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Waiting Periods for buying after bankruptcy foreclosure short sale deed in lieu

2021 When Can I Qualify for a Mortgage After Bankruptcy, Short Sale, Foreclosure or DIL

Qualifying for a mortgage after financial hardship is normally only a matter meeting a minimum waiting period.

The waiting period is determined by the nature of the financial hardship and the type of mortgage your are applying for.

If you’re like most people that got caught up in the financial crisis in 2008, you were either directly affected, or know someone that was directly affected.

Many homeowners found themselves in serious financial hardship resulting in a bankruptcy, foreclosure, deed in lieu or short sale.

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Often, a bankruptcy is followed by the default of a mortgage, and the loss of a home to foreclosure, short sale or deed in lieu.

It can get tricky knowing which waiting period apply and how to figure out the shortest waiting period possible.

This is a very popular subject as you can see if you scroll to the bottom of this article and see over 2,200 questions and answers dating back to early 2011.

2021 FHA Guidelines

  • Bankruptcy – You may apply for a FHA insured loan after your bankruptcy has been discharged for TWO (2) years with a Chapter 7 Bankruptcy.  You may apply for a FHA insured loan after your bankruptcy has been discharged for ONE (1) year with a Chapter 13 Bankruptcy
  • Foreclosure – You may apply for a FHA insured loan THREE (3) years after the sale/deed transfer date.
  • Short Sale / Deed in Lieu – You may apply for a FHA insured loan THREE (3) years after the sale/deed transfer date. FHA treats short sale, deed in lieu and foreclosure as the same waiting periods.

Credit must be re-established no late payments in past 12-24 months, depending on hardship

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Application Date must be after the above waiting period to be eligible for FHA financing after hardship.

2021 VA Guidelines

  • Bankruptcy Ch 7 – You may apply for a VA guaranteed loan TWO (2) years after a chapter 7 Bankruptcy
  • Bankruptcy Ch 13 – If you have finished making all payments satisfactorily, the lender may conclude that you have reestablished satisfactory credit.
    • If you have satisfactorily made at least 12 months worth of the payments and the Trustee or the Bankruptcy Judge approves of the new credit, the lender may give favorable consideration.
  • Foreclosure / Deed in Lieu – You may apply for a VA guaranteed loan TWO (2) years after the sale/deed transfer date.
  • Short Sale – VA does not recognize a short sale as a derogatory event.  If you are able to credit qualify for a VA loan, a short sale would not prevent you from being eligible for VA financing. – Updated 4/2016

Credit must be re-established with a minimum 620 credit score

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Application Date must be after the above waiting period to be eligible for VA financing after hardship.

2021 USDA Guidelines

  • Bankruptcy – You may apply for a USDA rural loan THREE (3) years after the discharge of a Chapter 7 or 13 Bankruptcy
  • Foreclosure – You may apply for a USDA rural loan THREE (3) years after the sale/deed transfer date.
  • Short Sale / Deed in Lieu of Foreclosure – If you had big issues the deed in lieu of foreclosure will be viewed as a foreclosure and you would want to wait no less than 3 years if the score is under 640.  Over 640 your UW will make the call but typically not less than one year.
  • UPDATED 12/2014 – Mortgage debt included in Bankruptcy will go by BK discharge date, and and subsequent foreclosure will not count as an additional waiting period, as long as you are off title for any defaulted mortgages.
  • Link to 12/1/2014 USDA Guideline – HB-1-3555  Attachment 10-B  See Page 31 of 34

Date of Credit Approval must be after the above waiting period to be eligible for USDA financing after hardship.

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2021 Conventional (Fannie Mae) Guidelines

  • Bankruptcy – You may apply for a Conventional, Fannie Mae loan after your Chapter 7 bankruptcy has been discharged for FOUR (4) years, TWO (2) years from the discharge of Chapter 13
  • Foreclosure – You may apply for a Conventional, Fannie Mae loan SEVEN (7) years after the sale date of your foreclosure.  Additional qualifying requirements may apply,
  • Foreclosure / Short Sale / DIL included in Bankruptcy – You may apply for a Conventional, Fannie Mae loan after a minimum FOUR (4) years from the DISCHARGE of a Chapter 7 Bankruptcy, TWO (2) years from the DISCHARGE of a Chapter 13 Bankruptcy
  • Short Sale / Deed in Lieu of Foreclosure – UPDATED – Effective 7/29/2014:  Short Sale or Deed in Lieu of Foreclosure not included in a Bankruptcy has a new Waiting Period of FOUR (4) years from the date your name is removed from title.

Credit must be re-established with a minimum 620 credit score.

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2021 Conventional (Freddie Mac) Guidelines

Bankruptcy (7,11,13) – You may apply for a Conventional, Freddie Mac loan after your Chapter 7 bankruptcy has been discharged for FOUR (4) years, or as determined by Loan Products Advisor (AUS)

  • Foreclosure – You may apply for a Conventional, Freddie Mac loan SEVEN (7) years after the sale date of your foreclosure or as determined by Loan Products Advisor (AUS)
  • Foreclosure / Short Sale / DIL included in Bankruptcy – You may apply for a Conventional, Freddie Mac loan after a minimum FOUR (4) years after the sale date of your foreclosure or as determined by Loan Products Advisor (AUS)
  • Short Sale / Deed in Lieu of Foreclosure –
  • You may apply for a Conventional, Freddie Mac loan FOUR (4) years after the sale date of your foreclosure or as determined by Loan Products Advisor (AUS)

Credit must be re-established with a minimum 620 credit score.

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Fannie Mae and Freddie Mac have reduced waiting periods in cases of extenuating circumstances

Date of Credit Report must be after the above waiting period to be eligible for Conventional financing after hardship.

