Homes and Equity Real Estate: How long do I have to wait after a Short Sale or Foreclosure?

Have you ever been asked how long someone has to wait before buying another house after a Short Sale, Foreclosure or a Bankruptcy? If not, you will hear this question in the future. Being able to answer this question will set you apart as a broker that knows the business. Below are the underwriting guidelines to answer this question. There are a lot of people that will be able to buy another house shortly. This will help you ask the right questions to see if your buyers can buy now in in the near future.

Short Sale

Conventional Loans:

Minimum 2 years with restrictions up to 7 years

2 to 4 years – 80% maximum LTV

4 to 7 years – 90% maximum LTV

7 years and after allow for maximum standard financing

FHA and VA Loans:

0 to 3 years if borrower’s credit and mortgage payments were in good standing prior, and up to date of Short Sale

Foreclosure

Conventional Loans:

7 years with exceptions considered between 3 to 7 years

FHA and VA Loans:

FHA: 3 to 4 years with acceptable explanation of circumstances

VA: 2 to 4 years with acceptable explanation of circumstances with 600+ FICO

Bankruptcy

Time frame for re-established credit starts at Discharge or Dismissal Date.

Conventional:

Chapter 7: 4 Years From Discharge Date

Chapter 13: Years From Discharge Date, or 4 Years for a borrower who was unable to complete the Ch. 13 plan & received a Dismissal.

Multiple BK Filings In Last 7 Years – 5 Years from Most Recent Discharge

Exception:

An underwriter may allow for between 2 and 4 years if a review of the file supports the bankruptcy was caused by extenuation circumstances outside of the borrower’s control and not likely to reoccur. Extenuating circumstances include but are not limited to events such as: death of a primary wage earner, major medical expenses or loss of job due to companywide layoffs or closure. Divorce is not considered an extenuating circumstance nor is financial mismanagement.

FHA/VA:

Chapter 7 & 11: 2 years elapsed since the completion or discharge of Bankruptcy.

Chapter 13: No minimum time required, provided:

§ One year of the pay-out period under the bankruptcy has elapsed, and

§ The borrower’s payment performance has been satisfactory and all required payments have been made on time, and

§ The borrower has received written permission from the bankruptcy court to enter into the mortgage transaction.

Modified or Restructured Loans

Not eligible if Modified loan was on Subject Property.

If Modified Loan was NOT on our Subject Property:

Exception:

Extenuating circumstances, with supporting documentation, will be allowed between 3 and 7 year’s time period from completion date with the following restrictions:

§ O/O only. Purchase of a second home or investment property is not permitted

§ Purchase and limited cashout refinances are permitted for all occupancy types pursuant to the eligibility requirements in effect at the time.

Be sure to call Max Nasab at 206-719-2694 if you, or your buyers have any questions about whether your buyers qualify for a home mortgage or not.