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When does my waiting period start?

When Does My Waiting Period Start?

When Can I Buy Again?

Trying to figure out the waiting period after Bankruptcy? Foreclosure? Short Sale? Deed in Lieu of Foreclosure?

I have been helping homebuyers after financial hardship since February 2011, and as a result, I have become one of the foremost experts on the underwriting guidelines and waiting periods surrounding this topic.

I’ve answered more than 3,000 comments on this site from folks all over the United States trying to figure out when they are able to buy again after a financial hardship, and this is one of the most common questions I get.

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There is a lot of confusion out there when it comes to the waiting periods required after a bankruptcy, or the loss of a home in the past.  Most of this confusion comes from lenders that understand some of the guidelines, but not all of the guidelines.

The number of phone calls and emails I get from homebuyers that were pre-approved, and got all the way through the process until the very end before being turned down is staggering!

It’s heart breaking talking to so many people that have spent money on appraisals and home inspections, only to be told a week before closing that the loan cannot be done.

My hope is that you’re one of the folks finding this before you start shopping for homes after a financial hardship, and not because your current lender is dropping the ball, or will not return your calls because they are embarrassed that they misled you about their experience and expertise.

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If you are one of those folks that are up against a deadline and your lender is back peddling, I can at least provide you with accurate answers so you know exactly where you stand.

Which Date Do I Use?

There can potentially be a lot of moving parts when it comes to navigating through a financial hardship.  Often, there are multiple challenges that may include a bankruptcy, and possibly the loss of real estate through foreclosure, short sale or deed in lieu of foreclosure.

The order that these challenges unveil themselves will also affect the timelines and dates you need to keep track of in order to determine the soonest date that you would be eligible for a new home loan.

Which date you use, and how long the waiting periods are will be determined mostly by what the financial hardship is, the timing of the events that follow the hardship, and the type of financing you are now applying for.

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Conventional Waiting Period

Also known as Conventional financing, both Fannie Mae and Freddie Mac underwritten loans use the same timelines and dates when determining when you’re eligible for home financing again.

Bankruptcy – You are eligible for conventional financing in 4  years from the discharge of a Chapter 7 Bankruptcy, 2 years from the discharge of a Chapter 13 bankruptcy.

If there was no mortgage included in the BK, or if you continued to make on-time payments on all mortgages discharged through the bankruptcy, you will use the discharge date as on your discharge papers your starting point for the waiting period.

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Foreclosure – A foreclosure that occurs on a mortgage that was included, and discharged in a bankruptcy will use the Bankruptcy discharge date for the eligibility timeline.

If the foreclosure occurs outside of the bankruptcy (prior to filing the bankruptcy), or if the mortgage  was not included in a bankruptcy, the waiting period is 7 years from the date that title transfers into the new owner’s name (recorded).

Short Sale or Deed in Lieu of Foreclosure – Considered “pre-foreclosure” hardships, a short sale or deed in lieu that occurs on a mortgage that was included, and discharged in a bankruptcy will use the bankruptcy discharge date as the waiting period.

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If the short sale or deed in lieu occurs prior to the bankruptcy discharge date, or if the mortgage is not included in the bankruptcy, the waiting period is 4 years from the date that title transfers into the new owner’s name (recorded).

Multiple properties – If you have multiple properties that were lost through foreclosure, short sale, or deed in lieu, you are going to use the date of the last (most recent) hardship as your waiting period.  The exception to this rule is if the mortgage was included, and discharged through a bankruptcy.

FHA Waiting Period

FHA insured loans typically have shorter waiting periods than Conventional in most cases.

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Bankruptcy – You are eligible for a FHA insured home loan 2  years from the discharge of a Chapter 7 Bankruptcy, 1 year from the discharge of a Chapter 13 bankruptcy.  If there was no mortgage included in the BK, or if you continued to make on-time payments on all mortgages discharged through the bankruptcy, you will use the discharge date as on your discharge papers your starting point for the waiting period.

