What You Need To Know After a Bankruptcy or Foreclosure
If you have had either there is still hope for you when trying to buy a home. Even though Fannie Mae, Freddie Mac, and the government (FHA, VA, & USDA) have their own guidelines each individual bank, broker, lender, or whatever you want to call all of us may have their own policy that is different. Make sure to always check with who you are getting a loan through.
Being a Mortgage Bank we have access to many different lenders which enables us to be able to do a lot more than your traditional bank. At the end of the day you will want to make sure you are dealing with an expert tells you what I am about to explain.
It’s probably best to break the policies down based up what type of loan you are getting so let’s start with a government loan. For a Chapter 7 bankruptcy typically you will need it to be discharged for 2 years. Less than 2 years but not less than 1 year may be acceptable if you can show that the bankruptcy was caused by extenuating circumstances beyond your control that you can document and have since shown you can manage your finances. This will be to the underwriter’s discretion. For a Chapter 13 bankruptcy you need 1 full year of payments made on time, get written permission from the court to buy a home, have no delinquencies, and an explanation. Lastly, with a foreclosure, short sale, or deed-in-lieu of foreclosure you will have to wait 3 years from the date the property was sold. It’s not the date that the bank forecloses and takes back the property from you. It’s the date that they dispose of it after taking it back from you.
Conventional loans are different and I am going to give you the guidelines when putting 20% down. For a Chapter 7 Bankruptcy you will have to wait 4 years and 2 years with documented extenuating circumstances from the discharge date. For a Chapter 13 you will need to 2 years from the discharge date, 4 years from the dismissal date, and with extenuating circumstances it will be 2 years from the discharge or dismissal date. A Foreclosure is 7 years from the completion date as described above and 3 years with extenuating circumstances. A Deed-In-Lieu of Foreclosure and a Short Sale require 2 years.
The credit score requirements for government and Conventional loans vary among lenders. Many are 620 for Conventional and a lot are going to 640 middle credit scores for government loans. That is subject to change.