New Home Loan Waiting Periods After Bankruptcy, Short Sale, Foreclosure or Deed In Lieu of Foreclosure

By
Real Estate Agent with RE/MAX Executive Realty - The Powell Team 202938
http://actvra.in/4ckz

Have you had a Bankruptcy, Foreclosure, Short Sale or Deed in Lieu of Foreclosure and are wondering how long you have to wait before you can obtain a new home loan?  Here are the guidelines as of Februrary 2011, which I verified with a loan officer friend. 

Of course, every rule is made to be broken and under the right circumstances of reestablished credit and an underwriter waiver/exception you may be able to qualify for a new home loan in less time than the general seasoning periods.  A seasoning period, in this case, is the mortgage industry term for waiting period.

BANKRUPTCY

Chapter 7- FHA & VA require two years seasoning. Conventional loans now require four years seasoning. If the bankruptcy has been discharged at least one year and less than two years, it is possible to obtain an FHA or VA mortgage. It must be documented that the bankruptcy was due to an extenuating circumstance. For example a loss of job, acts of nature, medical emergencies, etc. USDA Rural Development generally requires three years seasoning after discharge, but may make an exception before that with reestablished credit and an underwriter "waiver".                                                                     

Chapter 13- This type of filing indicates an effort to pay creditors. FHA and VA will allow borrowers to purchase a home after one year from the date of discharge if the payments have been made on time and their payment performance has been satisfactory. Conventional loans require 2 years from discharge date of 4 years from dismissal date.  USDA Rural Development generally requires three years seasoning after dismissal, but may make an exception before that with reestablished credit and an underwriter "waiver".       

SHORT SALES

Conventional and VA loans require two years minimum seasoning on a short sale.                               

FHA will allow borrowers to obtain a new mortgage after a short sale if: The borrower was current on their mortgage and other debts at the time of the short sale and proceeds from the short sale serve as payment in full.       

FHA will not allow borrowers to obtain a new mortgage after a short sale if: The borrower is taking advantage of a declining market or are purchasing a similar or superior property at a reduced price within commuting distance.                                                                                                               

♦ USDA Rural Development generally requires three years seasoning after discharge, but may make an exception before that with reestablished credit and an underwriter "waiver".    

FORECLOSURE or DEED IN LIEU OF FORECLOSURE 

FHA requires three years seasoning on a borrower with a previous foreclosure or deed -in-lieu of foreclosure. If extenuating circumstances can be documented exceptions can be granted.                       

Conventional loans now require a seven year time period from completion date.                                  

VA loans require a two year seasoning period before acquiring a new VA loan. If the foreclosure was on a VA loan then the applicant may not have full entitlement available for the new loan.                               

USDA Rural Development generally requires three years seasoning after discharge, but may make an exception before that with reestablished credit and an underwriter "waiver".       

Contact me anytime if I can help in any way.  I'd love to help you find your new home!

Cheryl Powell- Remax Executive Realty

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Topic:
Lending / Financial
Location:
North Carolina
Groups:
RE/MAX Active Rain Bloggers
REMAX North Carolina
Realtors®
Posts to Localism
North Carolina Real Estate
Tags:
after foreclosure
after deed in lieu of foreclosure
after short sale
after bankruptcy
new loan seasong periods
new loan waiting periods

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Rainmaker
130,461
Kathy Smiley
Westlake Village, CA - "Making YOU Smile!"
Berkshire Hathaway Home Services California Realty

Cheryl - great information to have on hand. It's important for people to know that they can buy a house again in the future.

February 21, 2011 10:27 AM
Rainmaker
563,876
Mike Saunders
Lanier Partners

Cheryl - great breakdown on this information. One suggestion, for lay people that might read this, you might want to define "seasoning".

February 21, 2011 10:46 AM
Rainmaker
271,960
Cheryl Powell
The Powell Team- Helping YOU make the right move!
RE/MAX Executive Realty - The Powell Team

Hello Kathy, you are right... everyone needs to have hope!

Hi Mike, that is a good idea... I added the definition of seasoning period as you suggested!

February 21, 2011 12:30 PM
Rainmaker
1,734,524
William Feela
Realtor, Whispering Pines Realty 651-674-5999 No.
WHISPERING PINES REALTY

Cheryl....many of these do make sense.  We need the conventional market to catch up.

