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

Boomerang Buyers Buy Again After Hardship

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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

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

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

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

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

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

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.
    • 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.

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

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

As a 17 year veteran of the Mortgage and Real Estate industry, I am passionate about educating and empowering consumers. Feel free to call, text or email me at (949) 558-3338 or Scott@FindMyWayHome.com

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998 comments
Gn0mE
Gn0mE

Does the name off title rule wait time apply if the house was never foreclosed on?


Chapter 7 bankruptcy discharge was November 6, 2012 and the mortgage was listed in the bankruptcy. I'm currently living in the house with on time mortgage payments (the house was never in foreclosure status, payments on time for 13 years).


If I sell the house, can I apply for a mortgage or do I still have to wait 3 years?

latkin46
latkin46

Hello, I live in Orlando Fl. CH 7 discharged in March 2010, including co-applicant mortgage. Can you please let me know how to go about having my name removed from the deed?  I do not wish to purchase a new home, just want my name removed from the property deed.

ScottSchang
ScottSchang moderator

@latkin46 If you are a co-applicant on a mortgage, and the other person on the mortgage is cooperative, you can simply do a quit claim deed to be removed from title.

latkin46
latkin46

@ScottSchang @latkin46 Thank you Scott, yes I believe he's more than willing. I just never knew what needed to happen. Thanks again!


Shep4leighann
Shep4leighann

Hi,

Can you provide any links or tell me where I could find the rule changes which state the conventional loan waiting period is only held to the 4 year Ch.7 discharge date instead of the subsequent foreclosure date?

Basically, I had a Ch.7 discharge in Sept. 2011 which included a mortgage. My foreclosure date/deed transfer date wasn't until March, 2015. My wife and I are attempting to obtain a construction loan (which converts to permanent upon comedian of construction) to build a house on the lot we already own. Two lenders have told us the waiting period of 3 years minimum begins on the date of foreclosure (March 2015). I don't know if possibly they aren't aware of this so-called change or what. I would really like to provide them with some documentation regarding the change if it exists.

Thanks!

John

Stencraft
Stencraft

Hi Scott,

I have posted before with my circumstances and I think I am correct in my assumptions.  Has a Chapter 7 discharged in August of 2012, subsequent short sale on May of 2014.  Mortgage was included in BK and not reaffirmed.  I am trying to get a USDA loan this year (August) since the 3 year waiting period for BK will be over.  I was pre-approved for 250K in lenders GUS but they are not giving final approval as they are saying there is grey area as to whether they can go with BK date or they have to go with short-sale date.  I read the guideline posted on your website and even though it can be interpreted as grey area, it seems like the section dealing with BK would override the section dealing with short sales towards the end of the guideline.  It would seem to me that the section dealing with short sales is geared to people who just did short sales without prior bankruptcy issues.  It looks like the vendor is not getting much help from USDA either as they are not providing concrete answers.  I feel like I should be able to get the loan based on the interpretation of the rule. Let me know what you think and if I should just try a different lender. I live in PA.  Thank you in advance.

ScottSchang
ScottSchang moderator

@Stencraft I think you're going to have challenges finding any lender that has experience with this, but I think you should try, what can it hurt?  I completely understand the "grey area part, they leave the decision up to lender discretion.  If you're looking for lender alternatives, find a direct lender that sells to GinnieMae.  Ginnie is the Government National Mortgage Association, and in short, securitizes government loans as mortgage backed securities.  This lender would have more of a direct line possibly for answering getting answers to these types of questions.  This is considered an "out of the box" deal, and you just need to find someone that will fight for you.

Hope this helps?




ScottSchang
ScottSchang moderator

@Stencraft @ScottSchang It's definitely not a necessity that they sell direct.  You can just ask them when you speak to them.  Good news though, sounds like they're willing to fight for you!  Good luck :)

Stencraft
Stencraft

@ScottSchang @Stencraft 

Thank you Scott, I am already working with another lender who thinks I have a better chance with their UW team.  How can I find out if a lender sells direct to GinnyMae?  Is this information readily available or would I have to find out from the lender direct.  Thank you again for your helpful advise

SBTX
SBTX

Hi! It's been 6 years since our home was included in our bankruptcy. We have continued to live in it and make payments on it until finally selling it this past February. We're looking to purchase again in the next 6-12 months. Would we qualify as first time buyers?

dancincoop85
dancincoop85

Our mortgage loan was included in our bankruptcy that was finally completed in November of 2013.  We DID NOT reaffirm the loan but have still been iiving in the residence and paying the mortgage.  We have a COE for a VA loan...if we did a short sale on the home or a deed in lieu would be able to get a mortgage in November of 2015 or would it be another two years from that date? I am so confused and would love to be out of this nightmare!  Thanks for any advice offered....

