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  • (651) 552-3681

    Home Purchase - Home Refinance
    Serving MN WI IA ND SD CO FL

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  • Waiting periods after bankruptcy or foreclosure REQUIRED before getting a NEW mortgage loan.

  • I had a bankruptcy or foreclosure.  How long do I have to wait to get a mortgage is a very common question.

    When you have a major negative credit event, like a bankruptcy, foreclosure, or short-sale, there is an automatic mandatory waiting period before traditional standard home mortgage loans will even consider you for new financing.

    In other words, you are automatically denied until your waiting period is up. Below is a chart of current mandatory waiting periods for the various loans.

    Next, understand that these are the raw guidelines. Just because you appear to meet the guidelines below, does not in any way mean you are approved. These rules just mean you would no longer be automatically denied.

    Further understand that Fannie Mae and Freddie Mac do not do loans. They BUY finished loans from lenders after closing. FHA, VA, and USDA also do not do loans. They issue insurance on loans. Mortgage lender may, and often do, add their own overlays or restrictions to what Fannie Mae, Freddie Mac, FHA, VA, or USDA guidelines say they may buy or insure. 

    Contact us at (651) 552-3681 or APPLY ONLINE for a personal review of your new loan options for homes in MN, WI, IA, ND, or SD

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    Current Rules for getting Mortgage after foreclosure. Mortgage after bankruptcy. Mortgage after a short sale.

  • Conventional Loan Waiting Period

    Derogatory Item

    Waiting Period

    Foreclosure

    Home given back to the bank – No owner participation

    7 years from date foreclosure completed and transferred back to bank – No extenuating circumstances *

    Extenuating circumstances - 3 years from date foreclosure completed and transferred back to bank with 10% down.  Primary home purchase and rate and term refinance only. No second homes or investments. Qualifying extenuating circumstances are death or well documented extended illness.

    Short Sale

    Deed in Lieu of Foreclosure

     

    New rule - started August 16. 2014

    Short Sale = Home sold but sales price less than owned

    Deed in Lieu = Home returned to lender in exchange for forgiving loan

    4 years from date sale closed and transferred to a new owner or transferred back to bank

    Bankruptcy – Chapter 7

    Debts are discharged through BK, client does not pay any debts owing

    4 years from discharge date

    2 years from discharge date possible with extenuating circumstances *

    Bankruptcy – Chapter 13

    Debts are paid back on a monthly scheduled payment plan

    2 years from discharge date

    4 years from dismissal date

    Bankruptcy AND Foreclosure

    House INCLUDED in bankruptcy

    New rule - started August 16, 2014

    Bankruptcy AND foreclosure, with home foreclosed on included in bankruptcy. Waiting period is based on bankruptcy discharge date, not foreclosure date, regardless of how long after the bankruptcy the official foreclosure occurred. Fannie Mae only

  • New FHA Loan Waiting Period

    Derogatory Item

    Waiting Period

    Foreclosure

    Deed in Lieu of Foreclosure

    Home given back to the bank – No owner participation

    Deed in Lieu = Home returned to lender in exchange for forgiving loan

    3 years from date foreclosure completed and transferred back to bank

    Less than 2 years, but more than 12 months from date foreclosure completed and transferred back to bank may be acceptable if the result of acceptable extenuating circumstances *

    Short Sale

     

    Short Sale = Home sold but sales price less than owned

    3 years from date sale closed and transferred to new owner

    NO waiting period if borrower had no late payments on any mortgages and consumer debts within the 12 month period proceeding short sale AND did NOT do a strategic short-sale. Job loss and relocation outside of area are examples of short-sale NOT being strategic.

    Bankruptcy – Chapter 7

    Debts are discharged through BK, client does not pay any debts owing

    2 years from date of discharge with re-established credit paid as agreed or no new credit obligations incurred

    LESS than 2 years, but more than 12 months from date of discharge may be acceptable if the bankruptcy was caused by acceptable extenuating circumstances * AND borrower has since exhibited a documented ability to manage financial affairs in a responsible manner.

