Experiencing financial hardships can result in stress and anxiety over many concerns. People worry about how they will pay their bills, how they can prevent their house from going to foreclosure and what will happen to their credit if they can’t pay their debts. After a bankruptcy or foreclosure, the biggest fear is whether they will be able to buy a home again. There aren’t as many restrictions to buying a home after bankruptcy or foreclosure you would think. The main issue is how quickly you will be able to obtain another loan.
Buying After Bankruptcy
The Federal Housing Authority (FHA) guidelines require you to wait two years before you are eligible to purchase a home if you received a Chapter 7 discharge. If you received a Chapter 13 bankruptcy discharge, you only have to wait one year. VA loans also have a two year waiting period. Conventional loans, such as those backed by Fannie Mae, require a four year waiting period for loan eligibility. However, conventional loan lender may approve a loan earlier if there are extenuating circumstances, such as a death of a primary income contributor.
Buying After Foreclosure
After a foreclosure, the FHA requires a three year waiting period to obtain a home mortgage loan. VA guidelines require the same two year waiting period as for a bankruptcy discharge. Conventional loans, are much more difficult to obtain following a foreclosure. You must wait seven years after the sale date of a foreclosure to obtain a conventional loan. The sale date refers to when the bank sold the property, not when the bank repossessed the property from the borrower. A conventional loan could take more than seven years, as the waiting period doesn’t begin until the property is sold. Conventional loans may also possess other qualification requirements related to credit score, income level and down payment minimums.
Buying After A Short Sale
The FHA guidelines treat a short sale the same as a foreclosure, requiring a three year waiting period from the date of sale or deed transfer. Similarly, VA loans are handled the same with a two year waiting period. Conventional loans possess the same restrictions as in a foreclosure, a seven year waiting period from the date of sale or deed transfer and the additional qualification requirements that are more strict than most types of loans.
Preparation is the key to obtaining a mortgage loan after a bankruptcy or foreclosure. Most lenders will require a minimum credit score of 620 in order to secure a loan. You should begin to repair your credit right away and examine your finances to ensure any additional lines of credit or loans are paid on time. It could take time to obtain another loan, months to years depending on the nature of your credit following the bankruptcy or foreclosure. The best strategy is to pay your bills on time, save money for a down payment and monitor your credit standing. By taking the time to make the necessary steps, buying a home after bankruptcy or foreclosure can be possible.