ScottSchang
ScottSchang moderator

@dancincoop85 The waiting period depends on what type of loan you are trying to qualify for - in this case, if you are trying to qualify for a VA loan, the waiting period is only 2 years for BK, short sale, or deed in lieu.  Unfortunately, these are considered separate events, with separate waiting periods.

If you do a short sale, or deed in lieu on your current home, you would have a waiting period of 2 years that would start from the date your name was removed from title.

Conventional financing allows you to buy in 4 years from the discharge of a BK7 (2 years from a BK 13), and you can ignore any foreclosure, short sale, or deed in lieu that happened after the fact, as long as your name is removed from title.

Hope this helps?

knurbina
knurbina

We filed for Ch 7 bankruptcy and was discharged May 2012 which it included our 1 st and 2nd mortgages. We are currently off the title so the house is not in our name any more which happened Sept 2013 due to our HOA foreclosing on it and auctioning it off. Our credit report shows our mortgage companies as accts closed due to bankruptcy. Our credit scores are about 700 and we make about $130,000 a year. We would like to purchase a home this fall with a VA loan since my husband is a disabled Vet. We live in Las Vegas. Do you see any problems for us to qualify? The only loan we have is an auto loan for $32,000 which we took out about a year ago. Any advice would be great.

CRoxy12
CRoxy12

Hi Scott, My name  is Cheryl. I was on a VA loan and divorce. Consequently I filed a chapter 7 bankruptcy that was discharge Feb 2013. I had medical bills and sickness and loss of income over 65%. I have recovered  and have paid credit cards on time, auto vehicle payments on time. My credit score is 720 as on 5/2015. Can I buy a home by myself. My income is 45,000. no dependents and all major credit cards are paid in full. I live in Georgia. If so what kind of loan am I able to get by myself. Ive never bought a home by myself. Thanks Cheryl

ScottSchang
ScottSchang moderator

@CRoxy12 Hi Cheryl, thank you for your question. There are many factors that go into qualifying for a loan.  Based on the information you've provided, you could be eligible for FHA financing 2 years from the discharge of a BK.

The real question that will give you the biggest challenge is, what happened to the VA loan that you were on?  I assume the mortgage was discharged in the BK, what happened with the mortgage?  Was there a short sale, deed in lieu, or foreclosure?  Or, do you still own the home?

Unfortunately, I cannot lend in Georgia myself.  I do have several friends that are lenders that I would feel comfortable sharing their contact information.

daveko
daveko

Scott,

I'm having difficulties identifying when my official 3yr waiting period starts to qualify for a FHA loan.  Previously you stated that it was the date the my name was off the title and back into the banks.  It was a long drawn out process after we got the bank to accept the DIL to when it actually "finalized".  I checked the county records and there was a receipt date of 5/7/2013 and a transfer date of 8/13/12.  I'm hoping it's the latter since that's when the DIL paperwork was signed.

My credit score has recovered to 730+ however, the amount of the 2nd mortgage remains as a blemish as a serious delinquency...will that go away when the 3yr time period hits?  If not, will underwriters approve loans on the basis of the FHA guidelines of the 3yr time lapse?  

Thanks,

David 

ScottSchang
ScottSchang moderator

@daveko  The waiting period begins from the date that your name was removed from title.  You should see the transfer from your name, to the bank’s name on the chain of title.  That’s what you’re looking at.  As long as your name is on title, you own the home.  As soon as your name is removed, you are no longer the owner of record, and the waiting period can begin.


If trying to qualify for FHA financing, you must wait for 3 years from the date your name was removed from title.  If the mortgage was included in a Bankruptcy, it’s possible for that timeline to be shortened.


Hope this helps?

Stencraft
Stencraft

@ScottSchang @daveko 

Hi Scott,

Just a quick question regarding your answer above.  Has anything changed in FHA guidelines with respect to having your mortgage included in Chapter 7 bankruptcy and the waiting periods.  I was under the impression that it was still 3 years from date of short-sale once your name was off title.  You are saying that it might be possible to shorten that period now or is that in relation to the "extenuating circumstances" clause.  Thank you.

ScottSchang
ScottSchang moderator

@Stencraft @ScottSchang @daveko Thank you for the question, and allowing me to clarify - If the mortgage was included in the BK, then we have the option of looking into conventional financing that may allow us to use the BK discharged date, and ignore the subsequent DIL.

