The Chart | Bankruptcy, Foreclosure or Shortsale to Mortgage Qualification Timeline |

Experiencing a severe adverse credit event such as foreclosure, short-sale, deed-in-lieu of foreclosure or bankruptcy does not mean you will never be eligible to get a home loan. This chart provides the time-out periods required by the adverse event. The assumptions are that you have established acceptable credit scores and meet standard underwriting guidelines.  With FHA, one may obtain a new purchase mortgage one year* after discharge of a Chapter 7 bankruptcy.

 

Adverse Credit Event

Loan Type

 

Foreclosure

Short Sale/Short Payoff/Deed-In-Lieu of Foreclosure

Chapter 7 With or Without Reaffirmation

Chapter 13 Bankruptcy

 

Conventional

 

7 years from transfer of deed unless discharged. Limited to 4 years from discharge

• 3 years from transfer of deed with extenuating circumstances*

• 4 years from transfer of deed.

• 2 years with acceptable extenuating circumstances*

• 4 years from Discharge

Less than 4 years from Discharge with extenuating circumstances*

• 2 years from Discharge with extenuating circumstances,* good credit, acceptable FICO credit scores.

2 years from Dismissal and all of the above.

4 years otherwise.

 

FHA

 

• 1 year from transfer of deed to loan servicer

• Not less than 1 year from deed transfer*See New Rules• Otherwise, 2 years

• 1 year from transfer of deed to loan servicer with hard proof of Extenuating Circumstances*.

• Wait period is not required if debtor is current and must take a job in a different market

• 24 months following Discharge with new good credit.

• 12 months post  Discharge with hard proof of Extenuating Circumstances*.

 • 12 months’ on-time Chapter 13 payments to Trustee with no 30 day late payments, no new bad credit, and reestablished credit.

• No 2 year wait post-discharge. See FHA 4000.1

 

 

VA

• 2 years from transfer of deed to loan servicer

• Between 12-23 months from deed   transfer*

• 2 years from transfer of deed to loan servicer*

• Wait period not required if debtor is current and must take a job in a different market

• Same as FHA • Same as FHA  

USDA

• 3 years from transfer of deed to loan   servicer

Less than 3 years*

• 3 years from transfer of deed to loan servicer*

• Wait period is not required if debtor is current and must take a job in a different market*

• 3 years from Discharge with reestablished credit

• Less than 3 years from Discharge*

• Same as FHA  

The New Reverse Mortgage

2 years from transfer of deed to bank/loan servicer. 2 years from transfer of deed to bank/loan servicer. 2 years following Discharge or 1 year with mitigating circumstances. During the bankruptcy with specific language in a Court Order or 1 year following Discharge.  

What events qualify for extenuating circumstances?

*Extenuating circumstances are events beyond a debtor’s control such as death or disability of a wage earner, divorce, distant employment transfer, or business failure. These events must be documented and verified, subject to manual underwriting review. The inability to sell the house does not qualify.  Exception: GSE HAFA New Short Sale Guidelines > 11/01/2012 with acceptable hardship and contract approval.

Chart attribution

Financially Speaking™ James Spray, MLO, CNE, FICO Pro
CO LMO 100008715 | NMLS 257365 | Revised December 16, 2016

Notice: The information on this blog is opinion and information. While I have made every effort to link accurate and complete information, I cannot guarantee it is correct. Please seek legal assistance to make certain your legal interpretation and decisions are correct. This information is not legal advice and is for guidance only. You may use this information in whole and not in part providing you give full attribution to James Spray.

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