NOTE:  I do not yet have a success story for someone qualifying for the reduced time frames that Freddie Mac proposes to offer.  That shouldn’t stop you from trying.

2021 Jumbo Mortgage Guidelines

  • Bankruptcy – You may apply for a Jumbo mortgage loan once any chapter of bankruptcy has been discharged for FOUR (4) years, FIVE (5) years if multiple bankruptcies occur on credit profile.
  • Foreclosure – You may apply for a Jumbo mortgage loan SEVEN (7) years after the sale date of your foreclosure.  Additional qualifying requirements may apply,
  • Short Sale / Deed in Lieu of Foreclosure – You may apply for a Jumbo mortgage loan:
    • SEVEN (7) Years from Short Sale or Deed in Lieu of Foreclosure with Maximum 80% Loan to Value
    • NOTE: There are investors out there that will allow you to buy again in FOUR (4) years after a short sale, but expect higher rates, higher fees, and possibly larger down payment requirements.  Jumbo lenders have not yet loosened up the qualifying guidelines for buying after a hardship.
    • It may make financial sense to consider a portfolio Jumbo lender that offers high rates so that you can take advantage of today’s market.  Once your short sale is seasoned, refinance into a more favorable, longer-term loan.

NOTE:  If hardship is the result of an extenuating circumstance, waiting periods may be reduced.  Contact your lender for details.

Portfolio Loans

We are beginning to see more and more portfolio loans in the market that have relaxed waiting periods for bankruptcy, foreclosure, short sale and deed in lieu of foreclosure.  These are not necessarily subprime loans, but they do often have higher interest rates and higher closing costs.

Portfolio loans are offered by investors that are looking at other compensating factors, like high credit scores, low loan to value (larger down payments), and reserves.

Do not rule out a portfolio loan as a “bridge” to get you into your home until you reach your waiting period for refinancing into a loan with better terms.

“Buy Again” Questions Answered

If you are like most people that visit this website, you’ve got a mortgage problem or an unanswered question and you’re having trouble getting answers.

We are here to help you get the right answer, the first time, and connect you with an experienced loan officer that can help if necessary.

Asking Your Question is Easy

  • Email me Directly:  Simply click the email at the top of the site.  These questions come directly to me and are answered very quickly.
  • Leave a Comment:  Below every article is the option to leave a comment or question.  We see these comments and questions in real-time and every question is answered.

NOTE:  This page was first created in February 2011, and is updated as new guidelines are released.

This page is monitored by experts that understand the guidelines, and have successfully guided countless families back into homeownership after significant financial hardship.

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

  • JR says:

    Hello,

    I filed for chapter 7 in July 2019. My debts were discharged in October 2019. My bankruptcy included a mortgage. I surrendered the home in July 2019 and the lender still has not foreclosed on the home. Since then, I have rebuilt my credit. When will I be able to purchase another house?

    • Scott Schang says:

      The waiting period to buy after a bankruptcy and/or foreclosure will vary depending on what kind of loan you are applying for. When applying for an FHA mortgage, there is a 2 year wait from the discharge of the bankruptcy, and a separate 3 year wait from the date that your name is removed from title once the foreclosure takes place.

      Using a conventional loan that follows Fannie Mae underwriting guidelines, there is a 4 year wait from the discharge of the bankruptcy, and you can ignore the foreclosure date.

      Last thought, if you have a 20% down payment, there are portfolio loans that will allow you to buy one day out of bankruptcy, but the foreclosure probably needs to be completed.

      Have you talked to the lender about processing a deed in lieu of foreclosure? That might speed up the process of getting the home out of your name.

      Hope this helps?

  • shane says:

    Hello Scott
    I stumbled on your blog and liked the way you were quick to respond to questions.
    I hope you can help me!

    Wanting to apply for mortgage. We have 2 bankruptcies on record.
    The 1st was 2002 and was discharged and we rebuilt. We kept our home and moved on.
    A serious medical event (open heart surgery for wife) in 2008 led to 2nd bankruptcy in
    2011, discharged 2012.
    The house was kept again, but ended in a deed in lieu in 2017 as we had moved and rented
    it and the value had plummeted.

    I’ve done alot of reading and understand the basic waiting guidelines.
    My main question is : does that first bankruptcy in 2002 have any impact at all to
    underwriting?
    Thanks in advance

    • Scott Schang says:

      Hi Shane, thanks for the question!

      Fannie Mae (conventional financing) has a guideline that extends the waiting period from 4 years to 5 years if you have multiple BK’s in a 7 year period.

      Because the first one was 9 years ago, it would not impact your waiting period.

      Since the second BK was discharged in 2012, you’re eligible now for either Conventional or FHA financing.

      Let me know if you would like an introduction to a Lon officer that is an expert with these guidelines.

      Hope this helps?

  • Terri meisner says:

    We had to move to Texas from Illinois due to family illness in 2013. Unfortunately, we were foreclosed on. We are now ready to buy again. We have great credit and income. My question is we got a preapproval for mortgage and the foreclosure did not come up. The mortgage company reported it as good payment history and closed account. What will happen if it goes to underwriting? We are getting different dates of sale from August 2013 to August 2015.

    • Scott Schang says:

      Hi Terri,

      Was the mortgage discharged through bankruptcy? The foreclosure will definitely show up during the underwriting process. You’re good for FHA whether the foreclosure occurred in August 2013 or August 2015.

      If you’re trying to qualify for a conventional loan, the bankruptcy will matter. If there was not bankruptcy, there’s a 7 year waiting period.

      You should be able to easily get the documentation for the foreclosure from public records to verify the date. If you’re working with a loan officer already, they can order it for you.

      If you’re not working with someone, you can shoot me an email to scott@findmywayhome.com and I can introduce you to someone that I know and trust that has experience with these guidelines.

      Hope this helps?