FHA requires separate waiting periods for BK and DIL.  Getting an extenuating circumstances exception on FHA is very, very challenging.  I've pretty much only seen death, or permanent disability of primary wage earner accepted as an acceptable circumstance.

Stencraft
Stencraft

@ScottSchang @Stencraft @daveko 

Thanks for quick response Scott. My Chapter 7 was discharged in August of 2012 and my short sale was completed in May of 2014.  Mortgage was included in bankruptcy.  Would this make me eligible for conventional now?  Credit score of 700+ and no late payments or derogatory items for the last 3 years. 

tpagan78
tpagan78

That's my exact situation I hope he has good news for us.

dannyboy301
dannyboy301

I did a DIL in February because I was underwater and had to move away for a job.  My credit is surprizingly still good.  Am I reading correctly that I might be able to get a USDA loan now?  Thanks for your help.

Ababa11
Ababa11

This may be a stupid question.

I had a house sell at auction almost exactly four years ago.  Currently, I think we a stuck waiting for 3 more years to get a conventional loan.  My question is this (I don't want to do anything illegal or unethical) - is there any way that my wife (who was not listed on the foreclosure) could apply for a mortgage and use my income but not my name/SSN/foreclosure history?

ScottSchang
ScottSchang moderator

@Ababa11 This is not a stupid question at all, as a matter of fact, I get it a lot.  Unfortunately not.  However, have you considered purchasing with a FHA loan now (3 years after foreclosure), and refinance into a conventional loan once you're eligible?

Tiff5150
Tiff5150

My husband and I went through Chap 7 BK March 2012 which included our mortgage. We are now getting divorced and the home in currently in foreclosure, not sure when that will be completed. I would like to buy a home once the divorce is completed and the 4 year waiting period is over, so March 2016. Will I be able to qualify for any type of mortgage if the foreclosure has not been completed or do I have to wait to apply for mortgage once the foreclosure has been completed?


ScottSchang
ScottSchang moderator

@Tiff5150 You would need to have your name off title, and the divorce will have to be complete.  As long as the home foreclosed before March 2016, you should be in good shape!  Hope this helps?

Tiff5150
Tiff5150

@ScottSchang @Tiff5150 


So the foreclosure would have to be completed before I would even be considered for a new mortgage? I would not be looking to purchase a new home until the divorce was completed as well.

ScottSchang
ScottSchang moderator

@Tiff5150 @ScottSchang Yes, that's correct.  BK only protects you from a deficiency judgement, it does not affect your ownership, or your responsibility for the mortgage.  Technically, even though there is no "credit penalty" if you foreclose, you are in default on a home that you still own.  That needs to be cleared up (either foreclosed, or caught up on payments) before you would be able to apply for financing.

As long as the mortgage was discharged in the BK, you can use Conventional financing in 4 years from the discharge date of the BK.  If using FHA financing, the waiting period starts from the date of the foreclosure (3 years).

ecspringer
ecspringer

I had a deed in lieu of foreclosure discharged in 2012, but process began and was approved in 2011.  When does my 3 or 4 year status actually begin?

ScottSchang
ScottSchang moderator

@ecspringer The waiting period begins from the date that you name was removed from title, and put in the bank's name.  If buying using Conventional financing, the wait is 4 years.  If buying using a FHA mortgage, the wait is 3 years.

tpagan78
tpagan78

Hi Scott, 


We went bankrupt 3 years ago and a deed in lieu of foreclosure feb 2014.  Are there any programs for us or do we have to wait the 3 year waiting period before we can do anything?

ScottSchang
ScottSchang moderator

@tpagan78 Great question - Fannie Mae changed it's waiting period guidelines in August 2014 to state that if a mortgage debt is included in bankruptcy, and a default happened afterwards, you could use the Bankruptcy waiting period, and you can disregard the waiting period for the default.  That would put you 4 years from the discharge date, and it sounds like you're sitting at 3 years.

FHA or VA financing is going to impose a 3 year waiting period for FHA, 2 for VA, starting from the date your name was removed from title through short sale, deed in lieu, or foreclosure.

Right now, you're a year out. That's plenty of time to get your finances, and credit, and down payment together!

ScottSchang
ScottSchang moderator

@ChristineYeringtonWalls @ScottSchang @tpagan78 That's a really tough situation Christine.  Unfortunately, you're unable to buy a home if you still own a home that is in default.  

