For those who have previously owned a home and are hoping to re-enter the market, timing is everything. One of the most common questions that home loan professionals receive is in regards to the timelines that must be followed after derogatory credit events like foreclosure, short sale and bankruptcy. With that in mind, here are the minimum waiting periods that should elapse after these credit events. Because the timeline period can depend on what type of home loan an applicant is attempting to qualify for, we have included information on the type of home loan that each waiting period applies to.
Waiting Period after Bankruptcy, Short Sale and Foreclosure for FHA Loans
For Chapter 7 bankruptcy (the most common type of bankruptcy among average consumers), the minimum amount of time that must elapse before someone can apply for an FHA home loan is two years from the time of the bankruptcy discharge. For Chapter 13 bankruptcies (a less common option that requires the consumer to adhere to a repayment plan), a minimum timeline before applying for an FHA home loan is one year of on-time payments to the trustee of the repayment plan. Written permission from the court should also be obtained.
In the case of foreclosure, deed-in-lieu of foreclosure, or short sale, the minimum waiting period for an FHA loan is three years since the event in question.
Waiting Period after Bankruptcy, Short Sale and Foreclosure for Conventional Loans
For Chapter 7 bankruptcy, the waiting period for conventional loans is four years since the discharge and dismissal (the difference between bankruptcy discharge and dismissal is explained here). For Chapter 13 bankruptcy, it is two years from the discharge or four years from the dismissal.
In the case of foreclosure, deed-in-lieu of foreclosure, or short sale, the minimum waiting period for a conventional loan is seven years since a foreclosure or deed-in-lieu, or four years since a short sale.
Waiting Period after Bankruptcy, Short Sale and Foreclosure for VA Loans
For Chapter 7 bankruptcy, the minimum waiting period for VA loans is two years from the time of discharge. That is the case for both Chapter 7 and Chapter 13 bankruptcies. In the case of foreclosure, deed-in-lieu of foreclosure, or short sale, the minimum waiting period for a VA loan is two years from the time of the event.
Exceptions for Extenuating Circumstances
At Wholesale Capital Corporation, we understand that some applicants have extenuating circumstances associated with their derogatory credit events. If you have questions as to whether a waiting period may be shortened in order to apply for a home loan, it is best to discuss your specific scenario with a loan officer. Please bring documented evidence of the extenuating circumstances that were beyond your control; we can discuss them at that time.
Waiting periods are designed to give people time to get their credit back on track after a derogatory event. However, it’s important to take steps to repair credit deficiencies before applying for a mortgage again. If you have questions regarding your unique credit scenario, a WCC loan officer can help. Contact us at (855) 640-2020 to request a home loan consultation.
Wholesale Capital Corporation is not affiliated with or acting on behalf of or at the direction of the Federal Housing Authority (FHA), the Department of Veterans Affairs (VA), or any government agency or government-sponsored entity. WCC is licensed by the California Bureau of Real Estate, Broker License #01147747 and the California Department of Business Oversight Finance Lenders License #603K610. Also licensed in Arizona by the Arizona Department of Financial Institutions, MB #0926199. Equal housing lender. NMLS# 9873.