How long must a buyer wait before buying a new home if they have:
• Chapter 7
• Chapter 13
• Foreclosure
• Deed-in-Lieu of Foreclosure
• Short Sale
Below are the underwriting guidelines for both Conforming and FHA Loans.
CONFORMING:
- Time Elapsed After a Chapter 7 Bankruptcy: Time elapsed must be 48 months or greater from either the discharge or dismissal date.
- Time Elapsed After a Chapter 13 bankruptcy: Time elapsed must be 24 – 48 months or greater from either the discharge or dismissal date depending on Cause of bankruptcy
- Time Elapsed After Multiple Bankruptcy Filings Within the Last Seven Years: Time elapsed must be 36 or 60 months or greater from the most recent discharge or dismissal date depending on Cause of bankruptcy
- Time Elapsed After Completion of Foreclosure: Time elapsed must be 36 months or greater.
Additionally, the following is required:
- The property must be owner-occupied, and the loan must be a purchase transaction, and the borrower must contribute the greater of 10% minimum down payment or the minimum required for the loan program.
- Time elapsed must be 84 months or greater if:
- The property is a second home or investment property; or
- If the loan is a rate and term or cash-out transaction.
- Time Elapsed After Short Sale or Completion of Deed-in-Lieu of Foreclosure:
- Time elapsed must be 24 months or greater.
FHA:
- Time Elapsed After a Chapter 7 Bankruptcy: 24 months since the discharge date and good credit has been reestablished. Bankruptcies less than 24 months (but not less than 12 months) may be allowed provided the reason for the bankruptcy was due to extenuating circumstances, theborrower has exhibited an ability to manage financial affairs, and the reason for the bankruptcy is not likely to recur.
- Time Elapsed After a Chapter 13 bankruptcy: Bankruptcies are allowed after 12 months of the payout period provided performance has been satisfactory and borrower receives court approval to enter into the mortgage transaction.
- Time Elapsed After Completion Foreclosure / Deed-in-Lieu / Short Sale: A borrower whose previous residence or other real property was foreclosed, “Short sold” on or has given a deed-in-lieu of foreclosure within the previous 36 months is generally not eligible.
All of the above information is typically the minimum time frame and each case is treated independently. This information is provided by Bret Cohn who is mortgage broker at Franklin Loan Center. For more information, please contact him at 760-779-8136.