The housing market slump has left many owners without options other than renting. All is not lost and you can get yourself back on track for purchasing another home in the near future. Use this helpful table to find out how long you must wait after a short sale, foreclosure or bankruptcy before you can qualify for another mortgage.
How long must a buyer wait after a bankruptcy, short sale or foreclosure before they can get mortgage financing?
If applying for an FHA loan
Short sale or foreclosure: 3 years from date of sale (completion)
Chapter 7 bankruptcy: 2 years from discharge date
Chapter 13 bankruptcy: 1 year of the payout must elapse and payment information must be satisfactory; also requires permission of Bankruptcy Trustee
AUGUST 2013 FHA UPDATE: If a borrower meets the new FHA “Back to Work” program criteria, they will be eligible for an FHA loan 1 year after bankruptcy, short sale, foreclosure or deed in lieu of foreclosure. Here are a few key “Back to Work” FHA mortgage guidelines:
1. Borrower must have sustained a reduction in income of at least 20%
2. Borrower’s reduction in income must have lasted at least 6 months
3. Borrower’s income reduction must be related to an “economic event” (circumstances beyond their control such as termination, reduction in hours, pay cut, etc)
4. Borrower’s bankruptcy, short sale, foreclosure or deed in lieu of foreclosure must have been directly related to the reduction in income and economic event
5. Borrower must have re-established credit within the 12 months after the bankruptcy discharge date, short sale completion date and/or foreclosure recording date
6. Borrower will also be required to complete specific homebuyer education to use the “Back to Work” FHA program
If applying for a VA loan
Short sale: no waiting period is required if Automated Underwriting Approval is obtained
Foreclosure: 2 years from date of sale (completion)
Chapter 7 bankruptcy: 2 years from discharge date
Chapter 13 bankruptcy: 1 year of the payout must elapse and payment information must be satisfactory; also requires permission of Bankruptcy Trustee
If applying for a conventional loan
Short sale: 2 years from date of sale (completion) with maximum financing of 80%; 4 years from date of sale (completion) with maximum financing of 90%
Foreclosure: 7 years from date of sale (completion)
Chapter 7 bankruptcy: 4 years from discharge date
Chapter 13 bankruptcy: 2 years from discharge date or 4 years from dismissal date
To boost your chances of obtaining a mortgage again, there are a few things you can do:
- Take out a major credit card. This isn’t as hard as one would think because creditors know you can’t file bankruptcy again for at least 7 years and you no longer have any debt.
- Stay at your current job for at least another year or two.
- Save up a down payment of 10 to 15%.
- Do everything you can to pay your existing bills on time, every time.