February 21, 2011 03:23 PM
Rainmaker
271,960
Cheryl Powell
The Powell Team- Helping YOU make the right move!
RE/MAX Executive Realty - The Powell Team

True William, but it seems that the conventional market is getting further behind the curve! Fannie Mae recently increased their seasoning period after foreclosure to 7 years!

February 23, 2011 09:14 AM
Rainmaker
839,534
Joshua Zargari
MJ Decorators Workshop
MJ Decorators Workshop LI staging and home decorating

Good morning Cheryl.

That is a great post... Very informative.

Have a nice day.

April 07, 2011 07:06 AM
Rainmaker
591,494
Laura Giannotta
Your Realtor Down the Shore!
Keller Williams Realty - Atlantic Shore

Good information, Cheryl. I get questions like this everyday!  This a lot of misinformation out there.

April 13, 2011 07:09 AM
Rainmaker
271,960
Cheryl Powell
The Powell Team- Helping YOU make the right move!
RE/MAX Executive Realty - The Powell Team

Hello Erik,  Do you work in the mortgage industry?  I don't know first hand who is right here regarding the Fannie Mae seasoning requirement following a Deed in Lieu, but I got my information from a loan officer who shared an internal list from their company.  I do know however, know that Fannie Mae has recently made their seasoning requirements more strict.

April 13, 2011 12:22 PM
Rainmaker
271,960
Cheryl Powell
The Powell Team- Helping YOU make the right move!
RE/MAX Executive Realty - The Powell Team

Thanks Joshua and Laura, I'm glad that you found the information helpful.  My own need for this information is the reason I did the research, so I thought I'd share my findings with others.  :-)

April 13, 2011 12:25 PM
Rainmaker
606,870
Sheila Newton Team -- Anderson & Greenville SC Real Estate
--Residential/Short Sales/Foreclosures
Berkshire Hathaway HomeServices - C. Dan Joyner

A lot of folks think that after a foreclosure or short sale they have to wait 10 years... Thanks for the post.

April 13, 2011 09:14 PM
Rainmaker
407,597
The Scott Loper Team Lansdale & Harleysville PA Homes
Keller Williams Real Estate - Montgomeryville

Hi Cheryl,

Thanks for the breakdown.  I wasn't sure of a few of the timeframes.  But anyone who went through one of these, should wait a bit before plunging back into home ownership.

Lisa

April 14, 2011 08:00 AM
Rainmaker
614,848
Sandy Shores Broker, Melbourne Real Estate
Brevard County FL Real Estate
M & M Realty of Brevard Inc.

Cheryl, This is a great comprehensive guide for buyers, outlining home loan waiting periods.  Love the information!

April 15, 2011 08:53 PM
Ambassador
1,260,384
Silvia Dukes PA, REALTOR
Florida Waterfront and Country Club Living
Tropic Shores Realty - Ich spreche Deutsch!

Cheryl, thank you for sharing this information.  Obviously there is no "one fits all" solution, no wonder are confused!

April 17, 2011 01:05 PM
Ambassador
1,234,678
Kathleen Daniels
San Jose Homes for Sale - Probate Specialist
KD Realty - 408.972.1822

Cheryl,  This is great information.  Do you happen to know if the interest rates are higher for those who have any of the examples you provide.  Or, if the credit score is restored to 720 or above does it not make a difference on the interest rate? 

May 25, 2012 07:19 PM
Rainmaker
271,960
Cheryl Powell
The Powell Team- Helping YOU make the right move!
RE/MAX Executive Realty - The Powell Team

Hello Kathleen,  In my experience these buyers don't pay a higher interest rate once the required seasoning period has passed.  Their current credit score is the key to the interest rate on their new mortgage.  You may want speak with a mortgage loan officer about it though, since these guidelines change constantly!  Thanks for your comments.

