When does my waiting period start?

When Does My Waiting Period Start?

When Can I Buy Again?

Trying to figure out the waiting period after Bankruptcy? Foreclosure? Short Sale? Deed in Lieu of Foreclosure?

I have been helping homebuyers after financial hardship since February 2011, and as a result, I have become one of the foremost experts on the underwriting guidelines and waiting periods surrounding this topic.

I’ve answered more than 3,000 comments on this site from folks all over the United States trying to figure out when they are able to buy again after a financial hardship, and this is one of the most common questions I get.

There is a lot of confusion out there when it comes to the waiting periods required after a bankruptcy, or the loss of a home in the past.  Most of this confusion comes from lenders that understand some of the guidelines, but not all of the guidelines.

The number of phone calls and emails I get from homebuyers that were pre-approved, and got all the way through the process until the very end before being turned down is staggering!

It’s heart breaking talking to so many people that have spent money on appraisals and home inspections, only to be told a week before closing that the loan cannot be done.

My hope is that you’re one of the folks finding this before you start shopping for homes after a financial hardship, and not because your current lender is dropping the ball, or will not return your calls because they are embarrassed that they misled you about their experience and expertise.

If you are one of those folks that are up against a deadline and your lender is back peddling, I can at least provide you with accurate answers so you know exactly where you stand.

Which Date Do I Use?

There can potentially be a lot of moving parts when it comes to navigating through a financial hardship.  Often, there are multiple challenges that may include a bankruptcy, and possibly the loss of real estate through foreclosure, short sale or deed in lieu of foreclosure.

The order that these challenges unveil themselves will also affect the timelines and dates you need to keep track of in order to determine the soonest date that you would be eligible for a new home loan.

Which date you use, and how long the waiting periods are will be determined mostly by what the financial hardship is, the timing of the events that follow the hardship, and the type of financing you are now applying for.

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Conventional Waiting Period

Also known as Conventional financing, both Fannie Mae and Freddie Mac underwritten loans use the same timelines and dates when determining when you’re eligible for home financing again.

Bankruptcy – You are eligible for conventional financing in 4  years from the discharge of a Chapter 7 Bankruptcy, 2 years from the discharge of a Chapter 13 bankruptcy.

If there was no mortgage included in the BK, or if you continued to make on-time payments on all mortgages discharged through the bankruptcy, you will use the discharge date as on your discharge papers your starting point for the waiting period.

Foreclosure – A foreclosure that occurs on a mortgage that was included, and discharged in a bankruptcy will use the Bankruptcy discharge date for the eligibility timeline.

If the foreclosure occurs outside of the bankruptcy (prior to filing the bankruptcy), or if the mortgage  was not included in a bankruptcy, the waiting period is 7 years from the date that title transfers into the new owner’s name (recorded).

Short Sale or Deed in Lieu of Foreclosure – Considered “pre-foreclosure” hardships, a short sale or deed in lieu that occurs on a mortgage that was included, and discharged in a bankruptcy will use the bankruptcy discharge date as the waiting period.

If the short sale or deed in lieu occurs prior to the bankruptcy discharge date, or if the mortgage is not included in the bankruptcy, the waiting period is 4 years from the date that title transfers into the new owner’s name (recorded).

Multiple properties – If you have multiple properties that were lost through foreclosure, short sale, or deed in lieu, you are going to use the date of the last (most recent) hardship as your waiting period.  The exception to this rule is if the mortgage was included, and discharged through a bankruptcy.

FHA Waiting Period

FHA insured loans typically have shorter waiting periods than Conventional in most cases.

Bankruptcy – You are eligible for a FHA insured home loan 2  years from the discharge of a Chapter 7 Bankruptcy, 1 year from the discharge of a Chapter 13 bankruptcy.  If there was no mortgage included in the BK, or if you continued to make on-time payments on all mortgages discharged through the bankruptcy, you will use the discharge date as on your discharge papers your starting point for the waiting period.

Foreclosure, Short Sale or Deed in Lieu – Unlike Conventional financing, FHA treats foreclosure, deed in lieu, and short sale as separate events from a bankruptcy which carry an independent 3 year waiting period from the date that title transfers into the new owner’s name (recorded).

