Waiting Period After Bankruptcy

This page will tell you everything you need to know about qualifying for a mortgage after a bankruptcy.

There is a lot of misinformation and lack of experience around this topic. We can clear all that up now.

Mortgage included in BK? These Links Might Help

Foreclosure

Qualify for a mortgage after a Foreclosure

Short Sale

Qualify for a mortgage after a Short Sale

Deed in Lieu

Qualify for a mortgage after a Deed in Lieu

Waiting Periods by Mortgage Type

New Loan Type

Bankruptcy Waiting Period

Fannie Mae
Freddie Mac
FHA Mortgage
VA Mortgage
USDA Mortgage
Jumbo Mortgage
Portfolio Loan
Fannie Mae

Fannie Mae Waiting Periods

These guidelines apply specifically to how the Fannie Mae DU (Desktop Underwriter) Automated Underwriting System will look at a past bankruptcy.

Chapter 7 or 11 Bankruptcy

  • 4 Years from the Discharge Date
  • 4 Years from a Dismissal Date 

A four-year waiting period is required, measured from the discharge or dismissal date of the bankruptcy action.

Chapter 13 Bankruptcy

  • 2 Years from the Discharge Date
  • 4 Years from a Dismissal Date 

If you are unable to complete the Chapter 13 plan and receive a dismissal, you will be held to a four-year waiting period.

Multiple Bankruptcy Filings

  • 5 Years if Multiple BK in past 7 years

If you have more than one bankruptcy filing within the past seven years, a five-year waiting period is required, measured from the most recent dismissal or discharge date.

Freddie Mac

Freddie Mac Waiting Periods

These guidelines apply specifically to how the Freddie Mac LPA (Loan Products Advisor) Automated Underwriting System will look at a past bankruptcy.

Chapter 7 or 11 Bankruptcy

  • 4 Years from the Discharge Date
  • 4 Years from a Dismissal Date 

A four-year waiting period is required, measured from the discharge or dismissal date of the bankruptcy action.

Chapter 13 Bankruptcy

  • 2 Years from the Discharge Date
  • 4 Years from a Dismissal Date 

If you are unable to complete the Chapter 13 plan and receive a dismissal, you will be held to a four-year waiting period.

Multiple Bankruptcy Filings

  • 5 Years if Multiple BK in past 7 years

If you have more than one bankruptcy filing within the past seven years, a five-year waiting period is required, measured from the most recent dismissal or discharge date.

FHA Mortgage

FHA Waiting Periods

These guidelines apply specifically to how FHA loans are underwritten using either Fannie Mae DU (Desktop Underwriter), or Freddie Mac LPA (Loan Products Advisor) Automated Underwriting Systems will look at a past bankruptcy using FHA guidelines.

Chapter 7 or 11 Bankruptcy

  • 2 Years from the Discharge or Dismissal Date

A two year waiting period is required, measured from the discharge or dismissal date of the bankruptcy action.

Chapter 13 Bankruptcy

  • 1 Year from the Discharge Date if Manually Underwritten
  • 2 Years from a Dismissal Date 

With Court approval, you may be eligible for a manually underwritten FHA loan after 12 months of on-time payments under a Chapter 13 bankruptcy plan.

Multiple Bankruptcy Filings

  • No additional waiting period

If you have more than one bankruptcy filing, FHA does not address multiple bankruptcy filings in it's guidelines.

VA Mortgage

VA Waiting Periods

These guidelines apply specifically to how VA loans are underwritten using either Fannie Mae DU (Desktop Underwriter), or Freddie Mac LPA (Loan Products Advisor) Automated Underwriting Systems will look at a past bankruptcy using VA guidelines.

Chapter 7 or 11 Bankruptcy

  • 2 Years from the Discharge Date

A two year waiting period is required, measured from the discharge or dismissal date of the bankruptcy action.

Chapter 13 Bankruptcy

  • 2 Years from the Discharge Date

Multiple Bankruptcy Filings

  • No additional waiting period

If you have more than one bankruptcy filing, VA does not address multiple bankruptcy filings in it's guidelines.

Mortgage Included in Bankruptcy

VA considers Bankruptcy, and any subsequent foreclosure or deed in lieu as separate events, enforcing the waiting period of each independently and concurrently.

VA Manual Underwriting

VA mortgages can be very flexible if you are working with an experienced loan officer and underwriter who are not afraid to get their hands dirty.

VA waiting periods can be addressed with manual underwriting if the hardship is the result of an event outside of your control.

If you fall victim to a big box VA lender's call center and are in need of manual underwriting, it is likely you will simply be told you do not qualify.  This may not be true.  ALWAYS work with a loan officer that is a VA expert, and solves these kinds of problems for a living.

USDA Mortgage

USDA Waiting Periods

These guidelines apply specifically to how the USDA GUS (Guaranteed Underwriting System) Automated Underwriting System will look at a past bankruptcy.

Chapter 7 or 11 Bankruptcy

  • 3 Years from the Discharge Date

A three year waiting period is required, measured from the discharge or dismissal date of the bankruptcy action.

Chapter 13 Bankruptcy

  • 1 Year from the Discharge Date 

A one year waiting period is required, measured from the discharge or dismissal date of the bankruptcy action.