I would recommend you attempt a short sale, or deed in lieu of foreclosure.

Hope this helps?

ScottSchang
ScottSchang moderator

@ChristineYeringtonWalls @ScottSchang @tpagan78 If you can sell the home for what it's worth, that's neither a short sale, or deed in lieu of foreclosure!  If you cannot net enough to cover all of the liens, then the bank might dictate which they prefer - short sale, or DIL.  Most banks will require that you try to short sell the home before they will allow a deed in lieu.  Some banks will just offer a DIL out of the gates.

ScottSchang
ScottSchang moderator

@ChristineYeringtonWalls @ScottSchang @tpagan78 Yes, you can sell it out right and pay back the bank.

Including a mortgage in bankruptcy does not mean that you cannot go into default.  You are still the owner of the home, and If you continue to make the payments, you can stay in the home.  If you stop making payments, the loan will go into default, and the lender can foreclose.  That's what I mean by default.

If you can sell and pay the lender the full amount owed, you're golden!

red flag
red flag

Hi I am in Thornton Co. We r looking to buy again after loosing our home 4- 5 years ago. short sale started 2010 finished in 2011. We have been renting and have paid on time. our rent is 1,400. our credit we all checked r in the 60's. husbands 621,625. mine, 620, 640, and my daughters is the highest at 653 and 669. She will be living with us. Do you think we have a good chance of buying a house . the interests rates r so low . and our rent id ridiculous! We might only have 1,000 or 2 to put for down payment.

ScottSchang
ScottSchang moderator

@red flag You can buy using FHA financing with 3.5% down 3 years after a short sale.  Many lenders require a minimum 640 credit score, some will allow lower.   Hope this helps?

graphicsmith1972
graphicsmith1972

My ex-wife is on the loan to the home I still live in and I pay her rent for the mortgage. My name is still on the title of the house and now the problem... She has only been paying principle and interest and not taxes. We were going to split the equity when the house was sold and now she tells me that she might have to have the house foreclosed or she might claim bankruptcy because she can't afford to make-up delinquent payments. I wanted to buy a small house with a VA loan but will I now be able to because of the disclosure form I have to sign about foreclosure. Because there won't be much equity left over after the bank gets through with it, can I quit claim my name off the deed to the mortgage company so that I'm not involved in the foreclosure, or am I screwed!

ScottSchang
ScottSchang moderator

@graphicsmith1972 You can quit claim off anytime you like if your name is not on title.  A lot of has to do with how the divorce decree is written up to describe the distribution of assets.  

If you have equity, why would she foreclose?  Just sell the house, pay back the past due amount, and move forward from there?  Hope this helps?


renee225
renee225

I co signed for my father's home 13 years ago. He passd away November 2013. I did everything I could to save the home but I was not able to. The house foreclosed in September 2014. I live in Nashville TN and the rental properties has double and even triple in most places.It is expensive to rent anything here. I'd rather buy a home instead. My credit score did take a hit but now it's in the low 600's.  I have maintained a job for 19 years straight. I spoke with FHA and was told due to the circumstances of my father's death I may be able to work with a lender. Could you please tell me what can I do to purchase a home?

ScottSchang
ScottSchang moderator

@renee225 This is a going to be a bit of a challenge.  It sounds like the advice you were given is considering this an extenuating circumstance.  You are going to need to speak with a few lender before one of them knows how to navigate through this challenge.  Worse case scenario, you may have a waiting period before you are eligible to buy again, and that will most likely be an underwriter's call.

Unfortunately I cannot lend in TN.

Hope this helps?

tbradford28
tbradford28

I went through chapter 7 Bankruptcy in 2009 that included the mortgage loan. The foreclosure did not happen until 2013. Will I be able to take advantage of the new changes?

ScottSchang
ScottSchang moderator

@tbradford28 Yes, it sounds like you meet the Fannie Mae guidelines which would allow you to use a 4 year waiting period from the discharge of the BK, with no additional timeline for the foreclosure that took place after the discharge.  I have encountered many lenders that are not familiar with this guideline.  If you're in CA, I can help, if not, I might be able to recommend someone if you encounter challenges finding a lender that can help.

cellens1
cellens1

@ScottSchang @tbradford28


I too included my mortgage loan in a chapter 7 which was discharged in 2009, but the foreclosure did not happen until 2012. 


It sounds as though I am eligible for the FM Conventional as well? Is a 10% down payment required?


Do you have any lenders you could recommend in the Grand Rapids, MI area?

Thanks!