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Waiting Periods for buying after bankruptcy foreclosure short sale deed in lieu

2018 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 meeting a minimum waiting period.

The waiting period is determined by the nature of the financial hardship and the type of mortgage your are applying for.

If you’re like most people that got caught up in the financial crisis in 2008, you were either directly affected, or know someone that was directly affected.

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Many homeowners found themselves in serious financial hardship resulting in a bankruptcy, foreclosure, deed in lieu or short sale.

Often, a 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 apply 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.

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2018 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/deed transfer date. FHA treats short sale, deed in lieu and foreclosure as the same waiting periods.

Credit must be re-established no late payments in past 12-24 months, depending on hardship

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

2018 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 the sale/deed transfer date.
  • 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

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

2018 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 the sale/deed transfer date.
  • 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 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.

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2018 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,
  • Foreclosure / 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
  • Short Sale / Deed in Lieu of Foreclosure – 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 date your name is removed from title.

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

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2018 Conventional (Freddie Mac) Guidelines

Bankruptcy (7,11,13) – 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)

  • Foreclosure – 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)
  • Foreclosure / Short Sale / DIL included in Bankruptcy – 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)
  • Short Sale / Deed in Lieu of Foreclosure –
  • 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)

Credit 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.

2018 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.

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.

“Buy Again” Questions Answered

If you are like most people that visit this website, you’ve got a mortgage problem or an unanswered question and you’re having trouble getting answers.

We are here to help you get the right answer, the first time, and connect you with an experienced loan officer that can help if necessary.

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  • Email me Directly:  Simply click the email at the top of the site.  These questions come directly to me and are answered very quickly.
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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.

Buy a home after bankruptcy, foreclosure, short sale or DIL

About Your Expert

Scott Schang

As a 19 year veteran of the Mortgage and Real Estate industry, I am passionate about educating and empowering consumers. I have been writing about consumer protection issues, and making sense of complicated real estate and mortgage topics on this website since 2007

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  • Gerald Shockley says:

    Due to a Divorce in 2013, filed a chapter 7 Bk which discharged in 2014. The house had not been foreclosed as of today and was awarded to my ex-wife through divorce agreement. Earlier this year I had my name removed off the title to property and released all my rights to her who was the other person on the deed. I’m since re-married with stable income and re-established credit. Do you think I could qualify for a FHA loan

    • Hi Gerald, yes, I do think that FHA is a possibility. A lot would depend on how the divorce decree is written regarding awarding her the home/liability, and the payment history on the mortgage. In theory, if the decree clearly awards all responsibility and liability for the home to your ex, FHA is only going to require a 2 year waiting period from the discharge of the Chapter 7.

      If you would like an introduction to a professional loan officer that has experience with these guidelines, shoot me an email to scott@findmywayhome.com and let me know what State you’re trying to buy in. Hope this helps?

  • Vince says:

    Hey Scott,

    Hoping I can pick your brain, we filed bankruptcy in 2010 and our home was included in it. We never reaffirmed on the loan, yet we remained in the home keeping the payments current. Early this year we have decided to move and started the home search. Because we have kept the payments current, the bank has not started the foreclosure process. We have been pre-approved for a conventional loan, we have put in an offer on a new home and it is currently under the underwriting process.

    My fear is that because of our current home we will not pass the underwriting process. Should I be concerned.

    Summary.
    Bankruptcy in July 2010, home included in bankruptcy
    Remained in home, kept payments current. “No foreclosure as of yet”
    Attempting to purchase a new through a conventional loan

    Thank you very much,
    VP

    • Hey Vince, you have options. The first option is to continue to make the payments on the home and put a renter in there. Let that asset grow.

      If you cannot rent the home out, and you cannot carry both payments, you would have to sell the home. Is the home worth more than the balance of the mortgage? If so, sell it, and use the equity for the down payment on your new home.

      Technically, using a conventional mortgage, you could ignore any short sale, deed in lieu, or foreclosure date if the mortgage was discharge in the BK. However, none of these are good options. If you can rent it out or sell it for a profit, those are your best options.

      If you live in the home, and stop making payments, you’re not only going to be subject to the timeline of the lender before the home is foreclosed on, you’re also throwing away your long time pattern of making your payments after the bankruptcy.

      I have loan officer friends that have a lot of experience with these scenarios, and can help guide you through this process. If you would like an introduction, shoot me an email to scott@findmywayhome.com and let me know what State your in?

      Hope this helps?

      • Vince says:

        Thank you very much, I just sent you an email. We are currently working with a loan officer and are under contract. Should something go change or come up prior to closing, I would definitely be interested in one of your referrals. Thanks again

  • Brian and Teresa Snyder says:

    We are wanting to purchase our home that we are currently renting. Our chapter 7 bankruptcy was discharged on September 27, 2016 and our former residence was sold as a short sale on November 14, 2016. We have the 20% down payment ready as well as our credit scores are 650ish. Also, we have already negotiated the purchase price.
    What options do we have as we would like to close by October 2018?

    • Hi Brian and Teresa,

      Your only option under this scenario is going to be a portfolio loan. It will be a 7/1 ARM (fixed for 7 years). Expect higher closing costs and interest rates, but when compared to renting, it’s a GREAT option!

