2022 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 of meeting a minimum waiting period.
The waiting period is determined by the nature of the financial hardship and the type of mortgage you are applying for.
- Buy a Home after Bankruptcy
- Buy a Home after Foreclosure
- Buy a Home after Short Sale
- Buy a Home after Deed in Lieu of Foreclosure
If you’re like most people that got caught up in one of the many financial crises in our lifetime, you were either directly affected, or know someone that was directly affected.
Many homeowners found themselves in serious financial hardship resulting in bankruptcy, foreclosure, deed in lieu, or short sale.
Often, 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 applies 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.
2022 FHA Guidelines
- FHA Bankruptcy Waiting Period – You may apply for an FHA-insured loan after your bankruptcy has been discharged for TWO (2) years with a Chapter 7 Bankruptcy. You may apply for an FHA insured loan after your bankruptcy has been discharged for ONE (1) year with a Chapter 13 Bankruptcy
- FHA Foreclosure Waiting Period – You may apply for an FHA-insured loan THREE (3) years after the sale/deed transfer date.
- FHA Short Sale / Deed in Lieu Waiting Period – You may apply for an FHA-insured loan THREE (3) years after the sale/deed transfer date. FHA treats short sales, deed in lieu, and foreclosure as the same waiting periods.
FHA Credit Requirement – Credit must be re-established no late payments in the past 12-24 months, depending on hardship
Application Date must be after the above waiting period to be eligible for FHA financing after hardship.
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2022 VA Guidelines
- VA Bankruptcy Ch 7 Waiting Period – You may apply for a VA guaranteed loan TWO (2) years after a chapter 7 Bankruptcy
- VA Bankruptcy Ch 13 Waiting Period – 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.
- VA Foreclosure / Deed in Lieu Waiting Period – You may apply for a VA guaranteed loan TWO (2) years after the sale/deed transfer date.
- VA Short Sale Waiting Period – 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
VA Credit Requirement 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.
2022 USDA Guidelines
- USDA Bankruptcy Waiting Period – You may apply for a USDA rural loan THREE (3) years after the discharge of Chapter 7 or 13 Bankruptcy
- USDA Foreclosure Waiting Period – You may apply for a USDA rural loan THREE (3) years after the sale/deed transfer date.
- USDA Short Sale / Deed in Lieu of Foreclosure Waiting Period – 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 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.
2022 Conventional (Fannie Mae) Guidelines
- Fannie Mae Conventional Bankruptcy Waiting Period – 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 Chapter 13
- Fannie Mae Conventional Foreclosure Waiting Period – You may apply for a Conventional, Fannie Mae loan SEVEN (7) years after the sale date of your foreclosure. Additional qualifying requirements may apply,
- Fannie Mae Conventional Foreclosure Waiting Period (includes 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
- Fannie Mae Conventional Short Sale / Deed in Lieu of Foreclosure Waiting Period – 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 the date your name is removed from the title.
Fannie Mae Conventional Credit REquirement: Must be re-established with a minimum 620 credit score.
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2022 Conventional (Freddie Mac) Guidelines
Conventional Loan After Bankruptcy (Types 7,11, and 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)
- Freddie Mac Conventional Foreclosure Waiting Period – 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)
- Freddie Mac Conventional Foreclosure / Short Sale / DIL included in Bankruptcy Waiting Period – 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)
- Freddie Mac Short Sale / Deed in Lieu of Foreclosure Waiting Period –
- 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)
Freddie Mac Credit Requirement: Must be re-established with a minimum 620 credit score.
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.
2022 Jumbo Mortgage Guidelines
- Jumbo Mortgage Bankruptcy Waiting Period – 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 bankruptcies occur on your credit profile.
- Jumbo Mortgage Foreclosure Waiting Period – You may apply for a Jumbo mortgage loan SEVEN (7) years after the sale date of your foreclosure. Additional qualifying requirements may apply,
- Jumbo Mortgage Short Sale / Deed in Lieu of Foreclosure Waiting Period – 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 requirements. 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 offers 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 your lender for details.
