Have you had to deal with a short sale, foreclosure, or bankruptcy? If anyone of these financial issues has plagued you in the past you might be wondering when you can qualify for a mortgage again.
Typically, it’s only a matter of time. The waiting period is determined by the type of financial hardship and the mortgage you’re applying for. BUT – Even though these are the norm, I have programs that allow my clients to avoid all these rules and even 1 day out of a bankruptcy, short sale or foreclosure can close with NO WAITING PERIOD as long as they have a credit score of 660. (Other stipulations and eligibilities are required)
Buying a home after bankruptcy
The type of bankruptcy and the type of mortgage you’re going for all determine the waiting periods.
Fannie Mae and Freddie Mac:
- Chapter 7 or Chapter 11 bankruptcy is 4 years from the discharge date and four years from a dismissal date. A 4 year period is required from the discharge or dismissal date of the action.
- For chapter 13 bankruptcy it’s two years from the discharge date or four years from a dismissal date.
- For multiple bankruptcies, a 5-year waiting period is required if you’ve had multiple bankruptcies within the past seven years measured from the most recent dismissal or discharge date.
FHA:
- For chapter 7 or 11 bankruptcy it’s 2 years from the discharge or dismissal date.
- For chapter 13 bankruptcy it’s 1 year from the discharge date if manually underwritten and two years from a dismissal date. With court approval, you may be eligible for a manual underwritten FHA loan within 12 months but these are considered on a case-by-case basis. There are no additional waiting periods for multiple bankruptcy filings.
VA Loans:
- For chapter 7, 11, or 13 bankruptcy it’s 2 years from the discharge date. There are no additional waiting periods for multiple bankruptcies. And it’s important to note that the VA considers bankruptcy, foreclosure, or deed in lieu as a separate event enforcing waiting periods of each independently and concurrently. VA mortgages, however, are very flexible and if you’re working with an experienced loan officer many of these waiting periods could be decreased.
USDA Loans:
- For chapter 7 or 11 bankruptcy it’s 3 years from the discharge date.
- For chapter 13 bankruptcy it is 1 year from the discharge date.
Jumbo Home Loan:
These vary based on the lender you choose because some banks will require longer waiting periods than other lenders. It’s important to note that you’ll probably expect a 4 year waiting period for most jumbo mortgage lenders but again, talk with your loan officer about the different options.
Buying after a foreclosure.
- Most mortgage institutions such as Fannie Mae and Freddie Mac require 7 years from the foreclosure date. It’s measured from the date that your name was removed from the deed. If the mortgage debt was discharged through a bankruptcy, the bankruptcy waiting time may also be applied if the lender has the documentation to verify that the mortgage obligation was discharged in the bankruptcy.
- FHA and USDA mortgages require a waiting period of just 3 years.
- VA mortgages require just 2 years from the foreclosure date.
Buying a home after a short sale.
- For most conventional loans through Fannie Mae and Freddie Mac, the waiting period is 4 years from a short sale or deed in lieu. It is measured from the close of escrow on a short sale or the execution of the new grant deed. There’s also a 4 year waiting period for any jumbo mortgages
- FHA and USDA mortgages have just a 3 year waiting period after a short sale.
- VA mortgages have just a 2 year waiting period after a short sale.
These are the basics but you might be surprised as to what’s available out there. Just because you’re a few years off from qualifying doesn’t mean you can’t start planning today. Everyone is different and many lenders evaluate applicants on a case by case basis.
Give me a call and let’s discuss your options. After making on-time payments for a year many lenders may offer programs that can help you get into a house sooner. I’d love to help you plan for your future and get things back on track!
REAL STORY – I had a client who had 6— yes 6 —- various short sales/ foreclosures on his credit( all were investment properties he lost after the crash) He had a 6.5% rate on his owner-occupied primary residence and using this program we were able to reduce his rate to 4.5% and save him over $400 a month on his monthly payment. Give me a call! You never know how many options there may be for you until you do!