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2015 Buy Again After Bankruptcy, Short Sale, Foreclosure or Deed in Lieu

Boomerang Buyers Buy Again After Hardship

Click Here to view Buy Again series in Video Library

2015 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 with a 640 minimum credit score

2015 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 - You may apply for a VA guaranteed loan TWO (2) years after a foreclosure
  • Short Sale / Deed in Lieu - You may apply for a VA guaranteed loan TWO (2) years after a short sale, unless it was a VA loan then restrictions apply
  • Credit must be re-established with a minimum 620 credit score

2015 USDA Guidelines

  • Bankruptcy - You may apply for a USDA rural loan THREE (3) years after the discharge of a Chapter 7 or 13 Bankruptcy
  • Foreclosure - You may apply for a USDA rural loan THREE (3) years after a Foreclosure
  • Short Sale / Deed in Lieu of Foreclosure – 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, short sale, or deed in lieu of 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 4 of 6

Although I have not personally processed a USDA with a short sale under 3 years, I have heard of instances when it is possible to buy again with re-established credit in as little as 18 months.In some cases there is not a waiting period.

If the credit was perfect and they had to move because of a relocation or something and had no choice but to ask for a deed in lieu of foreclosure you would be ok.

2015 Conventional (Fannie Mae) – UPDATED 12/2014

  • 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.
  • Currently treated the same as a foreclosure with a waiting time of SEVEN (7) years before you can buy again using a Fannie Mae conventional home loan.
    • TWO (2) Years up to Maximum 80% Loan to Value | 20% Down Payment
    • FOUR (4) Years up to Maximum 90% Loan to Value | 10% Down Payment – Subject to Private Mortgage Insurance underwriting guidelines.

     

  • 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.

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.

2014 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:
    • FOUR (4) Years from Short Sale or Deed in Lieu of Foreclosure with Maximum 80% Loan to Value

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

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 in the lowest priced real estate market that California has seen in years and years!

We specialize in these situations so feel free to drop me an email, call or leave a question below.

562-999-1355

Scott Schang

Branch Manager at Broadview Mortgage Long Beach, California, I am passionate about educating and empowering consumers. Feel free to call, text or email me at (562) 999-1355 or ScottS@broadviewmortgage.com

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874 comments
cc13
cc13

Curious . . . Ch. 7 discharge included primary and second 11/2010 w no reaffirmation.  Notice of substitution of trustee (removing me in favor bank's trustee) and Trustee's sale were recorded 1/24/2011; property sold at trustee's sale 4/26/11.  I understand the BK date (and attendant waiting periods) should prevail for conventional, but what about Jumbo?  I would think the same logic should apply: loan was discharged and right to property forfeited in 11/10 in either case, but I've heard they may be treated differently.  Thanks for any help!

Popsy2
Popsy2

We had to short sale our home due to a job loss, then cancer diagnosis and finally relocation for a new job.  It has been 6 months since we closed on the short sale.  Due to these circumstances, can we qualify for a new loan before the 4 year mark?  Our finances have recovered and our median credit score is about 700..

niko82
niko82

really? my name is wonderful loans, i'm from mars, i can give 0.00001 interest rate, nice to meet you idiot.

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Stephanie5917
Stephanie5917

I Live in illinois and have been discharged from a chapter 7 bankruptcy, 10/2010, the sherifs sale for the home that we forclosed on was done 5/29/12 to be approved or apply for a home loan via FHA or RD to we have to wait 3 years from the sale?

Any help is appreciated!

southcarolina23
southcarolina23

Hello Scott - 


I'm having a hard time getting a conventional loan due to a foreclosure that was included in Bankruptcy filed in July 2007.  I have found this information from Fannie Mae but no one seems to know what I am talking about...


If a mortgage debt was discharged through a bankruptcy, the bankruptcy waiting periods may be applied if the lender obtains the appropriate documentation to verify that the mortgage obligation was discharged in the bankruptcy. Otherwise, the greater of the applicable bankruptcy or foreclosure waiting periods must be applied.   (I have the link the fanniemae's page but it won't let me paste it here)


Any thoughts that could help me?  Thank you.

EA2015
EA2015

Hi Scott,


We short sold our home in 2013.  We live in California, currently own 2 other properties, and would like to purchase another investment property this year. We have 20% down and our credit score is above 700. We have minimal debt, high income, and equity in both properties. Do you think we are eligible for a new investment loan?


I appreciate your feedback,


Ericka

Cal Carpenter
Cal Carpenter

Scott,

Quick question do you know of any good VA lenders in RI? I get the usual come up on searches Quicken Loans, Lending Tree and lots of brokers... but I'm hoping to deal directly with a lender who I can be sure upfront they're not escalating my rate 3% using BK as the reason... only to sell it to a lender for a big profit when  I could have used that lender to begin with. Thanks again.


