shows it. The BK was discharged 8/6/2013. We did not reaffirm on the house. Based upon conversations I have had with a few lenders it seems WF did not transfer the property out of our name till mid 2014. We are being told different things. One lender said because the house was included in the BK then we are able to purchase after 8/7/2016. The other lender is saying not until 3 years after it is out of our name. We have money for the down payment and our credit is in lower to mid 700's. Can you please help sort through this and if there is any hope point us in the right direction? Thank you

ScottSchang
ScottSchang moderator

@AmieG Hi Amie, in regards to your question about construction loans, take a look at my answers to the two questions below, they had the same question :)

As for your other question - both lenders are wrong.  This is very common to get advice like this, they are kind of mixing up guidelines between a couple of different loan options.  Using conventional financing, you can buy right now - 2 years from the discharge of the Chapter 13, as long you have no other properties that are in default.  Conventional financing will not hit you for a separate waiting period from the foreclosure if the mortgage was discharged in the BK.

The other lender is referring to FHA financing waiting period, which is accurate, but they do not understand the guidelines, so they did not suggest that you are eligible using Conventional financing with as little as 5% down now.

Hope this helps?

AmieG
AmieG

Our BK was a Ch 7. not Ch 13 does this matter? Do you by chance know any lenders in KY that are knowledgable and will be able to help us? Thanks so much

ScottSchang
ScottSchang moderator

@AmieG  Hi Amie, yes, I'm sorry - I misread the BK, that does make a difference.  In that case, it's 4 years from the discharge of the Bankruptcy for Conventional financing, and you can ignore the foreclosure.  That will put you at 3/2017.  

I do have a lender that can help.  If you send me an email to scott@findmywayhome.com, I can make an introduction.

TracyYoung2
TracyYoung2

Hi Scott, we live in Tampa and are just about 3 years out from a short sale. We purchased a lot and would like to apply for a construction to perm loan. What are our options? We own the lot outright and the house we are in now we owe 320 and it's worth about 500.

ScottSchang
ScottSchang moderator

@TracyYoung2 I am getting a lot of these questions lately about construction loans, and I will admit up front that I do not have a lot of experience with investors that offer this type of financing.  My guess would be that the construction lender will at the very least want to follow Fannie Mae or FHA waiting periods due to the fact that they will want to convert this loan to permanent financing as soon as the construction is done.

The specific terms of the construction loan would be dictated by the investor/lender offering the construction arm of the loan.  Depending on timelines and cost of construction, it also sounds like there might be equity in your current home that you can use to help with the construction?

TracyYoung2
TracyYoung2

Well I could sell my current home now to free up a chunk of cash but then I'm scared I do all that and I still can't get a loan and I'm going to live in a tent on my lot! Lol. I've reached out to several banks and a couple brokers and it doesn't sound like there are lenders for this. Frustrating!

ScottSchang
ScottSchang moderator

@TracyYoung2 I completely agree, this is not something you want to take a risk with.  Here's a little secret - MANY lenders will underwrite your file before you find a new home.  This is a company policy for me on any scenario where this type of risk is involved.  An underwriting approval means that you apply for the mortgage, submit all of your documentation, and an underwriter will review it just like you are in escrow for a purchase, except that you do not yet have a property identified.

The only things "missing" will be your down payment, which could come form the sale of your home, and the appraisal and inspections on the new home that you have not identified yet.  Essentially, this is a credit qualifying approval.

I do not do construction loans in my State, so I'm not sure if those lenders will offer this level of service, but it's worth asking?  Just keep in mind that it's possible, and ask around to see if anyone will offer this service.

Hope this helps?

momof38553
momof38553

Hi Scott I can't register for ur webinar tonite... the site seems to be down......however I do have a question for u. My Ch.13 BK was discharged 4/23/13.I also had 2 houses that were foreclosed on 11/14/12 (primary) and 9/24/13 (secondary).Both homes were included/surrendered in BK. When can I buy a home again if I wanted FHA/Conventional financing???  Also would I qualify for a portfolio loan???Thnx.

ScottSchang
ScottSchang moderator

@momof38553 I am so sorry that you were unable to join us, we will do that webinar again.  We had an overwhelming response, and I think it helped a lot of people.  We will probably reschedule it for another 2 weeks.

Let's tackle your question now though - Portfolio loans are available as early as 1 day out of a foreclosure, and the less the waiting time, the more expensive the rates and fees.  This should not be a concern for you though because you would be eligible for Conventional financing 2 years from the discharge of the Chapter 13, which would make you eligible now.  FHA is going to use the actual foreclosure date to start a 3 year waiting period, which would put you at 9/24/16.

A Conventional loan will require as little as a 5% down payment.  What State are you buying in?

momof38553
momof38553

@ScottSchang @momof38553


Hi Scot thnx for quick response, I am in Ft. Lauderdale Florida. But are u kidding me.... I can really buy now with a conventional loan???? Are you definitely sure about that?? I ask that because I was trying to buy a house last May 2015 under the FHA back to work and did not qualify and therefore was denied but none of the loan officers told me I could go conventional ....none...they told me there was nothing they could do for me and I wold have to wait until 9/2016. I mean ....had I known I simply would have gone conventional. Boy I wish I was at the seminar last night, is there a recording??? THnx.   

ScottSchang
ScottSchang moderator

@momof38553 @ScottSchang A recording will go out to anyone that registered, and I will probably be posting a new registration link for the next one in a couple of weeks.

I am not kidding, and I am not surprised that no lender told you what you qualify for.  Most lenders do not see these types of scenarios often enough that they know what the guidelines actually are, and they would rather tell folks the wrong information than take the time to research it before misleading consumers.  It's a sad thing, and it happens every single day.

Shoot me an email to Scott@findmywayhome.com and I will introduce you to a lender that can help :)

adheiniger
adheiniger

One more question for you Scott... Where do construction loans fall into waiting periods?  We are contemplating buying some land with owner financing and building next year after our 4 years after Ch 7.  But I just want to make sure we will be able to obtain some kind of construction loan before we decide on the land.  Thanks

ScottSchang
ScottSchang moderator

@adheiniger Great question!  Most new construction loan lenders are not necessarily following FHA or Conventional underwriting guidelines specifically.  Fannie Mae and FHA do not currently offer Construction loans, these are going to be private lenders that are doing the initial construction financing, and then they will convert it to a conventional or FHA loan after construction is done.  So you'll have to meet their specific guidelines, which I assume would be pretty conservative, and guidelines for the permanent financing that follows the construction phase.

adheiniger
adheiniger

@ScottSchang @adheiniger Thank you so much.  Looks like I should start by talking to some builders.  You have been a great resource during all this as we are approaching the end of our waiting periods.  My only hope now is finding an experienced lender familiar with all of this in WA.

ScottSchang
ScottSchang moderator

@adheiniger @ScottSchang I'm glad you said WA :)  I have an amazing lender in that part of the Country that can lend in WA!  If you shoot me an email to scott@findmywayhome.com, I will make an introduction.  Katy Parsons is amazing, and I'm sure she will be able to point you in the right direction.

ScottSchang
ScottSchang moderator

@adheiniger Since construction loans are not necessarily Fannie Mae or FHA underwritten loans, the waiting periods will vary by lender to lender.  The "construction" part is the challenge.  I would think that it would follow more restrictive guidelines because once the construction is completed, that loan will convert into a permanent loan that would be Fannie or FHA eligible.

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