2022 When Can I Qualify for a Mortgage After Bankruptcy, Short Sale, Foreclosure or DIL
Qualifying for a mortgage after financial hardship is normally only a matter of meeting a minimum waiting period.
The waiting period is determined by the nature of the financial hardship and the type of mortgage you are applying for.
- Buy a Home after Bankruptcy
- Buy a Home after Foreclosure
- Buy a Home after Short Sale
- Buy a Home after Deed in Lieu of Foreclosure
If you’re like most people that got caught up in one of the many financial crises in our lifetime, you were either directly affected, or know someone that was directly affected.
Many homeowners found themselves in serious financial hardship resulting in bankruptcy, foreclosure, deed in lieu, or short sale.
Often, bankruptcy is followed by the default of a mortgage, and the loss of a home to foreclosure, short sale, or deed in lieu.
It can get tricky knowing which waiting period applies and how to figure out the shortest waiting period possible.
This is a very popular subject as you can see if you scroll to the bottom of this article and see over 2,200 questions and answers dating back to early 2011.
2022 FHA Guidelines
- FHA Bankruptcy Waiting Period – You may apply for an FHA-insured loan after your bankruptcy has been discharged for TWO (2) years with a Chapter 7 Bankruptcy. You may apply for an FHA insured loan after your bankruptcy has been discharged for ONE (1) year with a Chapter 13 Bankruptcy
- FHA Foreclosure Waiting Period – You may apply for an FHA-insured loan THREE (3) years after the sale/deed transfer date.
- FHA Short Sale / Deed in Lieu Waiting Period – You may apply for an FHA-insured loan THREE (3) years after the sale/deed transfer date. FHA treats short sales, deed in lieu, and foreclosure as the same waiting periods.
FHA Credit Requirement – Credit must be re-established no late payments in the past 12-24 months, depending on hardship
Application Date must be after the above waiting period to be eligible for FHA financing after hardship.
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2022 VA Guidelines
- VA Bankruptcy Ch 7 Waiting Period – You may apply for a VA guaranteed loan TWO (2) years after a chapter 7 Bankruptcy
- VA Bankruptcy Ch 13 Waiting Period – 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.
- VA Foreclosure / Deed in Lieu Waiting Period – You may apply for a VA guaranteed loan TWO (2) years after the sale/deed transfer date.
- VA Short Sale Waiting Period – 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
VA Credit Requirement 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.
2022 USDA Guidelines
- USDA Bankruptcy Waiting Period – You may apply for a USDA rural loan THREE (3) years after the discharge of Chapter 7 or 13 Bankruptcy
- USDA Foreclosure Waiting Period – You may apply for a USDA rural loan THREE (3) years after the sale/deed transfer date.
- USDA Short Sale / Deed in Lieu of Foreclosure Waiting Period – If you had big issues the deed in lieu of foreclosure will be viewed as a foreclosure and you would want to wait no less than 3 years if the score is under 640. Over 640 your UW will make the call but typically not less than one year.
- UPDATED 12/2014 – Mortgage debt included in Bankruptcy will go by BK discharge date, and subsequent foreclosure will not count as an additional waiting period, as long as you are off title for any defaulted mortgages.
- Link to 12/1/2014 USDA Guideline – HB-1-3555 Attachment 10-B See Page 31 of 34
Date of Credit Approval must be after the above waiting period to be eligible for USDA financing after hardship.
2022 Conventional (Fannie Mae) Guidelines
- Fannie Mae Conventional Bankruptcy Waiting Period – 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 Chapter 13
- Fannie Mae Conventional Foreclosure Waiting Period – You may apply for a Conventional, Fannie Mae loan SEVEN (7) years after the sale date of your foreclosure. Additional qualifying requirements may apply,
- Fannie Mae Conventional Foreclosure Waiting Period (includes Short Sale / DIL included in Bankruptcy) – You may apply for a Conventional, Fannie Mae loan after a minimum FOUR (4) years from the DISCHARGE of a Chapter 7 Bankruptcy, TWO (2) years from the DISCHARGE of a Chapter 13 Bankruptcy
- Fannie Mae Conventional Short Sale / Deed in Lieu of Foreclosure Waiting Period – UPDATED – Effective 7/29/2014: Short Sale or Deed in Lieu of Foreclosure not included in a Bankruptcy has a new Waiting Period of FOUR (4) years from the date your name is removed from the title.