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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.
NOTE: This page was first created in February 2011, and is updated as new guidelines are released.
This page is monitored by experts that understand the guidelines, and have successfully guided countless families back into homeownership after significant financial hardship.
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ScottSchang Thank you Scott. As always, a clear and understandable answer.
MarcL ScottSchang gsn thank you so much for the kind words!
Just to be clear, there is not really a “waiting period” per se when we are discussing this scenario, there is however the underwriting guideline that states that there can be no more than 1 x 30 in the past 12 months – but in your case, the delinquency went beyond 30 days, so we have to wait for 12 months to show that there were no mortgage delinquencies in that time.
As for the lien, until that lien is removed, the lender has the ability to begin foreclosure proceedings in the event of default (which you are in default on the 2nd mortgage). The 12 months of no late payments could not start until the lien is extinguished, which is evidence of the debt being settled.
gsn ScottSchang technically, it’s a delinquent mortgage until the lien was removed. The underwriter will ask for a 12 month Verification of Mortgage during the process, which for the 1st, will come back with no issues. I would definitely try to get a second opinion from a lender in Rhode Island, but the way we would have to look at it (as a California direct lender) is that there is a history of delinquent payments on the 2nd mortgage, and we would need a minimum of 12 months time to pass from the date the lien was removed.
ScottSchang gsn We are buying in rhode island. We stopped paying in April 2013 while in negotiations. So would we have to wait a year from when we stopped paying or a year from final settlement? Or does the charge off date signify the year?
We are buying in rhode island. We stopped paying the HELOC during settlement negotiations. I guess we are looking at waiting a year?
ScottSchang gsnGreat question. I am in virtually same scenario. Ch 7 discharged 1/2013, always current on first. Settled 2nd 11/13, but it was not paid since 8/2011 (same date as ch 7 filing, so current prior to filing). So 12 month waiting period after settlement of 2nd, and 2 year wait after discharge, so eligible for FHA in 1/2015? Question regarding the timing of the 12 month waiting period after settlement? Settlement was offered by bank, and accepted by us, and payment made in 11/13 (and confirmed received), but we still have not got the lien release. Does the 12 month waiting period run from the settlement date or from the Lien release date? My lawyer says the lien release date is irrelevant and of no consequence, but I believe the waiting period would only start at lien release date. Could you clarify? Love this blog BTW – thanks for doing it. Any advice on getting a Lien release after settlement was agreed to and payment was made 5 months ago. Bank says it is “in process”. I believe they are just stalling as long as they can to keep punishing us.
gsn this is a great question, thank you for asking. This is a potentially complicated scenario because there may be a few moving parts. You could possibly be eligible to buy using FHA financing 2 years from the discharge date if the HELOC payments were made on-time up until the date that you settled.
If the HELOC was in default when you settled, you would have to wait a minimum of 12 months (with no mortgage lates) before you could apply.
What State are you buying in?
settlement finalized february 2014. mistake on previous post
Hi,
We had a ch 7 bankruptcy discharged in december 2011. The first mortgage and HELOC were included and never reaffirmed. Stayed current on first mortgage and settled HELOC for a lump sum to remove the lien on the house. The HELOC was charged off september 2013 settlement finalized february 2013. Can we get a mortgage on a new house and rent our current home? We are $20,000 underwater on the mortgage but qualify based on debt to income ratios to carry mortgage on our current home and a new home. Credit score is high 600’s .
crna1ab I would recommend making the last two payments, then dispute the reporting of the balance with the credit bureaus. It will not negatively affect your credit with it showing included in BK, it’s just not helping contribute to the on-time payment history you are trying to establish after a BK to rebuild your credit.
Your lender should ask about the auto – If the loan officer you’re working with does not have much experience of working with borrowers after BK, it might not come up until later in the loan process, after it gets to an underwriter.
Simply keep all of your paperwork showing the auto was paid in full.