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Bankruptcy

Buying a Home After Bankruptcy

Bouncing back from bankruptcy or foreclosure takes time. Most people applying for a loan will need to wait two years after bankruptcy before lenders will consider their application, but it’s possible to wait up to four years. It all depends on the individual and type of loan.

There aren’t any laws that prevent you from buying a house after the bankruptcy. You’ll need to qualify for a loan and most lenders won’t be willing to immediately take a chance on you.

Mortgage Waiting Periods

Mortgage programs have borrower and property requirements. After bankruptcy one requirement is a waiting period. After a minimum waiting period, which varies depending upon the type of home loan program and severity of the credit event, borrowers may be eligible to buy a home again.

Waiting periods may be reduced If the original derogatory credit event happened because of extenuating circumstances. Extenuating circumstances are non recurring events that are beyond a person’s control that result in a sudden, significant, and prolonged reduction in income or a catastrophic increase in financial obligations. In such a case a borrower may find that they’re eligible for a shorter waiting period.

During this time you should work to reestablish your credit. Learn more about life after bankruptcy.

Listed below are the waiting periods for mortgage lending after bankruptcy, foreclosure and short sales. This is for informational purposes only and results may vary depending on the particular lender.

Freddie Mac


Foreclosure

  • 7 years from the date of completion

Short-Sale

  • 4 years from completion

Deed In Lieu

  • 4 years from completion date

Chapter 7

  • 4 years from date of dismissal or discharge
  • 2 years with extenuating circumstance

Chapter 13

  • 2 years from date of discharge
  • 4 years from date of dismissal

Fanni Mae


Foreclosure

  • 7 years from the date of completion

Short-Sale or Deed In Lieu

  • 4 years—Standard Waiting Period
  • 2 years—Extenuating circumstances waiting period

Chapter 7

  • 4 years from date of dismissal or discharge
  • 2 years with extenuating circumstance

Chapter 13

  • 2 years from date of discharge
  • 4 years from date of dismissal

FHA


Foreclosure

  • 3 years from the date of completion

Short-Sale or Deed In Lieu

  • 3 years from the date of completion—UNLESS borrower has been current on their mortgage payments for the previous 12 months and they did not pursue a short sale simply to take advantage of declining market. Under these circumstances, they can purchase immediately.

Chapter 7

  • 2 years from date of discharge
  • 1 year with extenuating circumstance

Chapter 13

  • 2 years—trustee has to approve the new debt and one year of the payout period under the bankruptcy has elapsed.
  • 1 year—extenuating circumstances waiting period

VA


Foreclosure

  • Upon re-establishing good credit history with extenuating circumstance

Short-Sale or Deed In Lieu

  • Upon re-establishing good credit history with extenuating circumstances

Chapter 7

  • 2 years from date of discharge—standard waiting period
  • 1 year—extenuating circumstances waiting period

Chapter 13

  • 2 years—trustee has to approve the new debt
  • 1 year—extenuating circumstances waiting period

USDA Rural Housing


Foreclosure

  • 3 years from the date of completion

Short-Sale or Deed In Lieu

  • No available options

Chapter 7

  • 3 years from date of discharge

Chapter 13

  • 12 month on time payment history and approval from the trustee to incur new debt

Own a Home? Yes You Can!

The goal for many people when filing for bankruptcy is ultimately to be able to own a home someday. This goal can easily be achieved in the timeframes outlined above if you take all the right steps to rebuild your credit after bankruptcy. We offer a free consultation and the guidance to help you along the way.

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