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Wait Times for Buying a Home After a Foreclosure

If you’ve experienced mortgage problems in the past, it’s easy to assume that buying a home after a foreclosure isn’t possible. However, even if you’ve gone through a home foreclosure, it’s still possible to buy another home.

The question most people have is when. They want to know how long they have to wait before buying another home.

We’re sharing industry insights into how long it takes to get a mortgage after you’ve experienced a foreclosure. This blog is also handy for anyone looking to buy another home after going through financial challenges like credit issues.

Before we look at your mortgage options one by one, let’s define some key terms you’ll need to know:

  • A mortgage lender takes possession of a property after the borrower doesn’t make their monthly payments.
  • Short Sale. Approved by your lender, a short sale lets you sell your home for less than what you owe.
  • Mortgage charge-off. You’re still expected to pay back the loan, but the lender has written off the debt as “bad” or unable to collect.
  • Deed in-lieu. If you’re unable to pay your mortgage, you can give the title of your home to your lender. In exchange, you are released from your loan.
  • Bankruptcy (Chapter 7). Also termed a liquidation bankruptcy, this lets you clear away unsecured debts. It’s sometimes used to give people a chance to reset their finances.
  • Bankruptcy (Chapter 13). Those who file can regroup and develop a plan to pay off their debts without liquidating assets.

Now that you know the basics, here’s how long you can expect to wait for a mortgage, beginning with an FHA loan.

Federal Housing Authority (FHA) home loan

FHA mortgages are popular for their low rates, manageable down payments, and loosened qualification standards.

If you’re experienced financial issues in the past, here’s how long you can expect to wait to apply for your next mortgage:

  • Foreclosure – 3 years OR 1-year w/ extenuating circumstances, the household included in bankruptcy
  • Short Sale – 3 years OR 1-year w/ extenuating circumstances
  • Mortgage charge-off – None required
  • Deed in-lieu – 3 years OR 1-year w/ extenuating circumstances
  • Chapter 7 Bankruptcy – 2 years OR 1-year w/ extenuating circumstances
  • Chapter 13 Bankruptcy – 12 months into pay-out with timely payments & court permission
  • Multiple Bankruptcies – 5 Years from Discharge if more than 1 in the last 7 years

United States Department of Agriculture (USDA) home loan

A USDA home loan can be an attractive choice for anyone looking into buying a home after a foreclosure. Eligibility for a USDA-backed mortgage can be more inclusive than you think.

Here’s what you can more-or-less expect when applying for a USDA home loan after some financial challenges:

  • Foreclosure – 3 years OR 1-year w/ extenuating circumstances, the household included in bankruptcy
  • Short Sale – 3 years OR 1-year w/ extenuating circumstances
  • Mortgage charge-off – None required
  • Deed in-lieu – 3 years OR 1-year w/ extenuating circumstances
  • Chapter 7 Bankruptcy – 3 years OR 1-year w/ extenuating circumstances
  • Chapter 13 Bankruptcy – 12 months into pay-out with timely payments & court permission
  • Multiple Bankruptcies – None required

It’s easier than ever to qualify for a USDA loan in Massachusetts. Ask your local MBA Mortgage Loan Officer to determine whether your home search qualifies you for a USDA loan.

Veterans Administration (VA) home loan

A Veterans Administration home loan offers service members and their spouses comparatively lenient waiting periods after financial hardship.

Here’s what you can expect, depending on your circumstances:

  • Foreclosure – 2 years OR 1-year w/ extenuating circumstances, the household included in bankruptcy
  • Short Sale None required, though you are likely to be required to maintain 12 months of satisfactory credit.
  • Mortgage charge-off – None required
  • Deed in-lieu – 2 years OR 1-year w/ extenuating circumstances, the household included in bankruptcy
  • Chapter 7 Bankruptcy – 2 years OR 1-year w/ extenuating circumstances
  • Chapter 13 Bankruptcy – 12 Months into Pay-Out with Timely Payments & Court Permission
  • Multiple Bankruptcies – None required

We’re a veteran-owned and operated company that takes extra time to help military members and their families achieve the American Dream through homeownership.

If you’re eligible for a VA loan but you’re worried about qualifying, reach out to us, and we’ll discuss your options.

Conventional home loans

These mortgages satisfy the funding requirements for Fannie Mae and Freddie Mac. However, they are not guaranteed by the federal government, meaning credit scores and overall financial history are considered more heavily.

Generally speaking, here are the waiting times for a conventional home loan:

  • Foreclosure – 7 years w/ no bankruptcy (3 Years IF Extenuating Circumstance, but it will be limited to 90% of your Loan-to-Value ratio, the household included in bankruptcy
  • Short Sale – 4 years OR 2-years w/ extenuating circumstances
  • Mortgage charge-off – 4 years OR 2-years w/ extenuating circumstances
  • Deed in-lieu – 4 years OR 2-years w/ extenuating circumstances
  • Chapter 7 Bankruptcy – 4 years OR 2-years w/ extenuating circumstances
  • Chapter 13 Bankruptcy – 2 years from discharge date OR 4 years from dismissal date
  • Multiple Bankruptcies – 5 Years from Discharge if more than 1 in the last 7 years

As you can see, conventional loans are more stringent when buying a home after a foreclosure, not to mention other financial issues. The kind of mortgage you ultimately get for another home could very well depend on how recent your financial challenges were.

Bottom line

Ready to regain the pride of homeownership? Even if you’ve experienced mortgage problems or foreclosure in the past, you can still buy a home. Connect with an MBA loan officer today to get a personalized plan to get you back on the path to homeownership.

FREE GUIDE: Things To Consider When Buying a Home

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