The waiting period for “significant derogatory credit events” varies by both loan type and extenuating circumstances. The following is a quick synopsis by loan type of the impact of derogatory credit on your ability to obtain a new mortgage.

CONVENTIONAL FINANCING

FORECLOSURE – Home was given back to the bank with no owner participation.

• 7-years from the date the foreclosure was completed and transferred back to the bank if there were NO extenuating circumstances.
• 3-years from the date the foreclosure was completed and transferred back to the bank with acceptable extenuating circumstances* AND Borrower makes a 10% down payment on a primary residence purchase or rate/term refinance only. Non-owner and second home loans are not allowed.

SHORT SALE OR DEED IN LIEU OF FORECLOSURE 

SHORT SALE – Home sold but for less than amount owed and Borrower was not able to bring funds to closing to make up the difference.

DEED IN LIEU – Home was returned to the Lender in exchange for cancellation of the loan.

• 7-years from the date the sale closed and transferred to a new owner or transferred back to the bank <10% down payment
• 4-years from date sale closed and transferred to new owner or transferred back to the bank with 10% down payment
• 2-years from date sale closed and transferred to new owner or transferred back to the bank with 20% down payment
• 2-years from date sale closed and transferred to new owner or transferred back to the bank with acceptable extenuating circumstances with 10% down payment

CHAPTER 7 BANKRUPTCY

Debts are discharged through bankruptcy without the Borrower paying back any debts owed.

• 4-years from discharge date.
• 2-years from discharge date possible with extenuating circumstances*.

CHAPTER 13 BANKRUPTCY

Debts are paid back on a monthly scheduled payment plan by Borrower.

• 2-years from discharge date.
• 4-years from dismissal date.

FHA FINANCING

FORECLOSURE – Home was given back to the bank with no owner participation.

DEED IN LIEU OF FORECLOSURE – Home was returned to the Lender in exchange for cancellation of the loan.

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

SHORT SALE – Home sold but for less than amount owed and Borrower was not able to bring funds to closing to make up the difference.

• 3-years from date sale closed and transferred to new owner.
• No waiting period if Borrower had no late payments or any mortgages and/or consumer debts within the 12-month period preceding the short sales AND they are not taking advantage of declining market conditions.

CHAPTER 7 BANKRUPTCY

Debts are discharged through bankruptcy without the Borrower paying back any debts owed.

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

CHAPTER 13 BANKRUPTCY

Debts are paid back on a monthly scheduled payment plan by Borrower.

• 1-year payback period has occurred and the Borrower’s payment history has been satisfactory and all required payments have been made on time and as agreed.

VA FINANCING

FORECLOSURE – Home was given back to the bank with no owner participation.

DEED IN LIEU OF FORECLOSURE – Home was returned to the Lender in exchange for cancellation of the loan.

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

SHORT SALE – Home sold but for less than amount owed and Borrower was not able to bring funds to closing to make up the difference.

• 2-years from date sale closed and transferred to new owner.
• No waiting period if Borrower had no late payments on any mortgage or consumer debt within the 12-month period preceding the short sale AND they are not taking advantage of declining market conditions.

CHAPTER 7 BANKRUPTCY

Debts are discharged through bankruptcy without the Borrower paying back any debts owed.

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

CHAPTER 13 BANKRUPTCY

Debts are paid back on a monthly scheduled payment plan by Borrower.

• 1-year payback period has occurred AND the Borrower’s payment history has been satisfactory and all required payments have been made on time and as agreed.

USDA FINANCING – (determined by date of credit approval)

FORECLOSURE – Home was given back to the bank with no owner participation.

DEED IN LIEU OF FORECLOSURE – Home was returned to the Lender in exchange for cancellation of the loan.

SHORT SALE – Home sold but for less than amount owed and Borrower was not able to bring funds to closing to make up the difference.

• 3-years from the date the foreclosure was completed and transferred back to the bank.
• Less than 3-years from the date foreclosure was completed and transferred back to the bank may be considered with acceptable extenuating circumstances****.

CHAPTER 7 BANKRUPTCY

Debts are discharged through bankruptcy without the Borrower paying back any debts owed.

• 3-years from discharge date.
• Less than 3-years from discharge date may be considered with acceptable extenuating circumstances****.

CHAPTER 13 BANKRUPTCY

Debts are paid back on a monthly scheduled payment plan by Borrower.

• 1-year from the date repayment was completed and bankruptcy discharged.
• Less than 1-year from the date of discharge may be considered with acceptable extenuating circumstances****.

Acceptable extenuating circumstances (circumstances must be verified and documented):

* CONVENTIONAL – non-recurring events that are beyond the Borrower’s control that result in a sudden, significant and prolonged reduction in income or a catastrophic increase in financial obligations.

** 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 and/or spouse.

**** 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 reoccurrence 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 for.