Cal

niko82
niko82

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
Cal Carpenter

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.  

monkeyron
monkeyron

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
ymadera23

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. :(

ScottSchang
ScottSchang moderator

@Popsy2 It certainly sounds like you would meet the guidelines for an extenuating circumstances exception, which would make you eligible to apply in 2 years from the short sale date, instead of the 4 years normally required with Conventional financing.

If you are eligible for VA financing, that would be 2 years without extenuating circumstances.  FHA requires 3 years.

Was there a bankruptcy at any time during this time?

ScottSchang
ScottSchang moderator

@s1984 Yes, that's right.  Using conventional financing, there is a 7 year wait after a foreclosure unless there was an extenuating circumstance that led to the foreclosure such as death of a primary wage earner, loss of job, permanent disability resulting in a loss of income, and in some cases, divorce resulting in a significant loss of income.  Extenuating circumstances are extremely difficult to document in many cases, but it's an option - so I want to make you aware.

ScottSchang
ScottSchang moderator

@Stephanie5917 To be qualified for FHA, yes, there is a 3 year wait from the date that your name was removed from title.  That sounds like May 29th, 2015?  

USDA RD actually made a change to their guidelines in December to mirror Conventional financing, which allows you to use the 3 year waiting period from the discharge of the BK, without having an additional waiting period for the foreclosure.

Hope this helps?

niko82
niko82

@southcarolina23 

Bingo!

Bankruptcy AND Foreclosure

House INCLUDED in bankruptcy

New rule - started August 16, 2014

Bankruptcy AND foreclosure, with home foreclosed on included in bankruptcy. Waiting period is based on bankruptcy discharge date, not foreclosure date, regardless of how long after the bankruptcy the official foreclosure occurred. Fannie Mae only

ScottSchang
ScottSchang moderator

@EA2015 hi Ericka, was the home you sold an investment property or your primary residence?  Also, what was the reason for the short sale?  Was there a financial hardship that resulted in the short sale?

Last question, was there a bankruptcy involved in addition to the short sale?

ScottSchang
ScottSchang moderator

@Cal Carpenter Cal, I have an AMAZING VA lender - they are based here in California, and lend all over the Country.  I referred a Veteran to them that lives in South Carolina one time after that Vet was declined by 3 other banks - My lender was able to get the loan done!  It wasn't easy, but it was possible, and she got it done.

Shoot me an email and I will make an introduction - scotts@broadviewmortgage.com

ScottSchang
ScottSchang moderator

@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?

ScottSchang
ScottSchang moderator

@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 :)

MarcL
MarcL

Well said. And thanks again to Scott for always responding to every question.

ScottSchang
ScottSchang moderator

@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!

Popsy2
Popsy2

@ScottSchang @Popsy2


No, no bankruptcy.  Our primary loan was paid in full and a home improvement loan was the short sale  

Stephanie5917
Stephanie5917

Yes, May 29th 2015 is 3 years from sale date but wonder if because or being 5 years from discharge date makes a difference because of....

"UPDATED 12/2014 – Mortgage debt included in Bankruptcy will go by BK discharge date, and subsequent foreclosure, short sale, or deed in lieu of foreclosure will not count as an additional waiting period, as long as you are off title for any defaulted mortgages"

Maybe i am just wishful thinking? we have found a home we want

southcarolina23
southcarolina23

That's what I thought. Why can't I find anyone who knows this that will actually do the mortgage?

EA2015
EA2015

@ScottSchang @EA2015 Thanks for your fast reply Scott.  The home I short sold was my principal residence.  We short sold for a few reasons 1) We were in an adjustable negAm loan with our balance increasing every month. The interest rate was scheduled to adjust and our payment was going to increase by $2000.  2) In 2012 we had an increase in medical bills with both my daughter and husband having surgery. My husband didn't work for several months. There was no bankruptcy involved nor was I delinquent with any other creditors.


Let me know if you need anything else! 


Ericka

niko82
niko82

@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




Stephanie5917
Stephanie5917

reading your response again looks like we may qualify for RD not FHA?

jayns
jayns

@southcarolina23 

Check with Churchill Mortgage.  https://www.churchillmortgage.com/dave/default.aspx?exid=site.nav.dave&snid=recommends.churchill

Otherwise, I actually went to my local bank who had Quicken Loans underwrite my mortgage. 

Just be patient and keep shopping.  If the facts are as you state you should be able to find someone.  Take in a copy of the BK paperwork and it should clear you.  Make sure there isn't something else that isn't holding you up.  Debt/Income ratios, work history, etc. 

jayns
jayns

@southcarolina23 

The unfortunate part of this and I'm sure we can all attest is that you are going to have to keep shopping until you can find someone who is willing to battle for you.  Many UW are still being conservative or may not be aware of the change...I know, they should but they probably aren't aware. 

I had fought this for the past six months and finally have a clear to close on a property.  It just took the right UW to know the updated regulations. 

ScottSchang
ScottSchang moderator

@EA2015 Good morning, you would be unable to use Conventional financing to purchase an investment home at this time.  Conventional guidelines require a 4 year wait from the date your name was removed from title before you could be eligible.

