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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.

If you’re like most people that got caught up in the financial crisis in 2008, you were either directly affected, or know someone that was directly affected.

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Many homeowners found themselves in serious financial hardship resulting in a bankruptcy, foreclosure, deed in lieu or short sale.

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.

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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.

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.

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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

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  • Jessica Cruz says:

    I had bankruptucky discharge in 2010 chapter 7 I had forclosure on sept 2016 the name was taken out of my name then but it was me and a cousin who owned the home I was in the military far away that I didn’t know he wasn’t paying for the home so it got forcloused on I come back and the bank won’t work with me so they forcliused on it so I wanna by a home now can I by pass the two year wait we. Live in New Jersey but would like to buy a home in New Jersey or Pennsylvania do you know anyone who would by pass the two year wait for me can it be done

    • Scott Schang says:

      Hi Jessica, thank you for your service!

      There are a couple of options here. There is a possibility that a good VA lender, and a detailed explanation would allow you to use your VA mortgage benefit.

      The other option is that you are eligible now using Conventional financing with as little as 3% to 5% down payment.

      I’ve made an introduction by email to a lender friend of mine that has experience with both of these options, you should hear from them shortly.

      Hope this helps?

  • Lisa says:

    I had my bankruptcy discharged in2011 I didn’t reaffirm my house. Today I want to buy another home. I have sold my home but I have had some late payments . Will the lending company still have to verify with my old lender about my previous payment history even though I I don’t have that mortgage any more? Please advise

    • Scott Schang says:

      Hi Lisa,

      As long as you no longer own the home, you would be eligible for Conventional financing, 4 years from the discharge of the bankruptcy. The late payments are not considered. When you sold the home, were you able to pay off the mortgage in full, or was it a short sale?

      If you would like an introduction to a lender that I know that has experience with these guidelines, shoot me an email scott@findmywayhome.com and I can make connect you. Please include the State you’re buying in.

      Hope this helps?

  • Courtney says:

    I have a Chapter 7 bankruptcy that was discharged in July of 2014 there was no mortgage or short sale during the bankruptcy only Consumer Credit. And since then rebuilt my credit up to a 720 credit score and only a mortgage as debt.

    I am interested in two types of mortgage financing for a residential investment property.

    Since my bankruptcy I have bought one investment property with cash it’s owned by my LLC which I’m the single member of and I’m interested in any financing that I could secure against this property. To purchase the afformentioned residential investment property.

    I am also interested in securing a mortgage for this residential investment property personally using any type of mortgages that are available to someone like myself with a Ch7.

    I’m sitting on a decent amount of cash to keep the LTV at 60-80%

    I am also self-employed and have been for the past 17 years. My wife and I file a joint tax return and she is also self-employed but Pace herself with a W-2 our combined income is about $70,000 a year.

    • Scott Schang says:

      Hi Courtney,

      The BK7 is going to prevent you from buying an investment property using a conventional (Fannie Mae or Freddie Mac) loan until 4 years following the discharge. In the meantime, there are portfolio and hard money lender that will lend you the money if you’re close to 60-70% LTV until next July when you can refinance into a conventional loan.

      I am going to make an introduction to a very creative lender friend of mine that might have a solution. I will send an intro by email.

      Hope this helps?

  • Doug says:

    Bk in 7/2014 with foreclosure included. Kept a primary residence that had a lot of equity. When am I able to get a refinance with money out or home equity loan to do home improvements. I see Freddie Mac has a 3 year waiting period. Is that true

    • Scott Schang says:

      Hi Doug,

      The waiting period will depend on what type of financing you are applying for. FHA financing would be available to you 3 years from the foreclosure, as long as it’s also been a minimum of 2 years from the BK discharge.

      Conventional Fannie Mae guidelines allow you to use the bankruptcy waiting period of 4 years from discharge and ignore any subsequent foreclosures. If the foreclosure happened prior to the filing of the bankruptcy, Conventional is going require a 7 year wait from the foreclosure date.

      Although Freddie Mac has said that it’s automated underwriting system will allow reduced waiting periods, I have never been able to get one approved.

      Finally, there are always portfolio loans available that will require higher rates and fees, but it will get you access to your equity, and you can refinance into a better loan once eligible.

      If you would like an introduction to a lender that has experience with these guidelines, feel free to shoot me an email to scott@findmywayhome.com and I will try to point you in the right direction.

      Hope this helps?

  • Toni S. Holcomb says:

    We had a home in pre-foreclosure, but we paid off the arrears before the house was sold in foreclosure. Our credit scores, as a result, took a hit and are between 640 for my husband and 660 for me. We aren’t eligible for FHA because we have another home which is a rental property which has FHA loan. Any hope for a mortgage?

    • Scott Schang says:

      Hi Toni,

      A pre-foreclosure happens when you fall behind on your payments. Catching up your payments will ultimately “start” the clock again fro what an automated underwriting system looks at. In all of my experience, the “magic number” is 12 months with no late payments.

      Is your rental less than 100 miles from where you want to buy the new home? There is no restriction from using FHA again, other than the 100 rule from a property that you already own.

      If you would like an introduction to a lender friend of mine that has experience with these guidelines, shoot me an email to scott@findmywayhome.com and I can help you find someone that can explore all of these options for you.

      Hope this helps?

  • Tom says:

    Hi Scott. I’m in the military and can’t sell a home I own in another state. It’s pending short sale. Could I get a construction loan while this sale is pending ?

