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Waiting Periods for buying after bankruptcy foreclosure short sale deed in lieu

2018 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 meeting a minimum waiting period.

The waiting period is determined by the nature of the financial hardship and the type of mortgage your are applying for.

Most people today were either directly affected, or know someone that was directly affected by financial hardship resulting in a bankruptcy, foreclosure, deed in lieu or short sale in the past 5 to 7 years.

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Often, a 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 apply 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.

2018 FHA Guidelines

  • Bankruptcy – You may apply for a FHA insured loan after your bankruptcy has been discharged for TWO (2) years with a Chapter 7 Bankruptcy.  You may apply for a FHA insured loan after your bankruptcy has been discharged for ONE (1) year with a Chapter 13 Bankruptcy
  • Foreclosure – You may apply for a FHA insured loan THREE (3) years after the sale/deed transfer date.
  • Short Sale / Deed in Lieu – You may apply for a FHA insured loan THREE (3) years after the sale/deed transfer date. FHA treats short sale, deed in lieu and foreclosure as the same waiting periods.

Credit must be re-established no late payments in past 12-24 months, depending on hardship

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Application Date must be after the above waiting period to be eligible for FHA financing after hardship.

2018 VA Guidelines

  • Bankruptcy Ch 7 – You may apply for a VA guaranteed loan TWO (2) years after a chapter 7 Bankruptcy
  • Bankruptcy Ch 13 – 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.
  • Foreclosure / Deed in Lieu – You may apply for a VA guaranteed loan TWO (2) years after the sale/deed transfer date.
  • Short Sale – 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

Credit must be re-established with a minimum 620 credit score

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Application Date must be after the above waiting period to be eligible for VA financing after hardship.

2018 USDA Guidelines

  • Bankruptcy – You may apply for a USDA rural loan THREE (3) years after the discharge of a Chapter 7 or 13 Bankruptcy
  • Foreclosure – You may apply for a USDA rural loan THREE (3) years after the sale/deed transfer date.
  • Short Sale / Deed in Lieu of Foreclosure – 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 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.

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2018 Conventional (Fannie Mae) Guidelines

  • Bankruptcy – 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 a Chapter 13
  • Foreclosure – You may apply for a Conventional, Fannie Mae loan SEVEN (7) years after the sale date of your foreclosure.  Additional qualifying requirements may apply,
  • Foreclosure / 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
  • Short Sale / Deed in Lieu of Foreclosure – 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 date your name is removed from title.

Credit must be re-established with a minimum 620 credit score.

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2018 Conventional (Freddie Mac) Guidelines

Bankruptcy (7,11,13) – 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)

  • Foreclosure – 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)
  • Foreclosure / Short Sale / DIL included in Bankruptcy – 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)
  • Short Sale / Deed in Lieu of Foreclosure –
  • 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)

Credit must be re-established with a minimum 620 credit score.

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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.

2018 Jumbo Mortgage Guidelines

  • Bankruptcy – 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 bankruptcy occurs on credit profile.
  • Foreclosure – You may apply for a Jumbo mortgage loan SEVEN (7) years after the sale date of your foreclosure.  Additional qualifying requirements may apply,
  • Short Sale / Deed in Lieu of Foreclosure – 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 requirement.  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 offer 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 lender for details.

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.

“Buy Again” Questions Answered

If you are like most people that visit this website, you’ve got a mortgage problem or an unanswered question and you’re having trouble getting answers.

We are here to help you get the right answer, the first time, and connect you with an experienced loan officer that can help if necessary.

Asking Your Question is Easy

  • Email me Directly:  Simply click the email at the top of the site.  These questions come directly to me and are answered very quickly.
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NOTE:  This page was first created in February, 2011, and is updated as new guidelines are released.

This page is monitored by Boomerang Buyer experts that understand the guidelines, and have successfully guided countless families back into homeownership after significant financial hardship.

Buy a home after bankruptcy, foreclosure, short sale or DIL

About Your Expert

Scott Schang

As a 19 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

Leave a Question or Comment About this Topic

  • Dan says:

    Hi, I had a BK and fourclouser in 1995. I’m looking to buy a house this year. My credit score is 780 now. Will what happened in 95 show up when they check my credit history. Thanks, Dan

    • Hi Dan, it is unlikely that the BK will even show up on your credit report. There is zero risk of a foreclosure in 1995 affecting your ability to qualify for a loan today.

      On the loan application, it will ask you if you’ve had a foreclosure in the past 7 years. The answer is “NO”. That should be the end of the story.

      If you would like an introduction to a professional loan officer that I know and trust, feel free to shoot me an email to scott@findmywayhome.com and I can point you in the right direction.

      Hope this helps?

  • Suzi says:

    Hi Scott, this is the most helpful article!

