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- The Powell Team- Remax Executive Realty

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after foreclosure
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Rainmaker
274,933
Cheryl Powell
RE/MAX Executive Realty - The Powell Team - Harrisburg, NC
The Powell Team- Helping YOU make the right move!

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!

Feb 23, 2011 09:14 AM #5
Rainmaker
839,534
Joshua Zargari
MJ Decorators Workshop LI staging and home decorating - Lynbrook, NY
MJ Decorators Workshop

Good morning Cheryl.

That is a great post... Very informative.

Have a nice day.

Apr 07, 2011 07:06 AM #6
Rainmaker
591,694
Laura Giannotta
Keller Williams Realty - Atlantic Shore - Little Egg Harbor, NJ
Your Realtor Down the Shore!

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

Apr 13, 2011 07:09 AM #7
Rainmaker
274,933
Cheryl Powell
RE/MAX Executive Realty - The Powell Team - Harrisburg, NC
The Powell Team- Helping YOU make the right move!

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.

Apr 13, 2011 12:22 PM #8
Rainmaker
274,933
Cheryl Powell
RE/MAX Executive Realty - The Powell Team - Harrisburg, NC
The Powell Team- Helping YOU make the right move!

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.  :-)

Apr 13, 2011 12:25 PM #9
Rainmaker
611,209
Sheila Newton Team -- Anderson & Greenville SC Real Estate
Berkshire Hathaway HomeServices - C. Dan Joyner - Anderson, SC
25 years experience -Residential Real Estate Sales

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

Apr 13, 2011 09:14 PM #10
Rainmaker
412,175
The Scott Loper Team Lansdale & Harleysville PA Homes
Keller Williams Real Estate - Montgomeryville - Lansdale, PA

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

Apr 14, 2011 08:00 AM #11
Rainmaker
621,848
Sandy Shores Broker, Melbourne Real Estate
M & M Realty of Brevard Inc. - Melbourne, FL
Brevard County FL Real Estate

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

Apr 15, 2011 08:53 PM #12
Ambassador
1,295,012
Silvia Dukes PA, REALTOR
Tropic Shores Realty - Ich spreche Deutsch! - Spring Hill, FL
Florida Waterfront and Country Club Living

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

Apr 17, 2011 01:05 PM #13
Ambassador
1,283,772
Kathleen Daniels
KD Realty - 408.972.1822 - San Jose, CA
San Jose Homes for Sale - Probate Specialist

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 #14
Rainmaker
274,933
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
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
3,788
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
274,933
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
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
1,000,453
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
491,374
Sarah 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
205,797
Sandy Padula & Norm Padula
Keller Williams Carmel Valley - Del Mar, 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
35,457
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
35,457
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
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