When Can I Buy a Home After a Financial Hardship?
Get Straight Answer from Experienced Professionals
We've helped thousands of people just like you navigate the complicated waiting period guidelines around qualifying for a mortgage after a financial hardship like bankruptcy, foreclosure, short sale or deed in lieu of foreclosure.
There are many reasons why so much confusion and misinformation surround this topic, and getting straight answers is not always easy.
Accurate answers depend on both your loan officer and lender's underwriter being knowledgable or experienced with the legal definitions and documentation required for each waiting period.
And because each loan program follows different waiting periods, it's easy for inexperienced loan officers to get confused and give you inaccurate answers.
The good news is that there are many mortgage professionals out there that are experts with these guidelines now. It's much easier today to find an experienced loan officer than it was 5 years ago!
FAQ's About Qualifying for a Mortgage After a Financial Hardship
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.
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.
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.