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If the mortgage on the home was a FHA insured loan, the waiting period begins on the day that the mortgage insurance claim is paid.  The government reporting system that determines eligibility is call CAIVRS.  If you show up on a CAIVRS report, you are not eligible for FHA financing yet.

Multiple properties and events – If you have multiple properties that were lost through foreclosure, short sale, or deed in lieu, you are going to use the date of the last (most recent) hardship as your waiting period.

VA Waiting Period

VA guaranteed loans tend to be the most flexible, and most aggressive in terms of waiting periods.  VA will always look at the “big picture” and evaluate the level of risk, and the circumstances surrounding the hardship.  VA qualifying guidelines tend to try to always fall on the side of benefiting the Veteran.

Bankruptcy – You are eligible for a VA guaranteed home loan 2  years from the discharge of a Chapter 7 Bankruptcy, and as early as 1 year from the filing of a Chapter 13 bankruptcy with 12 months of on-time payments and permission from the Bankruptcy court.

If there was no mortgage included in the BK, or if you continued to make on-time payments on all mortgages discharged through the bankruptcy, you will use the discharge date as on your discharge papers your starting point for the waiting period.

Foreclosure or Deed in Lieu – VA suggests that 24 months pass before a Veteran will be eligible to buy after a foreclosure or deed in lieu of foreclosure.  Similar to FHA insured financing, VA recognizes bankruptcy, and any subsequent loss of the home as two separate events with separate waiting periods.

Multiple properties and events – If you have multiple properties that were lost through foreclosure, short sale, or deed in lieu, you are going to use the date of the last (most recent) hardship as your waiting period.

Still Confused About Which Date to Use?

There is no black and white path to understanding these guidelines.  The biggest challenge that most lenders have is that they have very limited knowledge or experience of these guidelines, so they quote waiting periods from one program, and imply that this is a standardized waiting period regardless of what type of loan you’re using to buy again.

This is where 99% of all bad advice comes from, inexperienced loan officers quoting inaccurate guidelines.

Have a situation that you think is unique or extra complicated?  Leave your comments, questions or scenarios below in the comment thread, and I will help you sort out the truth.

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About the Author

Scott Schang

A 20+ 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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  • Erin says:

    Hello,

    I have a unique scenario. I filed for chapter 13 in July of 2018. Discharged 8/13/21. My two years is up 8/13/23. I was preapproved for a conventional loan. When I questioned the lender she mentioned that date being ok because we won’t close on the home until well after the 8/13/23. I don’t want to go through the whole offer process and subsequently be denied because of the lenders oversight on preapproval. Any insight? Is the two year waiting period relevant upon final underwriting and closing? Is the fact that I was pre approved before the two year period a barrier to further activities down the road? Thank you!

    • Scott Schang says:

      Hi Erin, your loan officer is right. The waiting period must be met by date on the final loan documents, not the application date. Congratulations on your journey from bankruptcy to homeownership!

  • Reggie says:

    Thanks for the article Scott.

    How are delayed foreclosures during bankruptcy handled?

    My mortgage went into default around 2010. I filed a 5 year Ch 13 plan in 2016 in which the home was surrendered, and eventually foreclosed in 2017. I am a couple of months away from completing the Ch 13 plan.
    If I understand this correctly, I will be eligible 2 years after my discharge date.

    And how are these rules applied to couples applying in which only 1 has the BQ/foreclosure background?

    Thanks!

    • Scott Schang says:

      Hi Reggie, the foreclosure included in the bankruptcy is going to impact your timelines and options depending on what mortgage program you’re using buy the new home.

      For instance, the 2-year waiting period is a Fannie Mae conventional underwriting guideline. Under the Fannie Mae guideline, you may ignore the foreclosure, which really just means there is no separate waiting period for the foreclosure.

      You could apply for an FHA loan one year out of the Chapter 13, and there is a 3 year waiting period for the foreclosure, which has already lapsed, so FHA is also an option.

      For your last question, if only one of the “couple” has the BK/foreclosure, and you need that person’s income to qualify for the new loan, then you are subject to the waiting period guidelines.

