Applying for a mortgage after a financial crisis is usually only a matter of waiting a certain amount of time. The duration of the waiting period is determined by the source of the financial difficulties and the type of mortgage you apply for. If you’re one of the individuals who were wrapped up in the 2008 recession, you were either directly affected or knew someone who was. Numerous homeowners experienced severe financial trouble, which resulted in bankruptcy, foreclosure, deed in lieu, or short sale.
Bankruptcy is frequently followed by a mortgage default and the loss of a house due to foreclosure, short sale, or deed in lieu. It might be challenging to determine which waiting periods apply and calculate the least possible waiting period.
FHA Guidelines
Bankruptcy
You may apply for an FHA-insured loan after your Chapter 7 bankruptcy has been dismissed for 2 years.
After your Chapter 13 bankruptcy has been discharged for 1 year, you may apply for an FHA-insured loan.
Foreclosure
You may apply for an FHA-insured loan 3 years after the date of sale/deed transfer.
Short Sale / Deed in Lieu
You may apply for an FHA-insured loan 3 years following the date of sale/deed transfer.
The FHA considers short sale, deed in lieu, and foreclosure to have the same waiting time.
Your credit must be re-established if there have been no late payments in the previous 12-24 months, depending on the severity of the difficulty.
To be qualified for FHA financing after hardship, the application date must be after the above-mentioned waiting period.
VA Guidelines
Bankruptcy (Chapter 7)
You may apply for a VA guaranteed loan 2 years following a Сhapter 7 Bankruptcy discharge.
Bankruptcy (Chapter 13)
If you have completed all payments successfully, the lender may decide that you have regained good credit.
If you have paid at least 12 months of payments on time and the Trustee or Bankruptcy Judge approves the new credit, the lender may offer you preferential treatment.
Foreclosure / Deed in Lieu
You may apply for a VA guaranteed loan 2 years after the sale/deed transfer date.
Short Sale
VA does not consider a short sale to be a negative occurrence. If you meet the credit requirements for a VA loan, a short sale will not prevent you from receiving VA financing.
Important note: Credit must be re-established with a minimum credit score of 620.
To be qualified for VA funding after hardship, the application date must be after the above-mentioned waiting time.
USDA Guidelines
Bankruptcy
You can apply for a USDA rural loan 3 years after your Chapter 7 or Chapter 13 bankruptcy has been discharged.
Foreclosure
You have to wait 3 years after the sale/deed transfer date to apply for a USDA rural loan.
Short Sale / Deed in Lieu of Foreclosure
If you had significant troubles, the deed in lieu of foreclosure would be treated as a foreclosure, and you should wait at least 3 years if your credit score is less than 640. If your credit score is Over 640, your UW will make the decision, but usually not in less than a year.
Mortgage debt included in the bankruptcy will be discharged on the BK discharge date, and future foreclosure will not count as an extra waiting time, as long as you are not on title to any defaulted mortgages.
To be qualified for USDA funding after hardship, the application date must be after the above-mentioned waiting time.
Conventional (Fannie Mae) Guidelines
Bankruptcy
You may apply for a Fannie Mae conventional loan after your Chapter 7 bankruptcy has been discharged for 4 years and 2 years after the discharge of your Chapter 13.
Foreclosure
You may apply for a Fannie Mae conventional loan 7 years after the selling date of your foreclosure. However, additional qualifications may be required as well.
Foreclosure/Short Sale/Deed in Leu Included in Bankruptcy
You may apply for a Fannie Mae conventional loan after a minimum of 4 years from the discharge of a Chapter 7 Bankruptcy or 2 years after the dismissal of a Chapter 13 Bankruptcy.
Short Sale / Deed in Lieu of Foreclosure
The Waiting Period for a Short Sale or Deed in Lieu of Foreclosure, which is not part of a Bankruptcy, has been extended to 4 years from the day your name is removed from the title.
Important: Your credit must be re-established with a credit score of at least 620.
Conventional (Freddie Mac) Guidelines
Bankruptcy (Chapter 7, Chapter 11, Chapter 13)
You may apply for a Freddie Mac conventional, loan once your Chapter 7 bankruptcy has been dismissed for 4 years, or as resolved by the Loan Products Advisor.
Foreclosure
You may apply for a Freddie Mac conventional loan after 7 years from the sale date of your foreclosure or as determined by the Loan Products Advisor.
Foreclosure / Short Sale / DIL included in Bankruptcy
You may apply for a Freddie Mac loan 4 years from your foreclosure sale date or as decided by the Loan Products Advisor.
Deed in Lieu/ Short Sale of Foreclosure
You may apply for a Freddie Mac loan 4 years from your foreclosure sale date or as decided by the Loan Products Advisor. Your credit must be re-established with a minimum credit score of 620 as well.
By the way, in case of mitigating circumstances, Fannie Mae and Freddie Mac may lower the waiting time.
To qualify for Freddie Mac Conventional loan after the hardship, the date of the credit report must be after the above-mentioned waiting time.
Guidelines for Jumbo Loans
Bankruptcy
You may qualify for a Jumbo mortgage loan once any chapter of bankruptcy has been discharged for 4 years or 5 years if numerous bankruptcies appear on your credit history.
Foreclosure
You may apply for a Jumbo loan 7 years after the selling date of your foreclosure.
Additional qualification requirements may be applied as well.
Short Sale / Deed in Lieu of Foreclosure
You may apply for a Jumbo loan 7 years from Short Sale or Deed in Lieu of Foreclosure with Max Loan to Value of 80%.
Some investors will help you buy property 4 years after a short sale, but you better be ready for higher rates, higher fees, and maybe more significant down payment requirements.
Important: Waiting times may be shortened if hardship results from an exceptional event. For more information, contact your lender.
If you have a mortgage question or having a hard time qualifying for a mortgage – we’ll be more than happy to give you the answers.
