Wait After a Foreclosure, Short Sale, or Bankruptcy?


How Long Must I Wait After a Foreclosure, Short Sale, or Bankruptcy? This is the most often asked question for any loan officer in the Reno Mortgage market. Below are our minimum waiting periods for qualifying for a Conventional Conforming, FHA, VA, or USDA purchase money home loan. It is important to remember the waiting period for foreclosures and short sales starts on the date the property transfer is recorded. Also, the waiting period after bankruptcy begins on the discharge date.

The other thing you must remember is the need to re-establish your credit. If you are considering purchasing a home in the Reno Sparks area and are concerned about qualifying, or wish to learn what you will  qualify for, you can call me @ (775) 828-7006

Significant Derogatory Credit Minimum Waiting Periods   

Foreclosure:

Conventional Conforming:

  • 7 years from the date foreclosure completed and transferred back to bank/lender.

FHA:

  • 3 years from the date foreclosure completed and transferred back to bank/lender.

VA:

  • 2 years from date foreclosure completed and transferred back to bank.

USDA:

  • 3 years from the date the foreclosure was completed and transferred back to the bank.

Deed-in-Lieu of Foreclosure:

Conventional:

  • 4 years from completion date for an Owner-Occupied purchase or limited cash-out refinance; and Max. LTV of 90%; and If purchase, borrower must contribute the greater of 10% min. down payment or product requirements.
  • 7 years from completion date if transaction is a: Cash-out, Second Home or Investment Property.

FHA:

  • Less than 3 years, but not less than 12 months from the date foreclosure completed and transferred back to bank may be acceptable if the result of acceptable extenuating circumstances*.

*Serious illness or death of a wage earner. Divorce and the inability to sell a property due to a job transfer or relocation to another area DOES NOT qualify as an acceptable extenuating circumstance.

VA:

  • 12-23 months from date foreclosure completed and transferred back to bank if credit re-established and paid as agreed and was caused by acceptable extenuating circumstances**.

** Unemployment, prolonged strikes, medical bills not covered by insurance, etc. Divorce is NOT viewed as beyond the control of the borrower.

USDA:

  • Less than 3 years from date the foreclosure was completed and transferred back to the bank may be considered with acceptable extenuating circumstances***.
  • Loss of job, delay or reduction in government benefits, or other loss of income, increased expenses due to illness, death, etc. Circumstances surrounding the adverse information must have been temporary in nature, AND beyond the applicant’s control, AND have been removed so their re-occurrence is unlikely or the adverse action or delinquency was the result of a refusal to make full payment because of defective goods or services or as a result of some other justifiable dispute relating to the goods or services purchased or contracted.

Short Sale

Conventional Conforming:

  • 7 years from date sale closed and transferred to new owner or transferred back to bank for maximum LTV/CLTV allowed by product.
  • 4 years from date sale closed and transferred to new owner or transferred back to bank with 10% down payment.
  • 2 years from date sale closed and transferred to new owner or transferred back to bank with 20% down payment.
  • Loan Modifications waiting period is from the modification completion date.

FHA:

  • 3 years from date sale closed and transferred to new owner
  • Less than 3 years, but not less than 12 months from the date short sale, pre-foreclosure or loan modification completed and transferred back to bank may be acceptable if the result of acceptable extenuating circumstances.*1
  • Loan Modifications waiting period is from the modification completion date.

VA:

  • 2 years from date sale closed and transferred to new owner or completion date of modification.
  • Loan Modifications waiting period is from the modification completion date.
  • Short Sale-When a short sale was completed within 12-24 months of loan application, there must be documented extenuating circumstances, AND requires a manual downgrade and must be underwritten and recommended by the Underwriter PRIOR to submission to the Credit Policy Exception Committee for approval.

USDA:

  • 3 years from date sale closed and transferred to new owner. Short Sales, Pre-Foreclosures & Loan Modification are not recognized by GUS and must be manually underwritten. Minimum 660 credit score required.
  • Less than 3 years, but not less than 12 months from the date short sale, pre-foreclosure or loan modification completed and transferred back to bank may be acceptable if the result of acceptable extenuating circumstances.
  • Loan Modifications waiting period is from the modification completion date.

Bankruptcy Chapter 7

Conventional Conforming:

  • 4 years from discharge date or dismissal date.

FHA:

  • 2 years from date of discharge with re-established credit paid as agreed or no new credit obligations incurred. Less than 2 years, but not less than 12 months from date of discharge may be acceptable if the bankruptcy was caused by acceptable extenuating circumstances1 and borrower has since exhibited a documented ability to manage financial affairs in a responsible manner.

VA:

  • 2 years from date of discharge.
  • 12-23 months from date of discharge if credit re-established and paid as agreed and was caused by acceptable extenuating circumstances. *2

USDA:

  • 3 years from the date of discharge unless approved by GUS.
  • Less than 3 years from date of discharge may be considered with acceptable extenuating circumstances. *3

Bankruptcy Chapter 13

Conventional Conforming:

  • 2 years from discharged date.
  • 4 years from dismissal date.

FHA:

  • 1 year payout period under bankruptcy has elapsed and the borrower’s payment performance has been satisfactory and all required payments made on time. Permission must be given by the courts to enter into a new mortgage obligation if currently under the payout period.

VA:

  • 1 year payout period under bankruptcy has elapsed and the borrower’s payment performance has been satisfactory and all required payments made on time. Permission must be given by the courts to enter into a new mortgage obligation if currently under the payout period.

USDA:

  • 1 year payout period under bankruptcy has elapsed and the borrower’s payment performance has been satisfactory and all required payments made on time. Permission must be given by the courts to enter into a new mortgage obligation if currently under the payout period.

Examples of acceptable extenuating circumstances (circumstances must be verified and documented):

  • FHA: Serious illness or death of a wage earner. Divorce and the inability to sell a property due to a job transfer or relocation to another area DOES NOT qualify as an acceptable extenuating circumstance.
  • VA: Unemployment, prolonged strikes, medical bills not covered by insurance, etc. Divorce is NOT viewed as beyond the control of the borrower.
  • USDA: Loss of job, delay or reduction in government benefits, or other loss of income, increased expenses due to illness, death, etc. Circumstances surrounding the adverse information must have been temporary in nature, AND beyond the applicant’s control, AND have been removed so their re-occurrence is unlikely or the adverse action or delinquency was the result of a refusal to make full payment because of defective goods or services or as a result of some other justifiable dispute relating to the goods or services purchased or contracted.