Foreclosure, Short Sale or Deed in Lieu – Unlike Conventional financing, FHA treats foreclosure, deed in lieu, and short sale as separate events from a bankruptcy which carry an independent 3 year waiting period from the date that title transfers into the new owner’s name (recorded).

If the mortgage on the home was a FHA insured loan, the waiting period begins on the day that the mortgage insurance claim is paid.  The government reporting system that determines eligibility is call CAIVRS.  If you show up on a CAIVRS report, you are not eligible for FHA financing yet.

Multiple properties and events – If you have multiple properties that were lost through foreclosure, short sale, or deed in lieu, you are going to use the date of the last (most recent) hardship as your waiting period.

VA Waiting Period

VA guaranteed loans tend to be the most flexible, and most aggressive in terms of waiting periods.  VA will always look at the “big picture” and evaluate the level of risk, and the circumstances surrounding the hardship.  VA qualifying guidelines tend to try to always fall on the side of benefiting the Veteran.

Bankruptcy – You are eligible for a VA guaranteed home loan 2  years from the discharge of a Chapter 7 Bankruptcy, and as early as 1 year from the filing of a Chapter 13 bankruptcy with 12 months of on-time payments and permission from the Bankruptcy court.

If there was no mortgage included in the BK, or if you continued to make on-time payments on all mortgages discharged through the bankruptcy, you will use the discharge date as on your discharge papers your starting point for the waiting period.

Foreclosure or Deed in Lieu – VA suggests that 24 months pass before a Veteran will be eligible to buy after a foreclosure or deed in lieu of foreclosure.  Similar to FHA insured financing, VA recognizes bankruptcy, and any subsequent loss of the home as two separate events with separate waiting periods.

Multiple properties and events – If you have multiple properties that were lost through foreclosure, short sale, or deed in lieu, you are going to use the date of the last (most recent) hardship as your waiting period.

Still Confused About Which Date to Use?

There is no black and white path to understanding these guidelines.  The biggest challenge that most lenders have is that they have very limited knowledge or experience of these guidelines, so they quote waiting periods from one program, and imply that this is a standardized waiting period regardless of what type of loan you’re using to buy again.

This is where 99% of all bad advice comes from, inexperienced loan officers quoting inaccurate guidelines.

Have a situation that you think is unique or extra complicated?  Leave your comments, questions or scenarios below in the comment thread, and I will help you sort out the truth.

About the Author

Scott Schang

A 20 year veteran of the Mortgage and Real Estate industry, I am passionate about educating and empowering consumers. I have been writing about consumer protection issues, and making sense of complicated real estate and mortgage topics on this website since 2007

Leave a Question or Comment About this Topic

  • Jason says:

    I had a foreclosure and the title was transferred/recorded out of my name in August 2014. If I wanted to build a house that will not be completed until after August 2021 will a lender approve me for a Conventional loan knowing the house will not be ready until after the 7 year point? Or does that entire process need to start after the 7 years has passed?

    I have talked to a couple lenders and neither has given me a solid answer.

    • Scott Schang says:

      Hi Jason, great question. Was there a bankruptcy prior to the foreclosure by any chance? If so, it’s only a 4-year wait from the discharge of the bankruptcy. I’m assuming you’ve already gone down that path.

      To address your question, it sounds like you’re asking if you would qualify for a loan to start construction, and the completion of the home and permanent conventional loan will be after the 7-year foreclosure waiting period?

      You can absolutely get pre-approved for the Conventional loan conditional upon the waiting period being met. The clarification that Fannie Mae came out with a few years ago is that the loan documents have to be dated after the waiting period.

      Since the construction will be done after the waiting period is over, the waiting period condition would be lifted and you could fund the loan.

      It shouldn’t be difficult to show that you will qualify for the conventional loan once the waiting period is met, the bigger challenge is finding a lender that would do a construction loan prior to that waiting period condition being lifted.

      This is definitely not going to be main-stream knowledge for most loan officers, it’s a relatively rare scenario. If you would like, shoot me an email to scott@findmywayhome.com and let me know what State you’re trying to build in and I will see if I can introduce you to someone I know and trust that has experience with this scenario.

      Hope this helps?