Life is hard, and at times, just not fair! Things happen – whether it’s a job loss, divorce, decline in home values, medical emergency or death in the family. These things wreak havoc with our financial well-being.
The above reasons, and I am sure many more, played a large role in people filing bankruptcy, losing their home to foreclosure, or for some, having to sell their homes as a short sale just to get out from under. It’s tough, and for those of you who experienced these major set-backs, I am truly sorry you had to deal with such devastation!
You might be thinking your chances of owning a home for the first time, or ever again, will never happen after these experiences. I am here to tell you that we all have second chances and you are worthy of being a homeowner! But how?
First, it helps to know the general guidelines for loan qualification after a short sale, foreclosure or bankruptcy. The guidelines vary by the type of loan you take out. FHA, the Federal Housing Administration, will be more lenient than Fannie Mae or Freddie Mac, which offer conventional loans. Sometimes, there are extenuating circumstances that could lessen the wait period, but those are considered on a case-by-case basis.
Bankruptcy – home financing eligibility date is taken from the date the bankruptcy was discharged from the courts. It is also dependent on the type of bankruptcy – Chapter 7 or 13. I will advise for Chapter 7 bankruptcies, but the wait period may be less with a Chapter 13 if certain requirements are met.
- FHA & VA: 2 years
- Conventional: 4 years
Foreclosure – eligibility date is taken from the latter of the sheriff’s sale date or the date the claim was paid to FHA. The claim date is only applicable if the loan foreclosed upon was FHA financing. This date is usually 3-6 months after the sheriff’s sale. Conventional financing could have a shorter waiting period depending on circumstances and other criteria.
- FHA: 3 years
- VA: 2 years
- Conventional: 7 years
Short Sale – eligibility date is the date the sale of the home took place. The waiting periods are the same as a foreclosure, except with conventional, where the waiting period can vary depending on the circumstances, as well as the amount of money you have down.
Once you’re over that waiting period, then what? As lenders, we certainly want to see that you’ve re-established credit. We understand that your credit and finances took a beating during that time – it happens! But, we want to see that you came out in a better place. We’re looking for on-time payments and a lack of derogatory credit, such as collections or charge offs.
Long and short of it – you ARE worthy, and after having a bankruptcy, short sale or foreclosure in your past, there is hope of becoming a homeowner! We’d love to help!
*Image compliments of Stuart Miles — freedigitalphotos.net