That doesn't mean that there isn't a program out there, I am seeing more and more "alternative" sources begin to hit the market.  Let me do a little more research and see if I can find something that might point you in the right direction.

ScottSchang
ScottSchang moderator

@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
ScottSchang moderator

@Stephanie5917 - correct, as long as you meet all other qualifying guidelines, the foreclosure will not preven you from being eligible for RD now, FHA in May

southcarolina23
southcarolina23

@jayns Thank you for the info.  Both brokers I have had before also went thru Quicken Loans, but for whatever reason this issue came up.


I will check into Churchill now.

niko82
niko82

@ScottSchang

Yes, i asked him to check CAIVRS and it came out clean. I'm puzzled and pretty scared at this point. Maybe consumers are getting bail out just like the banks? 

jayns
jayns

@southcarolina23 

I am curious when (month) that you had this issue?  I had issues all the way until December.  Even though the new requirements went into effect in August/September it takes time for staff and companies to implement/train. 

ScottSchang
ScottSchang moderator

@niko82 It would be nice to get the same treatment as the banks, wouldn't it?  It sounds to me like you've done your research.  If this were anything other than an FHA loan that you are trying to get qualified for, I would not be as concerned.

Maybe ask the lender for a copy of the DU approval and read through that.  It should provide guidance.

Also, on the application, did you list the NY home as Real Estate Owned?  As well as confirm that you have had a bk and foreclosure on the declarations section of page 3 of the application?

Input equals output, until the underwriter does their due diligence.  As long as your loan officer accurately completed the application, your result should be accurate.  The question really just comes down to that, was the application completed correctly?  

southcarolina23
southcarolina23

@jayns @southcarolina23 I'm having issues now.  Last week - to separate brokers, one in Indiana and another in South Carolina - couldn't get my deal completed because of this.


I found a guy that blogged about this thing in California and sent him all the info, he said he could do it.  But it's been radio silence since last Thursday when I sent it to him....


niko82
niko82

@ScottSchang @niko82 

Yes, the application was completed correctly, he asked copy of BK petition before he can give me an answer. It took him a week and he came back and told me BK attorney did the good write up, but do not explain what that meant. From reading your article and everywhere else my application should not be approved but may be chapter 13 saved me? Can you please explain what is DU approval mean?

ScottSchang
ScottSchang moderator

@southcarolina23 @jayns Thank you @jayns   for helping out on this!  @southcarolina23 , are you in South Carolina?  It sounds to me like there may be a different layer of complication or confusion about your specific situation.  If you're getting radio silence, there's a strong possibility that you just have a lousy loan officer that's afraid to deliver what they believe to be bad news.

There's always a solution, sometimes the timing just isn't what you want to hear.

Unfortunately I can only lend in California, but I have friends across the Country that I can refer you to.

ScottSchang
ScottSchang moderator

@niko82 DU stands for Desktop Underwriter, which is the automated underwriting engine that all lenders will use for FHA mortgages.  Based on FHA guidelines, your loan should be considered a "manual underwrite" which means that you would most likely not receive an approval based on the timelines involved, which is 2 years from the discharge of the Chapter 13.  Add to that the fact that you still own the home, the mortgage is in default, and there is still a lien against the home, and this just gets really complicated.

Here is the chapter of the FHA underwriting guidelines that addresses using an FHA mortgage after a Chapter 13 bankruptcy - http://portal.hud.gov/hudportal/documents/huddoc?id=4155-1_4_secC.pdf

niko82
niko82

@ScottSchang OK, i got the DU approval now. Desktop Underwriter. He gave me pre-approval letter and that's how i put an offer on the house. Is DU something he can share with me, i do not want to piss him off?


ScottSchang
ScottSchang moderator

@niko82  a pre-approval letter is usually not even worth the paper it's written on unless there is a full DU approval and the underwriter has reviewed your file.  Many lenders hand out those letters in cases where the borrower never qualified.  

I'm absolutely not saying that is what happened in your case, I am just saying that a pre-approval letter is not binding, nor is it an underwriting approval.

ScottSchang
ScottSchang moderator

@southcarolina23 @ScottSchang @jayns I just can't imagine this being the case - If you would like, you can give me a call and give me more details about the situation.  The only thing I can possibly imagine is that would are still on title to the home - is that possible?  I definitely know lenders that can lend in South Carolina that understand this guideline.  My cell is 714-336-8286

niko82
niko82

@ScottSchang @niko82 

they were pretty serious about every single item in my credit report before they hand me that pre-approval letter. They verified my income using theworknumber.com - checked debt to income ratios etc. I will email and ask him about the DU approval. Thanks for the education, appreciate it. 

ScottSchang
ScottSchang moderator

@niko82 I applaud you for educating yourself and not taking anything for granted - I hope everything goes smoothly!  Please check back in and let me know how this turns out?  

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