May 26, 2012 06:37 AM
Anonymous #16
Anonymous
T. Grey

Both my wife and I had financial problems in 2008 because we had a big mortgage and my wife was laid off. Due to that, our credit suffered greatly and we went into default with our mortgage. I had credit collectors calling me non stop, even at work. I am employed by a government agency and am out on the field most of the time and these credit collectors were constantly calling my superiors and leaving nasty messages that I was contemplating filing bankruptcy. My house went into foreclosure and my wife and I went into a rental. It was very difficult to have a management company to accept us due to our credit so we ended up renting a mobile home from an elderly lady. Last year we started to look for homes and found one we liked. I called a mortgage company and applied for a loan and was rejected because they told me my 3 year waiting period is not up. I told my wife that we had to wait another year. Then, my realtor called me and told me to contact Gustan Cho. Gustan Cho is a mortgage broker who has offices in Florida and Illinois. My realtor, Scott Johnson from Remax told me that Gustan Cho has helped people with really bad credit get loans and Gustan Cho just got a loan for one of his associates clients in Financing a Condotel in Hollywood, Florida. Scott told me that no lender in this country finances condo hotel loans and was really surprised that Gustan Cho was able to do so for his associates Hollywood, Florida condotel.

Skeptically, I contacted Gustan Cho through his website, GustanCho.com and spoke to him. The first thing he wanted was the paperwork by the county stating when the sheriff sale was or when the deed was transferred to the lender. That was no problem because my other loan officer, Mike, asked the same thing. I emailed Gustan Cho what he requested and he told me that I was in luck. I did not believe Gustan Cho at first but he swore to me that the foreclosure was a non issue but I still needed to qualify for the mortgage. Gustan Cho told me to go to GustanCho.com and apply online. My wife, Kate and I applied online and filled out the application. Within an hour or so after we submitted our application, Gustan Cho contacted Kate and told her we were preapproved and told us what the rate and term was for a $250,000 FHA loan. He then sent us our application to sign and we submitted all of our documents along with a real estate contract. We closed on our home exactly one month after submitting all of the documents to Gustan Cho. It has been almost a year since we are proud homeowners thanks to Gustan Cho.

Why did Gustan Cho get us a home loan when the other mortgage broker could not? The first mortgage broker was incompetent. Mike, the other broker (I will not use his last name or mortgage company because I think he was a newer loan officer and do not want to slander the kid or his company) did not read the foreclosure certificate correctly. The certificate drafted by the Broward County Circuit Court Clerk had two dates. One date was the date of the certificate of title and the other date, dated one year later, was the date of when my foreclosed loan was sold to Fannie Mae. Mike used the date the loan was sold to Fannie Mae and not the date of the certificate of title. Bottom line is that you as a borrower need to check with a competent loan officer like Gustan Cho. For us, it was a case of bad luck but got lucky because of our realtor Scott.

January 27, 2013 11:46 AM
Rainer
3,788
Terri Club

I had a client who wanted to buy a home in Arizona, but he had a foreclosure.  After researching the web I found a loan program at www.cfsflex.com, they allow a mortgage after a foreclosure.  There is no waiting period.  Good to see lending options coming back.

April 21, 2013 10:43 AM
Rainmaker
271,960
Cheryl Powell
The Powell Team- Helping YOU make the right move!
RE/MAX Executive Realty - The Powell Team

WOW, that is great Terri.  Thanks for sharing this program with us.  Although most people who just lost their home to short sale or foreclosure wouldn't have 25% downpayment and 6 months of payment reserves left after funds needed for closing, it could work for some people.

April 22, 2013 06:44 AM
Anonymous #21
Anonymous
Mark

My wife and I have a Chapter 7 now discharged for 2 years. We rolled the house into the BK beofre ever going into FC and moved out of the house before house ever went into FC. I understand FHA is 2 years for BK and 3 years for FC. However, I have talked to my attorney on several occasions and he is very addiment that it is not considered a FC since it was dismissed at time of discharge. Please help clarify if this is considered a foreclosure or just a BK. Will lenders look at this as a BK or FC? We want to purchase a new home and it is now at the 2 years mark since BK discharge. If lenders look at this as a FC it will be about 2.5 more years, which is insane. 

August 19, 2013 02:52 PM
Rainmaker
974,095
Michael J. Perry
Lancaster Relo Specialist
RE/MAX Associates of Lancaster, PA.

Bookmarked and Suggested !!! Pls. View our RELO message -  http://actvra.in/4jHG 

July 24, 2014 04:25 AM
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Rainmaker
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