How long do I have to wait if I had one of the following; Bankruptcy, Foreclosure, Short Sale?

                                

“How long do I have to wait if I had…”

I receive these questions a lot and even more so now that Short Sales (also known as "pre-foreclosure sales") and Foreclosures have been on the rise in recent years.  With programs evolving over time Fannie Mae, Freddie Mac, VA, and HUD have defined wait times for their respective programs.  The issues arise in that these wait times are following with other criteria that the client must meet.  I have created a chart below to help with time frame, with notes below

Event	Conventional	FHA	VA	USDA
Chapter 7 or 11 Bankruptcy	2 years	2 years	2 years	3 years
Chapter 13 Bankruptcy	2 years from discharge	2 years from discharge	2 years from discharge	3 years from discharge
Multiple Bankruptcies	3 years from most recent discharge	3 years from most recent discharge	2 years from most recent discharge	3 years from most recent discharge
Foreclosure	3 years*	3 years	2 years	3 years
Short Sale	2 years with 20% down 4 years with 10% down 7 years for max financing (95%)**	3 years***	2 years	3 years****

*Minimum of 10% down.  Purchase of owner occupied residence only.  Rate/Term of all occupancy types

**Fannie Mae only.  Freddie Mac requires 4 years regardless of loan to value

***If no late payments for the 12 months preceding short sale then no wait time is required.

****2 years on deed in lieu of foreclosure as long as there were not more than two 30 days lates in the 12 months leading up to it.

Keys to getting financing after one of these events:

Waiting period has been met.

Customer has clean and re-established credit since the event occurred.

Customer receives an automated underwriting approval through the appropriate program’s underwriting engine.

FHA Back To Work:

HUD (the governing body of FHA loans) has recently come out with a program for people that do not meet the specific waiting periods above.  It is the only program currently on the market that allows a client to waive the waiting period, but has very strict qualifications.  Here they are:

Back to Work – Extenuating Circumstances due to an “Economic Event”

An “Economic Event” is when a borrower has experienced an occurrence beyond their control that resulted in a loss of income, loss of employment, or a combination of both.

The “Economic Event” lasted at least 6 months; and

        
The “Economic Event” resulted in a 20% or more reduction in the borrower’s household income.

 Documented evidence that the delinquencies were due to the “Economic Event” must be provided.

 Borrower must have reestablished a “Satisfactory Credit” history for at least 12 months.

Borrower must have fully recovered from the “Economic Event.” 

If you have a client in this situation, I would be happy to discuss their options with them.