Fannie Mae Conventional Credit REquirement: Must be re-established with a minimum 620 credit score.
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2022 Conventional (Freddie Mac) Guidelines
Conventional Loan After Bankruptcy (Types 7,11, and 13) – You may apply for a Conventional, Freddie Mac loan after your Chapter 7 bankruptcy has been discharged for FOUR (4) years, or as determined by Loan Products Advisor (AUS)
- Freddie Mac Conventional Foreclosure Waiting Period – You may apply for a Conventional, Freddie Mac loan SEVEN (7) years after the sale date of your foreclosure or as determined by Loan Products Advisor (AUS)
- Freddie Mac Conventional Foreclosure / Short Sale / DIL included in Bankruptcy Waiting Period – You may apply for a Conventional, Freddie Mac loan after a minimum FOUR (4) years after the sale date of your foreclosure or as determined by Loan Products Advisor (AUS)
- Freddie Mac Short Sale / Deed in Lieu of Foreclosure Waiting Period –
- You may apply for a Conventional, Freddie Mac loan FOUR (4) years after the sale date of your foreclosure or as determined by Loan Products Advisor (AUS)
Freddie Mac Credit Requirement: Must be re-established with a minimum 620 credit score.
Fannie Mae and Freddie Mac have reduced waiting periods in cases of extenuating circumstances
Date of Credit Report must be after the above waiting period to be eligible for Conventional financing after hardship.
NOTE: I do not yet have a success story for someone qualifying for the reduced time frames that Freddie Mac proposes to offer. That shouldn’t stop you from trying.
2022 Jumbo Mortgage Guidelines
- Jumbo Mortgage Bankruptcy Waiting Period – 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 bankruptcies occur on your credit profile.
- Jumbo Mortgage Foreclosure Waiting Period – You may apply for a Jumbo mortgage loan SEVEN (7) years after the sale date of your foreclosure. Additional qualifying requirements may apply,
- Jumbo Mortgage Short Sale / Deed in Lieu of Foreclosure Waiting Period – 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 requirements. 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 offers 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 your lender for details.
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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.
NOTE: This page was first created in February 2011, and is updated as new guidelines are released.
This page is monitored by experts that understand the guidelines, and have successfully guided countless families back into homeownership after significant financial hardship.
niko82 Oh boy, I stand by my original statements that my understanding is that FHA will not allow you to take out another FHA loan under these circumstances.
Have you had this conversation with your lender? I think you need to push the subject with them and try to force assurance that they have the ability to NOT follow standard FHA guidelines.
And again, I’m only a lender that has a lot of experience, which does not necessarily mean I have all of the answers – this might be a learning experience for me too.
ScottSchang
Hi Scott, thanks for the fast reply. I checked the lien it doesn’t show any release from BOFA. It only shows “Notice of Pending Suit” It looks like they got the judgement confirmed by local judge. It just didn’t foreclose yet. I also see it that they sold this account to rushmore loans on 12/14.
How come they can make a claim if they didn’t even foreclose? I checked the case with hud and it shows that BOFA qualified to make a claim in this house under “Prequalified for 601”
check the link
http://portal.hud.gov/hudportal/HUD?src=/program_offices/housing/rmra/oe/rpts/acd/acdmenu
niko82 Thank you for the kind words. Yeah, this scares me a little bit as well. Please report back to me and let us know if this works out, it is not my experience that it is possible for you to purchase using a FHA loan while you are still on title to a home that is essentially in default.
Many times I learn new loopholes or guidelines through the stories and questions shared on this site, so this will be a learning experience for me if they are able to do it.
My advice is to make sure the lines of communication are WIDE open! If your lender stops returning your calls, or is slow to respond, that would be a red flag. You’re kind of in the home stretch at this point and the underwriters should be looking at your file by now, if they haven’t already.
I would also ask your lender if it’s possible to speak to an underwriter, or an underwriting manager. The end result is going to be whatever the end result is, and I would want to be proactive and make sure the underwriter knows exactly what the situation is sooner than later.
You said that the lender never foreclosed, but do you know if they removed the lien? If they removed the lien, and now you own the home truly free and clear, you might be ok. It is certainly possible that this is the case, and it’s pretty easy to confirm. Liens against a property you own are a matter of public record. Any lender, or real estate agent should be able to pull a “property profile” for you to see if in fact the lien has been removed. If the insurance claim was paid, it sounds like the lien has been removed.