    Bankruptcy – Chapter 13

    Debts are paid back on a scheduled repayment plan

    If still IN your Chapter 13, AND at least 1 years of on time payments under bankruptcy has elapsed and the borrower’s payment performance has been satisfactory (on time), and permission from the bankruptcy trustee to enter into a loan (very hard to get)

    If Chapter 13 discharged. NO waiting period, but the loan is manually underwritten for the first two years after the discharge, which has tougher underwriting guidelines

  • New VA Loan Waiting Period

    Derogatory Item

    Waiting Period

    Foreclosure

    Deed in Lieu of Foreclosure

    Home given back to the bank – No owner participation

    Deed in Lieu = Home returned to lender in exchange for forgiving loan

    2 years from date foreclosure completed and transferred back to bank

    1 – 2 years from date foreclosure completed and transferred back to bank IF credit re-established and paid as agreed AND was caused by extenuating circumstances *

    If the bankruptcy was discharged within the last 1 to 2 years, it is probably not possible to determine that the borrower or spouse is a satisfactory credit risk unless both of the following requirements are met:

    1) The borrower(s) had obtained consumer items on credit subsequent to the bankruptcy and has satisfactorily made the payments over a continued period.

    2 The bankruptcy was caused by circumstances beyond the control of the borrower or spouse such as unemployment, prolonged strikes, medical bills not covered by insurance, and so on, and the circumstances are verified. Divorce is not generally viewed as beyond the control of the borrower and/or spouse.

    Short Sale

     

    Short Sale = Home sold but sales price less than owned

    2 years from date sale closed and transferred to new owner

    NO waiting period if borrower had no late payments on any mortgages and consumer debts within the 12 month period proceeding short sale AND did NOT do a strategic short-sale

    Bankruptcy – Chapter 7

    Debts are discharged through Bankruptcy. client does not pay any debts owing

    2 years from date of discharge with re-established credit paid as agreed or no new credit obligations incurred

    1 – 2 years from date of discharge may be acceptable if the bankruptcy was caused by acceptable extenuating circumstances * AND borrower has since exhibited a documented ability to manage financial affairs in a responsible manner.

    Bankruptcy – Chapter 13

    Debts are paid back on a monthly scheduled payment plan

    1 years of on time payments under bankruptcy has elapsed and the borrower’s payment performance has been satisfactory (on time)

  • New USDA Loan Waiting Period

    Derogatory Item

    Waiting Period

    Foreclosure

    Deed in Lieu of Foreclosure

    Short Sale

     

    Home given back to the bank – No owner participation

    Deed in Lieu = Home returned to lender in exchange for forgiving loan

    Short Sale = Home sold but sales price less than owned

    3  years from date foreclosure completed and transferred back to bank

    Less than 3 years from date foreclosure completed and transferred back to bank IF credit re-established and paid as agreed AND was caused by extenuating circumstances *

    Bankruptcy – Chapter 7

    Debts are discharged through Bankruptcy, client does not pay any debts owing

    3 years from date of discharge with re-established credit paid as agreed or no new credit obligations incurred

    Less than 2 years from date of discharge may be acceptable if the bankruptcy was caused by acceptable extenuating circumstances * AND borrower has since exhibited a documented ability to manage financial affairs in a responsible manner.

    Bankruptcy – Chapter 13

    Debts are paid back on a monthly scheduled payment plan

    1 years of on time payments under bankruptcy has elapsed and the borrower’s payment performance has been satisfactory (on time)

    Less than 1 years from date of discharge may be acceptable if the bankruptcy was caused by acceptable extenuating circumstances AND borrower has since exhibited a documented ability to manage financial affairs in a responsible manner.

  • EXCEPTION RULES

    *Granting of extenuating circumstances exception is VERY RARE, and almost never happens

    EXAMPLE OF EXTENUATING CIRCUMSTANCES for a new mortgage loan

    CONVENTIONAL Loans: Non-recurring events that are beyond the borrower’s control that resulted in a sudden, significant, and prolonged reduction in income or a catastrophic increase in financial obligations. Death of primary wage earner. Loss of job, and divorce do not qualify.

    FHA Loans: Serious illness or death or death of a wage earner. Divorce and the inability to sell a property due to job transfer or relocation to another are DOES NOT QUALIFY as an acceptable extenuating circumstances

    VA Loans: Unemployment, prolonged strikes, medical bills not covered by insurance, etc. Divorce is NOT viewed as beyond the control of the borrower and/or spouse

    USDA Loans: Loss of job, delay or reduction in government benefits or other loss of income, increased expenses due to illness, death, etc. Circumstances surrounding the adverse event must have been temporary in nature AND beyond the applicants control AND the reoccurrence in unlikely to occur again

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    Waiting period after bankruptcy, Waiting period after foreclosure, Mortgage after foreclosure. Mortgage after bankruptcy. Mortgage after a short sale.

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