    • Scott Schang says:

      Hi Tom, thank you for your service!

      Let me start by saying that I do not have any personal experience with waiting periods and construction loans. That said, this is a tough question. If there are late payments on the home that you’re trying to short sell, it would negatively affect your credit, and that would prevent you from qualifying for a new loan.

      Construction lending is a little bit of a different animal than traditional conventional, FHA, VA or USDA. All this really means is that the lender can have their own guidelines.

      For the permanent loan, if you are eligible for your VA guaranteed housing benefit, VA does not recognize a short sale as a hardship. I know several lenders that will allow a VA loan after a short sale.

      Both FHA and Conventional guidelines are going to require a waiting period from the date of the short sale. That would be the reason why a construction lender may not be comfortable with your scenario. Construction loans are typically very short term, and are meant to be refinanced into a permanent loan upon completion of the construction.

      The last thing I can offer is a second opinion. If you would like, shoot me an email to scott@findmywayhome.com, and let me know what State you’re you’re living in. I can check my expert network for someone with construction loan experience.

      Hope this helps?

  • DAWN GENTHER says:

    We had a bankrupcy that was discharged in 2012 in which our home was included. The bank finally got around to foreclosing but we were told it would be better to short sale which we did and house sold 1/25/16. We are now wanting to buy and are being told we cant due to short sale date. So upset and aggravated. Any hope for us to buy now?

    • Scott Schang says:

      Hi Dawn,

      You are absolutely eligible to buy using conventional financing now. Most lenders doe not have experience with these guidelines, or choose to not help folks with financial hardship in the past because it requires a little bit more paperwork (BK petition, discharge and final HUD from sale).

      If your situation is not easy enough, many lenders will simply tell you that you don’t qualify instead telling you that they choose not to help.

      Send me an email to scott@findmywayhome.com and let me know what State you’re trying to buy in, and the best way to reach you, and I will introduce you to a lender friend of mine that has experience with these guidelines.

      Hope this help?

  • Aria says:

    We completed a DIL in June 2016 due to job relocation. We would like to apply for a home loan but were told by our broker than we have to wait 2 years and prove the hardship. The builder referred us to someone who claims they are able to bypass the 2 year waiting period with a strong package. This seems fishy so we’re trying to understand what the catch is. The rep claims that the mortgage doesn’t necessarily come with a fee or higher interest rate. Have you heard of anything that allows someone to bypass the seasoning period altogether? If so, what does this entail and is it something I should stay away from ? I don’t want to get the house at the expense of paying more or being in something that will hurt me financially in the end. (FYI, my broker said something about it being an unsalable loan but I don’t understand what this means). thanks for your help!

    • Scott Schang says:

      Hi Aria,

      Great question! Your broker is correct that this is an unsalable loan. That really just means that if they give you the loan, they are using their own money. The way 99% of all mortgages work is that the loan is approved using Fannie Mae or FHA guidelines for instance, then, once the loan is funded, the bank will “sell” the note on the secondary market, and a different lender will collect payments. This enables the original lender to get their money back that they just lent to you, so that they can lend it to someone else.

      What the builder is describing is a portfolio loan. This is just a fancy way of saying that they are lending their own money, and so they can make their own rules. Normally, portfolio loans are considered “higher risk” and require a larger down payment, higher interest rates and higher closing costs.

      That said, I’ve heard of credit unions doing loans like this at pretty competitive rates.

      Getting a conventional loan in less than 4 years is going to require an extenuating circumstances exception. The burden of proof for this exception is that it was a one time event that was completely outside your control. In your case, the move would have had to have been forced by your employer, and not a choice.

      You can’t really go wrong by pursuing the option the builder is offering. If you look at it this way, “why would the builder be willing to sell you the home unless they believe that lender can help?”.

      Don’t lose my info. You can also email me directly at scott@findmywayhome.com. Reach out to the builders lender, then run it by me and I’ll let you know what I think is going on.

      Hope this helps?

  • JD says:

    Hi Scott,
    My wife and I had a foreclosure in Oct 2011. We have an FHA mortgage on our primary residence and would like to now buy an investment property. I’m told the foreclosure is preventing this opportunity for us. Can you point us in the right direction to move forward with our goals? Thanks!

    • Scott Schang says:

      Hi JD,

      Was the mortgage included in a bankruptcy by any chance? If there was no BK, or if there was, and the foreclosure took place prior to the BK, there is a 7 year waiting period before being able to use Conventional financing to purchase an investment property. So, using traditional financing, you’ve got another year + before you can use conventional financing.

  • Scott Rose says:

    Ive heard that lenders are more flexible with lending now than In the past, even fro those who have had a Bk. I live in Tucson and I had a Ch 7 discharged 12 months ago. Is it possible to buy a home 12 months out form discharge date? Are there other loan types? With my income I qualify for a home purchase up to $525. What options if any do I have?

    • Scott Schang says:

      Hi Scott,
      Yes, there are loan programs that will allow you to buy 12 months from a bankruptcy. These are going to be portfolio loans, and will require a higher down payment, and higher rates and fees.

      You just have to run the numbers, and determine if it makes sense for you.

      If you would like, shoot me an email to scott@findmywayhome.com, and let me know what State you’re buying in, and I can introduce you to someone that has experience with these programs.

      Hope this helps?

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