Foreclosure, Bankruptcy & Short Sale Timelines

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The American Dream is to own a home. In recent years, many people have been caught in bad situations with their home ownership. With the downfall of the economy and recession, many people found themselves unable to pay their mortgages thus having to foreclose on their properties. Years later there may be a light at the end of the tunnel but having a situation like this on your credit report can have a major impact on your ability to purchase another home.

Many people do not know how long they need to wait after dealing with a foreclosure, bankruptcy or short sale for their credit to become high enough to purchase another home. Outlined below you can see the standard amounts of time that is necessary for people to build their credit and qualify for another mortgage.

Bankruptcy/Foreclosure/Short Sale/Deed in Lieu Seasoning

Bankruptcy:

Conventional – may not take an application until the minimum seasoning requirements have been met.
Chapter 7 – 4 years.
Chapter 13 – 2 years if bankruptcy was discharged. 4 years if bankruptcy was dismissed.

FHA – may take an application, however the DE Underwriting approval may not occur until the minimum seasoning requirements have be met.
Chapter 7 – 2 years
Chapter 13 – 1 year payout period under the bankruptcy, plus satisfactory payments to the trustee and written permission from the bankruptcy court to enter into a mortgage transaction.

VA – may not close until the minimum seasoning requirements have been met (can take application and approve loan conditional on closing after time requirement has been met.)
Chapter 7 – 2 years.
Chapter 13 – if the applicant has finished making all payments satisfactorily, lender can assume satisfactory re-established credit. 1 year payout under the bankruptcy, plus satisfactory payments to the trustee and written permission from the bankruptcy court to enter into a mortgage transaction also acceptable.

 

Foreclosure/Short Sale/Deed in Lieu:

Conventional – may not take an application until the minimum seasoning requirements have been met.
Foreclosure – 7 years
Deed in Lieu & Short Sales – 4 years from the execution date.

FHA – if the foreclosed mortgage was an FHA mortgage, the borrower may not apply for a new FHA mortgage until their eligibility date (generally this is 3 years from the date the claim was paid to the foreclosing lender.) If the foreclosed mortgage was a conventional mortgage, the borrower may apply, however DE Underwriting approval may not occur until the seasoning requirements have been met.
Foreclosure – 3 years
Short Sale – In default at time of sale – 3 years
Current at time of sale – 1 year with restrictions (must have been current on mortgage and all other installment loan payments in the 12 months preceding the short sale.)
Deed in Lieu – 3 years
VA – may not close until seasoning requirements are met
Foreclosure, Deed in Lieu and Short Sale – 2 years.

 

*Stats via Ryan Berg @ Marketplace Home Mortgage, LLC

*Always consult with your bank when considering purchasing a home, they can approve you for a loan and give current information on your status

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