Life After Bankruptcy, Foreclosure & Short Sale

A common questions many home buyers have today is, “How long do I have to wait before obtaining financing after a bankruptcy, foreclosure or short sale?”

Below is an overview based on credit issue:

Bankruptcy 

Conventional
• Ch. 7 or 11: 2 years with extenuating circumstance*, 4 year without and re-established credit
• CH 13 – 2 years from discharge date or 4 years from dismissal date

FHA
• Ch. 7: 2 years from discharge date with re-established credit – no delinquencies for 2 years
• Ch. 13: 1 year of the payout date must elapse and satisfactory payment performance with permission from the court to enter into a mortgage

VA
•  Ch. 7: 2 years from discharge date with re-established credit – no delinquencies for 2 years
• Ch. 13: 1 year of the payout date must elapse and satisfactory payment performance with permission from the court to enter into a mortgage

 Foreclosure

Conventional: 7 years from completion date
FHA:  3 years from completion date
VA: 2-3 years from completion date with good explanation of circumstances – must have sufficient entitlement.

Short Sale:

Conventional: 2 years – (Changing to 4 years on 8/15/14) with extenuating circumstances*- 4 years without extenuating circumstances

FHA: 1 year if qualified for “Back to Work Program” – 2 years with extenuating circumstances* or all debts were current until the short sale date - 3 years if short sale was not due to extenuating circumstances or debts were not paid on time before short sale.

VA: 2-3 years from completion date with good explanation or circumstances. Must have sufficient entitlement for new loan

NOTE: Currently, Conventional financing backed by FNMA has offered a wait period for short sales as low as 2 years with extenuating circumstances but it is important to note that for those loan applications received after August 15th, the wait period increases to 4 years. If you fit into the above category and are considering financing, you should act now or you will be limited to FHA financing and possibly VA, if entitled to VA programs and have sufficient entitlement for a new loan. Time is of the essence to experience the joy of homeownership.

*Always check with your mortgage professional for acceptable extenuating circumstances and any other changes that may have changed to the  programs listed since this printing.

About the Author..

Toni F. Ryan | NMLS#230507

Senior Loan Officer | Synergy One Lending

Toni F. Ryan has over 20 years experience in mortgage lending - both on the wholesale and retail levels. She believes that education is key to making the best decision for YOU! She shares her insight into the lending world here and encourages your feedback. Don't forget to connect on Facebook!

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