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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.

Most people today were either directly affected, or know someone that was directly affected by financial hardship resulting in a bankruptcy, foreclosure, deed in lieu or short sale in the past 5 to 7 years.

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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.

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.

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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.

Asking Your Question is Easy

  • Email me Directly:  Simply click the email at the top of the site.  These questions come directly to me and are answered very quickly.
  • Leave a Comment:  Below every article is the option to leave a comment or question.  We see these comments and questions in real-time and every question is answered.

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

Leave a Question or Comment About this Topic

  • Desperate says:

    Hey Scott
    Nice to see someone so experienced offering information here! Thank you!!

    Filed for chap 7 in 2011. Home was included in the bankruptcy as confirmed in bankruptcy paperwork.
    Moved out of the home in 2015. Home was not foreclosed on until 2017. Called HUD and CAIVRS has been cleared. Scores at 650. Looking to purchase again and DTI is 18-20%. Will this prevent me from getting a FHA again since the home wasn’t actually taken since last year. Trying to work with a lender now who indicates the foreclosure may come up in another report when getting through disclosures?

    • I’m happy to help! Yes, I have a LOT of experience on this topic. FHA requires a 3 year waiting period from the date that your name came off title. The BK is not a factor because it’s only a 2 year wait for FHA.

      Conventional financing will allow this. Fannie Mae updated their guidelines in 2014 that allows you to use the bankruptcy waiting period (4 years from discharge), ignoring any subsequent foreclosure date, AS LONG AS the mortgage is discharged in the bankruptcy. You can get a conventional loan with as little as a 3% down payment.

      Many inexperienced lenders will have challenges with the fact that you lived in the home until 2015, or they will examine the bankruptcy petition and not like that you checked the box saying your intention was to retain the property.

      It sounds like the lender you’re working with does not have any experience with these guidelines. The foreclosure is a matter of public records, and would not show up on your credit report. A title search of the address would give you a chain of title, as well as the sheriff deed from the foreclosure.

      If you would like a second opinion from a loan officer with experience working with these situations, shoot me an email to scott@findmywayhome.com, and let me know what State you’re buying in. I can introduce you to someone that has experience helping others in your situation.

      Hope this helps?

  • Nichole getz says:

    Hello,
    I would like to qualify for a FHA loan. I sold my house to be a short sale in April 2016. Would I be able to qualify for an FHA loan if I could prove extenuating circumstances? I have work to pay all of my bills on time and pay down credit card debt within the last two years. I now have a credit score of 674 . I would be able to put 3.5% down is getting approved possible?
    Thank you

    • Hi Nichole,

      FHA is extremely unforgiving when it comes to the extenuating circumstances exception, it is limited to death or permanent disability of a primary wage earner as the catastrophic event that led to the short sale. If this does not apply, FHA’s normal waiting period is 3 years from the date of the sale.

      If there was a bankruptcy prior to the short sale, Conventional financing may offer a shorter waiting period. Also, Conventional financing is a little more lenient with extenuating circumstances exceptions, with a reduced waiting period of 2 years instead of the normal 4 years.

      If you would like to email me, and tell me more about the circumstances surrounding the short sale, I can tell you if it sounds like something that Fannie Mae would accept.

      Conventional financing offers as low as 3% down payment. My email is scott@findmywayhome.com

      Hope this helps?

  • Angela says:

    Hi Scott, My name is Angela. My husband and I lost our 19 year old son in May of 2016 and then I lost my job in September 2016. We had to file chapter 7 in March 2017. It was discharged September 2017. My husband was offered a job in TN and we moved in October. We sold our house in FL in Feb. 2018. We have a piece of property in TN and would like to build a house but we aren’t sure we can get a loan this soon. Do we have any chance of getting a loan at this time?

    • Hi Angela, I am so sorry to hear about your loss. I can only imagine how difficult these past couple of years must have been.

      When you sold your home in FL, did you sell it for less than what you owed? Was it a short sale or deed in lieu of foreclosure?