      If the person without these past hardships can qualify for the loan based on their income alone, your being on title to the property or living in the home will not automatically impose a waiting period.

      The waiting period only applies if one of the borrowers on the loan has a past hardship.

      Does that make sense? Did I answer your questions?

      Hope this helps, let me know if you have any other questions!

  • Fran says:

    We filed chapter 13 in 2011 but left the house out of the plan which was an FHA.
    From what I understand it transferred out of our name in 2016 if I’m to understand the form correctly

    We are in the final stages before underwriting starts.
    We did click noon the box because it asked if we had in 7 years.
    We are going for another FHA with scores around 640 ish.
    I’m so nervous like I’m committing mortgage fraud I can barely sleep.
    What do I do?

    • Scott Schang says:

      Hi Fran, you should answer those questions as accurately as possible, but either way, you’re not hiding anything from the underwriters. There is enough due dilligence done that they will most likely know about both the BK and the foreclosure.

      The waiting period to qualify for another FHA loan after a bankruptcy is 2 year from discharge, and 3 years from the foreclosure.

      You are more than 2 years from the discharge of your bankruptcy and well beyond the 3 years from the foreclosure – You should be fine!

      If you have any challenges, shoot me an email at scott@findmywayhome.com and I can introduce you to someone for a second opinion.

      Don’t worry. I think you’re going to be just fine.

      If you really feel guilty about it, explain it to the loan officer. It will not impact your approval.

      Hope this helps?

  • David Lin says:

    Hi Scott, I had a Chapter 13 Bankruptcy that was completed in July 2014 that included my home. However, the home remained in my name until a bank auction in Oct. 2017 where the title changed hands. I’ve heard I need to wait 7 years before I can finance a home. Would that be July 2021 or Oct. 2024? Thanks in advance.

    • Scott Schang says:

      Hi David, what you “heard” is partially correct. Typically and historically if you are applying for a conventional loan that follows Fannie Mae underwriting guidelines, there is a 7 year waiting period following a foreclosure before you’re eligible to use conventional financing again.

      In 2015, Fannie Mae modified this guideline if the mortgage debt was included and discharged through a bankruptcy. In your situation, there is a 2 year waiting period following the discharge from the chapter 13, and you can ignore the foreclosure date. You are eligible for conventional financing now.

      Some banks do not follow guidelines, but more common is that loan officers don’t research or learn the guidelines.

      If you would like an introduction to a loan officer that has extensive experience with your situation, feel free to shoot me an email to scott@findmywayhome.com and let me know what State you’re buying in. I’m happy to connect you with someone that I know and trust.

      I hope this helps?

  • Jason says:

    I had a foreclosure and the title was transferred/recorded out of my name in August 2014. If I wanted to build a house that will not be completed until after August 2021 will a lender approve me for a Conventional loan knowing the house will not be ready until after the 7 year point? Or does that entire process need to start after the 7 years has passed?

    I have talked to a couple lenders and neither has given me a solid answer.

    • Scott Schang says:

      Hi Jason, great question. Was there a bankruptcy prior to the foreclosure by any chance? If so, it’s only a 4-year wait from the discharge of the bankruptcy. I’m assuming you’ve already gone down that path.

      To address your question, it sounds like you’re asking if you would qualify for a loan to start construction, and the completion of the home and permanent conventional loan will be after the 7-year foreclosure waiting period?

      You can absolutely get pre-approved for the Conventional loan conditional upon the waiting period being met. The clarification that Fannie Mae came out with a few years ago is that the loan documents have to be dated after the waiting period.

      Since the construction will be done after the waiting period is over, the waiting period condition would be lifted and you could fund the loan.

      It shouldn’t be difficult to show that you will qualify for the conventional loan once the waiting period is met, the bigger challenge is finding a lender that would do a construction loan prior to that waiting period condition being lifted.

      This is definitely not going to be main-stream knowledge for most loan officers, it’s a relatively rare scenario. If you would like, shoot me an email to scott@findmywayhome.com and let me know what State you’re trying to build in and I will see if I can introduce you to someone I know and trust that has experience with this scenario.

      Hope this helps?