Buying a Home After Short Sale, Foreclosure, Bankruptcy or Charge Off
Mortgage Meltdown of 2007 and rapid depreciation in real estate prices post that, resulted in financial crisis for a lot of homeowners. As a result of which, several of them went through a foreclosure, short-sale or bankruptcy. If you are one of those you must be trying to find out – how soon you can buy a house again. By the end of this post, you would know when you can qualify for mortgage – conventional loan, VA Loans or loans insured by Federal Housing Administration (FHA).
When do I qualify for a mortgage to buy a house after short-sale?
A pre-foreclosure sale or short sale is the sale of a property in lieu of a foreclosure resulting in a payoff of less than the total amount owed, which was pre-approved by the servicer.
Qualifying for Conventional mortgage after Short-sale:
The following waiting period requirements apply for conventional mortgage backed by Fannie Mae
Fannie Mae recently updated its guidelines and established a standard 4 year waiting period for a Pre-foreclosure sale (short sale) or deed-in-lieu of foreclosure, with a 2 year waiting period permitted if a borrower has extenuating circumstances.
Qualifying for FHA Loan after Short-sale:
You need to wait for 3 years after short-sale to qualify for an FHA loan. Some exceptions may apply if you were not late on any mortgage or installment debt 12 months prior to the short-sale debt. One caveat to three year wait period is that, you should not have any bankruptcy or foreclosure prior to the short-sale.
Qualifying for a VA Loan after Short-sale:
You need to wait for 2 years after short-sale to qualify for a VA loan.
When do I qualify for a mortgage to buy a house after foreclosure?
Qualifying for Conventional mortgage after Foreclosure:
A seven-year waiting period is required, and is measured from the completion date of the foreclosure action as reported on the credit report or other foreclosure documents provided by the borrower.
Qualifying for FHA Loan after Foreclosure:
You need to wait for 3 years after the foreclosure to qualify for an FHA loan.
- If the loan secured by the foreclosed property was not an FHA loan, the foreclosure time frame is measured from the foreclosure completion date.
- If the loan secured by the foreclosed property was an FHA loan, the three year time frame is measured from the date FHA paid the insurance claim.
- Defaulted time share loans are not considered foreclosures
Qualifying for VA Loan after Foreclosure:
To qualify for VA loan after foreclosure, the wait period is two years.
When do I qualify for a mortgage to buy a house after bankruptcy?
Qualifying for Conventional mortgage after Bankruptcy:
With Chapter 7 bankruptcy you need to wait for 4 years before which you can qualify for a conventional mortgage. With Chapter 13 bankruptcy 24 months must elapse from the discharge date or 48 months from the dismissal date.
Qualifying for FHA Loan after Bankruptcy:
Wait period for an FHA loan after Chapter 7 bankruptcy is two years.
To qualify for an FHA loan after Chapter 13 bankruptcy, following guidelines apply:
- Document at least one year into the payout plan has elapsed
- Document all required payments have been made on time
- If borrower is still in repayment, obtain court permission to enter into the new mortgage
- If the borrower is still in repayment, include the Chapter 13 payment in the debt ratio
Qualifying for VA Loan after Bankruptcy:
Two years wait period is required after chapter 7. For Chapter 13 bankruptcy – one year into payment plan is required with all payments made on time. A court permission to enter into a new mortgage is required too.
Waiting Period for Mortgage Debt Discharged through Bankruptcy
If a mortgage debt has been discharged through bankruptcy, even if a foreclosure action is subsequently completed to reclaim the property in satisfaction of the debt, the borrower is held to the bankruptcy waiting periods and not the foreclosure waiting period. This applies to Conventional loans.
Charge Off Accounts – Mortgage Debt
For Conventional Loans, Charge-offs of mortgage accounts requires a 4- year waiting period following this derogatory credit (2 years if the borrower can demonstrate extenuating circumstances).