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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

  • Michael says:

    As loan officer, do I have to wait until the the 7 year mark to begin the loan application or do I just need to close the loan after the date of the 7 year mark?

    • Scott Schang says:

      If you are using a 7 year waiting period, it sounds like you’re looking at Fannie Mae underwriting guidelines? For Fannie, the waiting period must be completed prior to the closing of the new loan. Here is the guideline.

      The waiting period commences on the completion, discharge, or dismissal date (as applicable) of the derogatory credit event and ends on the disbursement date of the new loan

  • Courtney says:

    Scott,
    Thanks for such a quick response! I’ve had the retail job for 9 years along with teaching for 15 years so that part will be fine. It sounds like I need to contact my county records to confirm the date that my name was officially removed from the title during each foreclosure. I live in Kansas. With a redemption period of 12 months I’ve read about, I wondered if the date would be after that period. Hopefully, I’ll still be a bit beyond the 7 years.

    • Scott Schang says:

      The redemption period will have no impact on your waiting period. If you’re working with a loan officer now, they can pull public records for you through a title company. You can, of course, contact the County recorder’s office where the properties are located and request a copy of the foreclosure deed.

      Let me know if there’s anything else I can help with?

      • Courtney says:

        Scott,
        I just contacted my county’s recorder’s dept and my name was removed from each of the deeds on July 2012 and March 2013, so I’m beyond the 7 year wait time. Now I’ll be ready to get preapproved for the conventional home loan in Sept. Thanks again for your advice!

  • Courtney says:

    I went through a divorce in Oct. 2011. We had a built a home in 2003 and also owned a 2nd property as a rental. Due to my husband’s financial mismanagement, we lost both properties to foreclosure that year. (No bankruptcy) I’ve been renting an apartment since June 2011 and working 2 jobs. (I’m a teacher and work in retail P-T). I have 10% saved for the down payment and my credit score is 807. I have no debt other than $1,000 on a credit card. I’ve signed an agreement with a buyer’s agent and plan to get preapproved in Sept. 2020 with the hopes of purchasing a home in the next 4 months. I know that the foreclosures fell off of my credit report around April of 2018, so I thought I was fine to be considering getting a mortgage now and have been working towards this for a long time. However, after reading your article, now it appears it’s 7 years from the SALE of the last foreclosed home. Can you confirm that for me and provide any feedback? Thank you for your time.

    • Scott Schang says:

      Hi Courtney, if you’re applying for conventional financing that follows Fannie Mae or Freddie Mac underwriting guidelines, the waiting period begins from the date that your name was removed from title through the foreclosure process. What happens to the home after the foreclosure has no impact on your waiting period at all.

      If both homes were foreclosed in 2011, you should have a clear path to conventional financing. The only “issue” you may run into is whether or not you have a 2 year history of having the retail P-T job, so that income may be included in your qualifying ratios.

      If you would like, I can introduce you to a loan officer that I know and trust that is an expert at these guidelines. I apologize for any confusion caused by my article, and from what you’ve stated here, it sounds like you’re on the right path.

      If you would like that introduction, just shoot me an email to scott@findmywayhome.com and let me know what State you’re buying in.

      I hope this helps?

  • Shane says:

    Thank you for this site and the foreclosure information is contains. For months I have been asking mortgage professionals in Illinois what foreclosure event starts the official post foreclosure clock. The answers I received were all over the place. Based on information from your website I am awaiting the foreclosure title transfer information from my county. Once I determine the exact date I come out of the penalty box, am I allowed in advance of that date to begin the application process for a new FHA loan or can no new paper be started until after the 3 year period is complete? Also…is there anyone you trust in Illinois you would recommend to work with on my next FHA mortgage?

    • Scott Schang says:

      Hi Shane, I have a VERY experienced loan officer in Illinois, so you’re covered there.

      Unfortunately, you would not be able to necessarily start the loan process, but an experienced loan officer can review your income, assets and credit and more or less “guarantee” your approval once the waiting period ends.

      If the foreclosed mortgage was also FHA, you’re most likely going to encounter an issue with CAIVRS as well. As long as you are 36 months from the date your name was removed from the title, an experienced loan officer can help get the CAIVRS alert suppressed.

      Shoot me an email to scott@findmywayhome.com and I’ll introduce you to Mia Schultz in Illinois. You can type her name into the search bar and learn more about Mia as well.

      Hope this helps?