The way I understand FHA’s underwriting guidelines, you must wait 3 years from the date the Mortgage Insurance claim is paid before using FHA financing again.
Good luck, I hope this helps?
Hi Scott,
Thank you for such a great website. I filed Chapter 13 in March 2010 in upstate new york. I included a house in Oklahoma City (FHA Loan). I completed CH 13 successfully in March 2014. Bank of America never foreclose the property but made FHA claim and got paid on 10/10/14.
I give all of this information to a lender(very reputable and known) they come back to me 1 week later and told me i’m good to go.
I’m going with FHA Loan in South Florida 342K home, putting down 40K and rest is financing at 3.125 interest rate, 4% APR.
Oklahoma home still shows up as it’s under my name and that scares the hell out of me by reading your article. I will close Florida home, in 2 weeks i do not want to have any type of last minute surprises.
Cal Carpenter thank you so much for the kind words Cal Carpenter and MarcL . Unfortunately spammers and scammers are very common and I apologize for the inconvenience. I usually catch them very quickly and delete their comments so as to not confuse people.
Your comments really made my day though, thank you 🙂
Well said. And thanks again to Scott for always responding to every question.
I really appreciate Scott doing this page as he’s been an awesome resource and his tips have helped put me in a place where we’re ready to take the final step back into home ownership. What’s become saddening is you scheming scumbags trying to prey on those who are already trying to come back from a tough time. You can’t expect anyone to take you seriously as a *mortgage* company when you use a yahoo, hotmail, or gmail account and can’t correctly spell or punctuate better than a 3rd grade exchange student from Rwanda. Please juliansmith2014 go get a professional email address or go back to trying to give away your late husband, the Vice President of Burkina Faso’s wealth to anyone willing to send thier bank info. It’s clear you are as much or less a lender as I am… I just hope all others on this awesome blog are on to this as well. I’ll throw in a qualifier if God forbid I am wrong, and by some chance you ‘are’ a lender anyone that would trust you to do a mortgage has to have rocks in their head.
Hello Scott,
Thanks for the info…seems to be a lot of confusing info out there and I can’t seem to get a good handle on it. Here’s my particulars – FHA short sale in May of 2012. I have a lender telling me that my credit is back up in the 700+ and that they can get me into a conventional with 5% down, provided that I’m able to give them my short sale packet so that they can prove extenuating circumstances (unexpected medical expenses from my son’s birth and various medical issues and loss of income from wife needing to stay home for care of son). We were not late on any payments until near the date of closing, so that closing could take place.
From your info above, it seems like the waiting period for conventional is 4 years no matter what. Is my lender doing something wrong? We are looking to buy in Oklahoma but the short sale was in Illinois.
Thanks for your help,
Ron
ymadera23 that is not true at all, I’m glad you did your research! The type of loan from the short sale has almost nothing to with when you are eligible to buy again. I will explain the “almost” part in a moment.
The waiting period before you are eligible to apply for financing depends entirely on the type of loan you are trying to qualify for to purchase the new home. These guidelines apply only Conventional, FHA, VA, or USDA financing.
The “waiting period” required is as follows. You are eligible to apply for a Conventional loan in 4 years form a short sale, 7 years from a foreclosure (this must be what your agent was thinking of). If the mortgage debt was included in a bankruptcy, the 4 waiting period begins from the discharge date, and the short sale date is waived.
Your are eligible to apply for FHA financing in 3 years from a short sale date. This is where the “almost” comes in – If the loan that was included in the short sale was a FHA loan, and you are applying for a FHA loan, the waiting period begins from the date the mortgage insurance claim is paid, not the short sale date. This doesn’t apply to you though.
If you are eligible for VA financing, the wait is only 2 years from the short sale date.
There are exceptions, but these are very rare and difficult to document. If you are able to qualify for an exception, the wait for conventional financing would be 2 years instead of 4.
I work for a direct lender in California, and we have quite a bit of experience and success with helping buyers get approved for financing after a hardship.
If you would like, send me an email at ScottS@Broadviewmortgage.com and let’s take a closer look at your situation and see what options may be available to you?
Hope this helps!
I short saled about two years ago and was wondering if I could start looking into buying a house. I’m in California. A realtor told me that I need to find out what kind of loan I had because if it was a conventional loan I would most likely not be able to buy a home until 7 years. Is that true? I’m most certain it was a conventional loan. 🙁