      If your FL home was an equity sale, and not short, then the only waiting period you would be looking at is for the bankruptcy.

      What I an tell you is what the standard waiting periods are when you are using standard financing. FHA is going to be your shortest waiting period, which would be 2 years from the discharge of the Chapter 7. To qualify for a Conventional loan, the waiting period is typically 4 years from discharge.

      Construction loans are a little more challenging than a FHA or Fannie Mae conventional loan. That’s the first hurdle you’ll have to overcome. The construction loan lender could impose their own waiting periods.

      That said, there are always portfolio lenders that may offer an exception to the standard waiting periods of FHA, Fannie Mae, or USDA.

      If you have a large enough down payment, it’s possible that there is a local builder or investor that might work with you.

      The first place I would start is a local bank or credit union. A local lender is going to be more likely to work with you than a national lender.

      I can also reach out to my network and see if I know anyone that has access to investors that can help.

      I have your email. If I get any leads on lenders that might work with you, I’ll make an introduction by email.

      Hope this helps?

  • Sharon says:

    I am curious if my husband and I would qualify for a conventional loan. We have middle credit scores 640 however we had a Deed in Lieu in October 2013. We have 3% down and could show reserves of 3 times home payment in my 401K. We found a home that the buyer is willing to pay the closing costs.

    • Hi Sharon,

      There is much more that goes into getting approved than simply your credit score and down payment, and from what you’ve stated, none of these factors would prevent you from being approved.

      The 640 credit score is pretty low, and unless you’re buying in an area where you can use Fannie Mae’s HomeReady, or Freddie Mac’s HomePossible, you might need 5% for conventional.

      Also, Conventional loans are much more sensitive than FHA, which would be much easier to qualify for, as long as you can scrape up 3.5% for the down payment.

      Conventional financing only requires a minimum 620, but it’s much more expensive (higher rate due to low credit score) than FHA would be at the same score. Also, the waiting period following a deed in lieu of foreclosure is 4 years for conventional, and 3 years for FHA.

      You should be clear on both of those.

      I have loan officer friends all across the Country that have a lot of experience with these guidelines. If you would like, shoot me an email to scott@findmywayhome.com and let me know what State you’re buying in, and I can make an introduction.

      Hope this helps?

  • Jason says:

    Hi Scott! We had a chapter 7 bk about 5 years ago. We had our home included in the chapter 7 and was recently foreclosed on. It will be out of my name in April. Will I be able to qualify for a new mortgage under the updated guidelines? Have you seen people in my situation acquire a new mortgage? We have about %5 down payment saved up. We are in MN if you could recommend a mortgage agent I would appreciate it! Thanks

    • Hi Jason,
      You’ve come to the right place. We see this kind of scenario a lot, and yes, you may be eligible for a Conventional loan.

      In some cases, if you vacated the home years ago, you don’t even have to wait until you’re off title.

      We have been able to get buyers qualified under similar circumstances as you’re describing, but it’s not black and white.

      There are a couple of things that can throw underwriters off. First is the length of time between the BK and the foreclosure. Even though Fannie Mae does not require an underwriter to consider this timeline, most do.

      Do you currently live in the home? Did you state on your original bankruptcy petition that your intention was to retain the property after bankruptcy?

      Neither of these are deal killers by any means, but they can most definitely confuse inexperienced loan officers and underwriters, and sometimes, banks will simply choose not to do the loan based on this information.

      I do have lender friends that have experience with this scenario, and I’m happy to make an introduction.

      If you can shoot me an email to scott@findmywayhome.com, and give me a few more details about the foreclosure in April. Do you live in the home? Is the home vacant? If vacant, when did you move out?

      Hope this helps?