Mortgage Included in Bankruptcy

In December, 2014 USDA issued an update to mimic Fannie Mae's foreclosure included in bankruptcy underwriting guideline.

Under this guideline, the foreclosure of a mortgage that was discharged in a bankruptcy would not be considered as a separate event and the bankruptcy waiting period can be used at the underwriter's discretion.

Jumbo Mortgage

Jumbo Waiting Periods

Jumbo underwriting guidelines are going to vary widely depending on the financing institution you are working with.

Some depository banks will require longer waiting periods than traditional underwriting guidelines.

Expect a minimum 4 year wait for most Jumbo mortgage lenders, with a higher waiting period for others.

There are many portfolio Jumbo lenders that will seriously look at compensating factors like credit profile since bankruptcy, employment history, equity and reserves, and may offer reduced waiting periods.

A portfolio loan would be an option if you are looking for reduced waiting periods or more flexible qualifying guidelines.

Portfolio Loan

Portfolio Loan Waiting Periods

A portfolio loan is not a specific loan program, but represents a broad range of unique underwriting guidelines offered by different lenders.

There are portfolio loans that will allow you to buy a new home one day from a bankruptcy, foreclosure, short sale or deed in lieu.

If you're interested in this type of timeline, less than 24 months from the bankruptcy, you can expect a minimum of 10% to 20% down payment will be required.  

Expect interest rates and closing costs to be higher than traditional financing, and that's ok.  A portfolio loan is a "stepping stone" to bridge the waiting period before you are eligible for traditional financing.

I encourage you to run the numbers comparing buying now with higher rates and fees versus waiting until you're eligible for traditional financing.  When you look at the equity growth, tax deductions and forced savings benefits of home ownership, this comes down to a math problem.

Experience Counts.  Make sure you are getting advice from a loan officer that has experience working with portfolio loan underwriting guidelines. 

Because no two portfolio loans are going to have the same guidelines, understanding the basics, and having access to multiple resources is the job of a professional loan officer.

Extenuating Circumstances Exception

Reduce Waiting Periods?

You may be able to shorten the published waiting periods if your hardship was the direct result of an extenuating circumstance. 

An extenuating circumstance is defined as a one-time event that was completely outside your control, and is unlikely to happen again.  This is where it gets tricky.

FHA considers the death or permanent disability of a primary wage earner as an extenuating circumstance, but that's it. 

Conventional underwriting guidelines tend to be more flexible and will include divorce, lay off, and other potential one-time events that you may not have control over.

If you think you are to qualify for an extenuating circumstance exception, it is vitally important that you work with a mortgage professional that has experience with extenuating circumstances. 

The documentation, attention to detail, and ability to tell the story is incredibly important to even have a chance at getting your exception.

Drop me a question below if you have any questions about extenuating circumstances.

Scott Schang
Founder, FMWH

FAQ's About Qualifying for a Mortgage After a Bankruptcy

When does my waiting period start?

This is one of the most common questions here at Find My Way Home, and one that comes with more questions usually.

Your waiting period, and the start of that waiting period will be calculated differently depending on what type of loan you're trying to qualify for.

Conventional, FHA, VA & USDA guidelines each have different waiting periods based for bankruptcy, foreclosure, short sale, or deed in lieu.

In some cases, a mortgage included in a bankruptcy that is lost to foreclosure, short sale or deed in lieu years later, can use the bankruptcy waiting period as your starting period.

I recommend you reach out to us with your specific situation to get an accurate timeline for when you can become a home owner again.

 

How do I prove that my mortgage was discharged?

At the time of your original bankruptcy petition, many folks checked the box that said your intention was to keep the home after the bankruptcy.  This causes a lot of confusion for inexperienced loan officers and underwriters.

Unless you specifically sign a separate reaffirmation agreement with your lender (which is incredibly rare), your mortgage was included and discharged through the bankruptcy.

The documentation that your loan officer and underwriter will need is a document from the court called a Notice to Creditors, or Certificate of Notice (I've seen it called both).

This is a list of creditors that were notified by the bankruptcy court that their debt has been discharged.  If you were not given a copy of this document after your discharge, you can get it from the court, or your bankruptcy attorney.

Can I buy before the waiting period is over?

Yes, there are a couple of options for shortening the waiting periods enforced by Fannie Mae, Freddie Mac, FHA, VA and USDA.

The first option is asking for an Extenuating Circumstances Exception.  An Extenuating Circumstance is defined as a one time event that is completely outside of your control that led directly to your hardship.

Depending on what underwriting guidelines you are following, that "one time event" has different definitions.  FHA defines an extenuating circumstance as the death or permanent disability of a primary wage earner.

The other, more accessible option is to use a portfolio loan that is "outside the box", and does not follow Fannie Mae, Freddie Mac, FHA, VA or USDA waiting periods.

Portfolio loans will typically require a higher down payment than traditional financing and often carry higher rates and fees.

Many folks choose to use a portfolio loan to bypass waiting periods.  When you do the math, the benefits of home ownership almost always outweigh the cost of using an "outside the box" solution to become a home owner again.

Most Popular Articles About Mortgage After Past Bankruptcy

>