Waiting Period After Foreclosure

This page will tell you everything you need to know about qualifying for a mortgage after a foreclosure. There is a lot of misinformation and lack of experience around this topic. We can clear all that up now.

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Bankruptcy

Qualify for a mortgage after a Bankruptcy

Short Sale

Qualify for a mortgage after a Short Sale

Deed in Lieu

Qualify for a mortgage after a Deed in Lieu

Waiting Periods will Vary Based on Type of Loan You Are Using

New Loan Type

Foreclosure 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 foreclosure.

Mortgage NOT Included in Bankruptcy

  • 7 Years from the foreclosure date

A seven-year waiting period is required, measured from the date that your name was removed from the deed, usually with a Sheriff's deed.

Foreclosure and Bankruptcy on the Same Mortgage

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.

This guideline ONLY applies if the foreclosure takes place after the discharge of the bankruptcy.  If the foreclosure took place prior to the bankruptcy, you will be subject to the seven year waiting period.

Experience Counts.  The experience of the loan officer with these scenarios will determine the options available to you.  Many folks get told "NO" when the real answer was "Yes", and the other loan officer simply didn't know.

As soon as you introduce a complication like a mortgage included in a bankruptcy, then later lost to foreclosure, you need to work with someone with experience.

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 foreclosure.

Mortgage NOT Included in Bankruptcy

  • 7 Years from the foreclosure date

A seven-year waiting period is required, measured from the date that your name was removed from the deed, usually with a Sheriff's deed.

Foreclosure and Bankruptcy on the Same Mortgage

Freddie Mac claims to follow Fannie Mae guidance on this issue regarding a mortgage that was included in bankruptcy first, then foreclosed later.

I would suggest using Fannie Mae first, and LPA as a second option.

This guideline ONLY applies if the foreclosure takes place after the discharge of the bankruptcy.  If the foreclosure took place prior to the bankruptcy, you will be subject to the seven year waiting period.

Experience Counts.  The experience of the loan officer with these scenarios will determine the options available to you.  Many folks get told "NO" when the real answer was "Yes", and the other loan officer simply didn't know.

As soon as you introduce a complication like a mortgage included in a bankruptcy, then later lost to foreclosure, you need to work with someone with experience.

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 foreclosure using FHA guidelines.

  • 3 Years from the foreclosure date

Foreclosure and Bankruptcy on the Same Mortgage

FHA underwriting guidelines consider a bankruptcy, and any subsequent foreclosure as two separate events with independent waiting periods that run concurrently.

Normally, a bankruptcy waiting period would have long lapsed once the foreclosure waiting period has been met.

Experience Counts.  It is common for inexperienced loan officers to confuse FHA waiting periods for all mortgage types, or vice versa.

It's important that you work with an experienced loan professional that solves these kinds of problems for a living.

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 foreclosure using VA guidelines.

  • 2 Years from the foreclosure date

Foreclosure and Bankruptcy on the Same Mortgage

VA underwriting guidelines consider a bankruptcy, and any subsequent foreclosure as two separate events with independent waiting periods that run concurrently.

Normally, a bankruptcy waiting period would have long lapsed by the time the foreclosure waiting period has been met.

Experience Counts.  A loan officer that is experienced with VA manual underwriting guidelines can often see opportunities to structure loan applications that raise fewer questions about past hardships.

The VA is very flexible when it comes to considering a manual underwriting loan approval if there is strong evidence that hardship was the result of a one time event that was outside of your control. 

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 foreclosure.

  • 3 years from foreclosure date

Foreclosure and Bankruptcy on the Same Mortgage

In December 2014, USDA Guaranteed updated their underwriting guidelines to follow Fannie Mae's lead regarding foreclosure on a mortgage discharged in bankruptcy.

This guideline ONLY applies if the foreclosure takes place after the discharge of the bankruptcy.  If the foreclosure took place prior to the bankruptcy, you will be subject to the three year waiting period.

Experience Counts.  The experience of the loan officer working for you will determine the options available to you.  Many folks get told "NO" when the real answer was "Yes", and the other loan officer simply didn't know.

As soon as you introduce a complication like a mortgage included in a bankruptcy, then later lost to foreclosure, you need to work with someone with experience.

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 7 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.

It is also rare, and possible for portfolio lenders to offer exceptions for mortgages included in bankruptcy when there are compensating factors.

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

Experience Counts.  Jumbo financing requires great attention to detail and organizational skills.  Using a mortgage professionals that solves these types of problems for a living will save you a lot of time and trouble.

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 Foreclosure

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 a new home 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.

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