  • Ann says:

    Hi Scott,
    I had a deed in lieu in December 2016 on an investment property I got stuck with in divorce that was way underwater and needed much work I couldn’t afford. I have a mortgage on my owner occupied current home and a 715 credit score. I wanted to downsize. Is there any way to get a conventional mortgage before the 4 years is up? It seems somewhat amazing that I have a mortgage, but can’t get a mortgage!

    • Hi Ann,

      Unless the mortgage was included in a bankruptcy, unfortunately, you’re going to be held to traditional lending guidelines if you want to use a conventional mortgage to refinance.

      With that credit score, if you have equity, there are certainly loans available at higher interest rates (5-6%) if you’re in a real bind.

      Also, considering the circumstances, there might be a portfolio lender out there that’s willing to do this loan with more reasonable terms. It might be worth fighting for.

      What State are you in? I can do some asking around and see if any of my expert network have investors that might like this scenario.

      Shoot me an email to scott@findmywayhome.com – give me more information about your home – what do you owe, how much do you think it’s worth, and what would be your goal with refinancing? Are you just trying to lower the payments, the term, or take cash out?

      It’s definitely just outside the box of being easy, but there might be something if we look hard enough.

      Hope this helps?

  • Gary says:

    Hi Scott, I’m trying to get the facts after being told by Chase that I have to wait 4 years from date of discharge for C-13 to qualify for a conventional Fannie Mae loan. I’m trying to refinance the same loan I had with them when I filed that I still have now. My credit scores are 719 to 747 and all payments have been on time during and since the C-13. Are they correct- 4 years to wait or 2 years from what I see in results from the internet searches I’ve done?

    • Hi Gary,

      What you are encountering is what is called an “Overlay”. This basically means that Chase has made the choice to add their own, more strict waiting period on top of Fannie Mae guidelines.

      I absolutely assure you that it is only 2 years from the discharge of a Chapter 13. The exception to this is if you’ve had multiple bankruptcies in the past 7 years, then the waiting period can be increased.

      There are not a lot of lenders that know how, or are willing to help people with past bankruptcies. I attribute most of it to ignorance. There are a lot of loan officers out there that don’t know the guidelines.

      If you would like an introduction to someone that has experience with these guidelines and can help, shoot me an email to scott@findmywayhome.com and I can get you pointed in the right direction. Please include what State you’re in.

      Hope this helps?

  • Dan says:

    Hi, I had a BK and fourclouser in 1995. I’m looking to buy a house this year. My credit score is 780 now. Will what happened in 95 show up when they check my credit history. Thanks, Dan

    • Hi Dan, it is unlikely that the BK will even show up on your credit report. There is zero risk of a foreclosure in 1995 affecting your ability to qualify for a loan today.

      On the loan application, it will ask you if you’ve had a foreclosure in the past 7 years. The answer is “NO”. That should be the end of the story.

      If you would like an introduction to a professional loan officer that I know and trust, feel free to shoot me an email to scott@findmywayhome.com and I can point you in the right direction.

      Hope this helps?

  • Suzi says:

    Hi Scott, this is the most helpful article!

    We are in Florida and had a mortgage included in BK7 in 03/2011, but are still living in the house. The house has been in foreclosure since 2010 and we have been trying to work something out with the bank. I even filed ch13 twice (12/2013 and 10/2014) with the sole purpose of forcing Citi to negotiate the modification through courts (recommended by our attorneys). Nothing else was included in those ch13 and both times they were voluntarily dismissed after we hit a roadblock. Looking back, that wasn’t the smartest decision, but we were honestly trying to keep the house as our finances recovered nicely since bk7 and it just made sense to us at the time. The latest ch13 was voluntarily dismissed 07/2016.

    Luckily, only I filed those ch13s. Husband’s credit recovered completely. He contributes about 85% to our household income, so it should be ok if he is the only one applying for the new mortgage. From everything I’ve read it seems like I wouldn’t be eligible until 07/2021, unless ch13 voluntary dismissal with $0 debt included and only the asset previously discharged through ch7 somehow gets a pass on that 5 year waiting period for multiple bankruptcies?