      The most important thing here is refinancing OUT of this portfolio loan as soon as humanly possible. You will have 2 options. The first option is FHA financing, which will also be the soonest you can refinance. FHA requires a 2 year wait from the bankruptcy, and a 3 year wait from the short sale. You would be eligible to refinance into a FHA loan in November 2019.

      The other option is Conventional financing. Conventional financing will allow you to buy in 4 years from the bankruptcy discharge, and ignore the short sale date.

      What State are you buying in? If you shoot me an email to scott@findmywayhome.com, send me the best way to reach you, and the State you’re buying in, and I can make an introduction to a professional loan officer that has experience with Portfolio loans, as well as buying after hardship guidelines.

      Hope this helps?

  • Gloria says:

    Hello Scott!

    I have a BK which was discharged in Nov 2014. My primary residence was included (although at the time I was told it wouldn’t be!). Once we found out that because we were no longer financially responsible it wasn’t reporting to the credit bureaus, we decided to sell it. It sold as a short sale (Sept 2016)…would this qualify as a “mortgage included in bankruptcy” scenario as you mentioned under the “FHA waiting periods?” If so, when would/should I be able to buy again? Thanks!

    • Hi Gloria,

      The waiting period after a short sale is determined by the type of financing you’re applying for. FHA considers the Bankruptcy and short sale as 2 separate events with 2 separate waiting periods. Only Fannie Mae conventional will allow you to use the BK waiting period and ignore the short sale date…which is not a actual published guideline, but we’ve had a lot of success doing loans under these circumstances.

      Based on the dates you’ve provided above, you would be eligible for Conventional financing in November 2018, and FHA financing in September 2019.

      If you would like, I can introduce you to an experienced loan officer that can get you pre-approved now, and all you would have to do is wait out the 4 years. The reason why I would get pre-approved now is that if there is an opportunity to improve on your approval, you’ll have a few months to get things lined up for the best rate and fees.

      If you would like an introduction, just shoot me an email to scott@findmywayhome.com and let me know what State you’re buying in.

      Hope this helps?

  • KM says:

    Hi Scott!

    I was included on a FHA loan with my mom back in the day around 2007. Unfortunately she lost the home, and it was foreclosed on in Oct. 2014. She filed bankruptcy and it was discharged in 2011. Can I still get an FHA loan even though I was on the foreclosure? And when is the earliest I can qualify for one?

    • Hi KM, you can absolutely qualify for FHA. FHA has a 3 year waiting period after a foreclosure, which would have made you eligible in October 2017. Not all lenders know these guidelines, so I can introduce you to an expert that has experience with FHA financing after a foreclosure.

      If you would like an introduction, just shoot me an email to scott@findmywayhome.com, and let me know what State you’re buying in.

      Hope this helps?

  • Chris says:

    Greetings Scott,
    I short sold my home in 2015, was told I would have a “penalty” for 3 years to apply for another home. We waited patiently and on Oct 14 2018 will be our 3 years. Would we have a harder time trying to get another home? My credit score went from 540 to 652, not the greatest but working its way up. So that’s my question, should we give up hope of getting into another home or is there a real possibility?

    • Hi Chris,
      There is ABSOLUTELY a possibility for buying again. FHA financing will allow you to buy 3 years from the completion of the short sale. The exception to this would be if the loan on the short sale was a FHA loan. If it was, then your 3 years will not begin until HUD pays the mortgage insurance claim to your old lender.

      If you want to shoot me an email to scott@findmywayhome.com, I can introduce you to a professional loan officer that has a lot of experience with these guidelines. Just let me know what State you’re buying in.

      If the previous loan was an FHA loan, the loan officer can look up CAIVRS to determine when the 3 year waiting period is up. If the short sale loan was a conventional loan, then you would be eligible for FHA as soon as you’re 3 years from the date your short sale closed.

      Hope this helps?

  • Jackie says:

    Hi Scott, Is there a difference from buying a manufactured home compared to a regular home? My house foreclosed January of 2018, and I have 10% to put down the trailer is 49,900 and my credit score is 575 is it possible for me or should I wait a couple of years.

    • Hi Jackie, yes there is a difference. Manufactured also can mean a couple of different things. If it is a manufactured modular home, that means that it’s pre-built, brought out on big trucks, and assembled on a permanent foundation on land that you own. These homes will have a HUD plaque that designates it as a home that qualifies for HUD financing.

      A mobile/manufactured home must be fixed to a permanent foundation on land you own, or with a land lease that exceeds the term of the financing (30 years). If you pay taxes to the DMV, a manufactured home is not eligible for Fannie Mae or FHA financing. If it is permanently fixed to a foundation and eligible for property taxes, it can be financed using traditional home financing.

      The waiting periods will apply if you are using a Fannie Mae or FHA loan. If the foreclosure was not included in a prior bankruptcy, there is a 7 year wait for Fannie Mae conventional financing, or a 3 year wait for FHA financing.

      Hope this helps?

  • s says:

    Also,,, my credit reports do not show any bankruptcy at this time..and my name has never been on any home loans..

    • Unfortunately, if you were included in the bankruptcy, you would be subject to the waiting periods following the discharge, for the loan program you are applying for. If you send me that email, could you tell me what the discharge date is on the bankruptcy?

      Your situation has a lot of moving parts. This should have all been identified and addressed a long time before you ever even made an offer to buy a home. Your lender really put you in a difficult situation here.

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