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 NC License# 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- The Powell Team- Remax Executive Realty

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Rainmaker
279,758
Cheryl Powell
RE/MAX Executive Realty - The Powell Team - Harrisburg, NC
The Powell Team- Helping YOU make the right move!

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 #15
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.

Jan 27, 2013 11:46 AM #16
Rainer
3,790
Terri Club
Allentown, AZ

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.

Apr 21, 2013 10:43 AM #17
Rainmaker
279,758
Cheryl Powell
RE/MAX Executive Realty - The Powell Team - Harrisburg, NC
The Powell Team- Helping YOU make the right move!

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.

Apr 22, 2013 06:44 AM #18
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. 

Aug 19, 2013 02:52 PM #21
Rainmaker
1,031,336
Michael J. Perry
RE/MAX Associates of Lancaster, PA. - Lancaster, PA
Lancaster Relo Specialist

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

Jul 24, 2014 04:25 AM #23
Rainmaker
542,856
Sarah & Les Oswald
Eastvale Team Realty & Property Mgmt - Corona, CA
Broker, Realtor, CDPE, CIAS, SFR , Investor

These time lines are sure to come in handy. I met a buyer over the weekend who had a SS in 2009 and thought he needed to wait 10 years. I informed him of his mistake and we are now looking for a home.

Aug 22, 2014 11:38 PM #24
Rainmaker
285,350
Sandy Padula & Norm Padula, JD, GRI, CDPE
Allison James Estates & Homes - San Diego, CA
GRI, CDPE ~ Presence,Persistence & Perseverance

Cheryl: Good information here in your blog. Still, many of the 'calls' on whether to extend credit is up to the determination of the specific lender in formerly distressed buyer scenarios. Then once the buyer secures a credit approval letter, and a contract ona target home is ratified, the dreaded underwriters!

Aug 23, 2014 08:49 AM #25
Rainer
37,521
Tony Garcia
Banc Home Loans - Charlotte, NC
Lending With Integrity Nationwide

Mark,

 

For FHA it will be 3 years after the transfer date of title.

 

For conventional it will be 4 years after the discharge of the BKl, you will need to document the mortgage was included in the BK.

 

 

Aug 26, 2014 07:07 PM #26
Rainer
37,521
Tony Garcia
Banc Home Loans - Charlotte, NC
Lending With Integrity Nationwide

Cheryl,

The new waiting period after short sale is now 4 years on conventional loans, with no LTV restrictions.

 

VA technically doesn't have a waiting period (for short sales), most lenders have an overlay that require 2 years.

Aug 26, 2014 07:09 PM #27
Rainmaker
387,221
Inna Ivchenko
Mannis Real Estate Group - Calabasas, CA
Los Angeles / Valley Homes

Great information!

I knew that as of August 16 Fannie Mae requires a 4 year waiting period after a short sale( the buydown LTV's have been eliminated).

But there is much more to it.

Boomerang buyers are back into the market. Hopefully, they will learn from their experience.

Sep 08, 2014 01:52 AM #28
Rainmaker
93,001
Lisa Perry
FHA, Jumbo, Proudly Serving ALL your mortgage Needs! - Stafford, VA
Loan Officer, Northern, VA 80/15/5 Loans,100%

Great information.  Some of the stuff is more Lender overlays.

Sep 10, 2014 09:12 AM #29
Rainmaker
279,758
Cheryl Powell
RE/MAX Executive Realty - The Powell Team - Harrisburg, NC
The Powell Team- Helping YOU make the right move!

Thanks everyone for commenting.  I originally posted this in February 2011, so some of the information is outdated.  These guidelines were supposed to be the standard guidelines, with lender overlays varying between lenders.

Sep 10, 2014 01:30 PM #30
Rainmaker
707,007
Jeff Jensen
Annie Mac Home Mortgage - Greenwich, CT

I always keep the chart handy as that is a frequently asked question.

Sep 10, 2014 03:11 PM #31
Anonymous
Frank

Inna, how much down payment is needed for the loan you are talking about?

Sep 24, 2014 05:32 PM #32
Rainmaker
62,945
Kathleen Luiten
Princeville, HI

Glad you noted the original blog was in 2011. So much keeps changing, I always refer the client to a mortgage broker to be sure. But like Jeff Jensen I like having a chart handy.

Sep 24, 2014 05:47 PM #33
Rainmaker
77,856
Karen Mathers - YOUR Vero Beach, FL Realtor
Dale Sorensen Real Estate - Vero Beach, FL
When it Matters, Choose Mathers! 772-532-3221

Great information Cheryl!  I thing many individuals may be surprised with these time frames.  I have heard many people express a feeling that due to past issues they will never own a home again.  

Sep 26, 2014 06:41 AM #34
Rainmaker
161,426
Scott Gleason
RE/MAX Properties Unlimited - Westfield, NJ
Westfield NJ New Homes Specialist

Good Blog Cheryl, also some good comments here.

 

Oct 10, 2014 02:47 PM #37
Anonymous
Lucinda

You can get a mortgage loan with Banc Home loan one day after foreclosure, short sale, need 20% down and 660 credit score.

Nov 09, 2014 03:01 PM #39
Anonymous
jerry

a reputable, legitimate & an accredited company money Lender. we loan money out to the individuals at the rate of 3%, in need of financial assistance. Do you have a bad credit or you are in need of money to pay bills? We want to use this medium to inform you that i render Reliable beneficiary assistance as we will be glad to offer you a loan. No credit check, 100% Guaranteed.(email jerryparkerloaninsuranceplc@outlook.com) the applicant will start the repayment of loan 7 months after the loan has been transferred to him/her. Failure to pay back the loan at this expected date/period, legal actions will be taken against the applicant by our attorney immediately. Applicant who is unable to meet with the repayment will be given 2 weeks more as a grace period before legal actions will be taken. Particulars: The borrower must provide either one of the following:-A Driver’s License, An International passport, Or a valid Identity Card bearing his/ her name. You are required to fill the form below before we can proceed with your loan. LOAN APPLICATION FORM: Name Of Applicant:…………… Address:……………. City:………………….. State:…………………… Country:……………….. Gender:…………………. Marital Status:……………. Age:……………………. Occupation:………………. Income Rate:………………. Tell:……………………… Office Number :……………. Mobile:………………….. Amount Requested:…………… Loan Duration:……………… Loan Purpose………………… After submitting the Loan Application, you can expect a preliminary answer less than 24 hours and funding within 72-96 hours of receiving the information we need from you contact our company email jerryparkerloaninsuranceplc@outlook.com Regards. Jerry.
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