    Anyhow, from reading through the comments here, it seems like my husband should be ready to buy as soon as his name is not on the title on this house. Our foreclosure trial is set for June, so if we don’t do anything, we should be off the title by September, maybe even August.

    The bank was pushing for short sale. Do you think a short sale would make sense at this point? Houses are selling like hot cakes these days in our neighborhood, but we are not looking forward to the hassle of having the house on the market, unless that is somehow a better option compared to foreclosure. I have asked the bank about deed in lieu, was told they wouldn’t be able to do that because there is a second mortgage.
    Thanks!

    • Hi Suzi, thank you for the kind words.

      Ok, there are a lot of moving parts here. I’m going to throw this out there, and if it sounds like an option, I would want to get this scenario in front of an underwriter to see if it would fly.

      If your husband could qualify for a new home using his income only, and if his BK7 is the only BK on his credit, it’s possible (I think) to do a grant deed to transfer the property into your name only….then you would have to move out of the home. He could not live in the home and apply for a mortgage to buy a new home.

      Your husband is well past the 4 year waiting period on the bankruptcy for conventional financing, and could potentially be eligible if his current residence was not the home that was included in the BK.

      There would be no exceptions for the multiple bankruptcies in most cases. It is possible that you could run this scenario by a local credit union or portfolio lender. It makes perfect sense, it really does.

      You are not trying to game the system here, you’re making the best decisions you can based on the professional advice you’ve received. I don’t get the feeling that you’re taking advantage of living in the home without making payments on the mortgage. That’s your biggest challenge here, is the perception of impropriety.

      As far as a short sale goes…I think this is a great option if the lenders allow it. Again, you would have to live in another home (or stay with family) during the process, so that when you apply for the new mortgage, we can better explain all of the circumstances around your situation and justify the timing in the underwriter’s eyes.

      With good credit and a larger down payment, your chances improve that an underwriter will be able to feel good about making a decision to extend credit to you.

      Another reason why the short sale is a good option is that you can better control the timeline lines here. At the end of the day, you’re going to have to vacate the home. Doing the short sale gives you more control over the terms of this move. The foreclosure could be postponed over and over again (see this a lot), which would leave you in a perpetual state of limbo. This can’t be great for your sense of security and peace of mind.

      Ok, I think that’s enough for now. I’ve covered a lot.

      Feel free to shoot me an email directly to scott@findmywayhome.com if you would like to explore some of these ideas further. I am in California, but I have loan officer friends that have a lot of experience with these types of situations all over the Country.

      I’m happy to help you figure this out, and get you pointed in the right direction with an introduction to someone that can help.

      It’s not a matter of if you can buy another home once you’re off title, it’s more about the path you take to get there, and the time it will take to get all of these pieces to fall into place.

      Hope this helps?

      • Suzi says:

        Thanks again, Scott. This is the most clarity we got in a long time!

        I will be asking our attorney if grant deed would be a possibility.
        Over the past couple days we kinda made peace with the fact that we’ll need to rent for x number of months, one way or the other. The only difference between short sale and letting the foreclosure run its course at this point seems to be our level of involvement and.

        I forgot to mention that our mortgage is now under Selene and so far they haven’t been most straightforward and pleasant to deal with. I have read a few stories about people in similar situations being pressured to do a short sale, then having Selene put a stop to it at the last moment. Of course, there may be plenty of positive experience with Selene, people just don’t rush to internet boards to report those. I’ll need to do a little more research before we decide.
        Hoping to stay in touch with you. A referral to a loan officer in Florida would also be much appreciated. Thanks!

        • I’m glad I could help Suzi. I have a very experienced loan officer friend that can help in Florida. I’ll make an introduction by email. You should see Jim’s contact info in the next 10 minutes or so. If you don’t, check your junk or spam folder just in case it gets filtered.

          Feel free to reach out anytime if you have any other questions. You can also email me directly at scott@findmywayhome.com

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