Waiting periods after Bankruptcy, Foreclosure or Short Sale

How long do I have to wait after Bankruptcy, Foreclosure or Short Sale to get a mortgage?

Just like there are different ball games, each with different rules, mortgage loan products come with different guidelines when it comes to waiting periods since major derogatory credit events  : Bankruptcy, Short sale or Foreclosure. And just like you wouldn’t apply softball rules when you play basketball or tennis rules when you play soccer, ONE guideline doesn’t fit all.

First let’s identify the four main types of home loan

FHA, VA, USDA, and CONVENTIONAL

And here’s a quick summary and reference chart you can use:

FHA:

Bankruptcy:

Chapter 7 : 2 years after Discharge  or Dismissal date

chapter 13  After 12 months of timely payments to BK Trustee (BK can be left open).

Foreclosure:

3 Years from Trustee deed/Sherriff’s deed from the sale of the home

Short sale:

3 years from Grant deed from sale of the home

Exceptions to standard FHA waiting periods:

If you qualify for FHA’s “Back To Work” program, you’ll be eligible to purchase just 12 months after the end of a derogatory credit event. 

VA:

Bankruptcy

Chapter 7 : 2 years after Discharge or Dismissal date

Chapter 13:  After 12 months of timely payments to BK Trustee (BK can be left open).

foreclosure

2 Years from Trustee deed/Sherriff’s deed from the sale of the home

Short sale:

2 Years from Grant deed from sale of the home 

Exceptions to all the above events down to a 1 year seasoning period are allowed with extenuating circumstances.

USDA:

Bankruptcy:

Chapter 7 : 3 years after Discharge or Dismissal date

Chapter 13: 3 years after Discharge date

foreclosure

3 Years from Trustee deed/Sherriff’s deed from the sale of the home

Short sale:

3 years from Grant deed from sale of the home

CONVENTIONAL:

Bankruptcy:

Chapter 7: 4 years after Discharge or Dismissal date

(Exception to this rule allows for 2 years seasoning if extenuating circumstances can be established).

Chapter 13:  2years after Discharge date or 4 yrs from Dismissal date

(Exception to this rule allows for 2 years seasoning if extenuating circumstances can be established).

Multiple BK Filings : For a borrower with more than one bankruptcy filing within the past seven years, a five-year waiting period is required, measured from the most recent dismissal or discharge date.

foreclosure

7 Years from Trustee deed/Sherriff’s deed from the sale of the home :

Exception#1  to this rule with Fannie Mae backed Conventional loans only: If the mortgage involved in foreclosure was discharged through Bankruptcy,  then you are eligible 4 years after the Bankruptcy discharge date.  This means even if the home was foreclosed on and ”title to the home passed” months or years after the bankruptcy discharge, you are not held to the date the foreclosure was completed by the Lender.  Instead you are eligible 4 years after the Bankruptcy date.

Exemption # 2: If Not Included in BK, but there were extenuating circumstances , a three-year waiting period is permitted if extenuating circumstances can be documented, and is measured from the completion date of the foreclosure action

shortSale:

4 years from Grant deed from sale of the home

Be sure to have your particular situation correctly analyzed by a seasoned loan Officer to make sure you don’t miss an opportunity to buy now. Contact us!

Real Estate Professionals: Click here to access a Chart on Waiting periods since Bankruptcy, Foreclosure or Short Sale