    We are in Florida and had a mortgage included in BK7 in 03/2011, but are still living in the house. The house has been in foreclosure since 2010 and we have been trying to work something out with the bank. I even filed ch13 twice (12/2013 and 10/2014) with the sole purpose of forcing Citi to negotiate the modification through courts (recommended by our attorneys). Nothing else was included in those ch13 and both times they were voluntarily dismissed after we hit a roadblock. Looking back, that wasn’t the smartest decision, but we were honestly trying to keep the house as our finances recovered nicely since bk7 and it just made sense to us at the time. The latest ch13 was voluntarily dismissed 07/2016.

    Luckily, only I filed those ch13s. Husband’s credit recovered completely. He contributes about 85% to our household income, so it should be ok if he is the only one applying for the new mortgage. From everything I’ve read it seems like I wouldn’t be eligible until 07/2021, unless ch13 voluntary dismissal with $0 debt included and only the asset previously discharged through ch7 somehow gets a pass on that 5 year waiting period for multiple bankruptcies?

    Anyhow, from reading through the comments here, it seems like my husband should be ready to buy as soon as his name is not on the title on this house. Our foreclosure trial is set for June, so if we don’t do anything, we should be off the title by September, maybe even August.

    The bank was pushing for short sale. Do you think a short sale would make sense at this point? Houses are selling like hot cakes these days in our neighborhood, but we are not looking forward to the hassle of having the house on the market, unless that is somehow a better option compared to foreclosure. I have asked the bank about deed in lieu, was told they wouldn’t be able to do that because there is a second mortgage.
    Thanks!

    • Hi Suzi, thank you for the kind words.

      Ok, there are a lot of moving parts here. I’m going to throw this out there, and if it sounds like an option, I would want to get this scenario in front of an underwriter to see if it would fly.

      If your husband could qualify for a new home using his income only, and if his BK7 is the only BK on his credit, it’s possible (I think) to do a grant deed to transfer the property into your name only….then you would have to move out of the home. He could not live in the home and apply for a mortgage to buy a new home.

      Your husband is well past the 4 year waiting period on the bankruptcy for conventional financing, and could potentially be eligible if his current residence was not the home that was included in the BK.

      There would be no exceptions for the multiple bankruptcies in most cases. It is possible that you could run this scenario by a local credit union or portfolio lender. It makes perfect sense, it really does.

      You are not trying to game the system here, you’re making the best decisions you can based on the professional advice you’ve received. I don’t get the feeling that you’re taking advantage of living in the home without making payments on the mortgage. That’s your biggest challenge here, is the perception of impropriety.

      As far as a short sale goes…I think this is a great option if the lenders allow it. Again, you would have to live in another home (or stay with family) during the process, so that when you apply for the new mortgage, we can better explain all of the circumstances around your situation and justify the timing in the underwriter’s eyes.

      With good credit and a larger down payment, your chances improve that an underwriter will be able to feel good about making a decision to extend credit to you.

      Another reason why the short sale is a good option is that you can better control the timeline lines here. At the end of the day, you’re going to have to vacate the home. Doing the short sale gives you more control over the terms of this move. The foreclosure could be postponed over and over again (see this a lot), which would leave you in a perpetual state of limbo. This can’t be great for your sense of security and peace of mind.

      Ok, I think that’s enough for now. I’ve covered a lot.

      Feel free to shoot me an email directly to scott@findmywayhome.com if you would like to explore some of these ideas further. I am in California, but I have loan officer friends that have a lot of experience with these types of situations all over the Country.

      I’m happy to help you figure this out, and get you pointed in the right direction with an introduction to someone that can help.

      It’s not a matter of if you can buy another home once you’re off title, it’s more about the path you take to get there, and the time it will take to get all of these pieces to fall into place.

      Hope this helps?

      • Suzi says:

        Thanks again, Scott. This is the most clarity we got in a long time!

        I will be asking our attorney if grant deed would be a possibility.
        Over the past couple days we kinda made peace with the fact that we’ll need to rent for x number of months, one way or the other. The only difference between short sale and letting the foreclosure run its course at this point seems to be our level of involvement and.

        I forgot to mention that our mortgage is now under Selene and so far they haven’t been most straightforward and pleasant to deal with. I have read a few stories about people in similar situations being pressured to do a short sale, then having Selene put a stop to it at the last moment. Of course, there may be plenty of positive experience with Selene, people just don’t rush to internet boards to report those. I’ll need to do a little more research before we decide.
        Hoping to stay in touch with you. A referral to a loan officer in Florida would also be much appreciated. Thanks!

        • I’m glad I could help Suzi. I have a very experienced loan officer friend that can help in Florida. I’ll make an introduction by email. You should see Jim’s contact info in the next 10 minutes or so. If you don’t, check your junk or spam folder just in case it gets filtered.

          Feel free to reach out anytime if you have any other questions. You can also email me directly at scott@findmywayhome.com

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