The journey to homeownership can be riddled with financial challenges, and for some, bankruptcy, foreclosure, or a short sale may become part of their financial history. While these events can be daunting, they do not necessarily spell the end of your dreams of homeownership. Different types of mortgages, including conventional, FHA, VA, and USDA loans, have varying requirements and waiting periods after these financial setbacks. In this article, we’ll explore when and how you can obtain each type of mortgage after experiencing a Chapter 13 or Chapter 7 bankruptcy, a foreclosure, or a short sale.
Chapter 13 Bankruptcy
Chapter 13 bankruptcy involves a repayment plan to clear debts over several years, which typically lasts between three to five years. Here’s a breakdown of when you can obtain different mortgage types after receiving a Chapter 13 discharge:
1. Conventional Mortgage: You may be eligible for a conventional mortgage two years after the discharge date or four years after the dismissal date.
2. FHA Mortgage: You can get approved one day from discharge date. Or if you are in an active Chapter 13 bankruptcy, you may be eligible after timely payments to the bankruptcy trustee for one year. This is a great option for those that want to refinance. Your bankruptcy attorney would need to obtain court approval before the mortgage/refinance can be finalized.
3. VA Mortgage: The Department of Veterans Affairs allows individuals to obtain a mortgage one year from discharge date.
4. USDA Mortgage: USDA loans can be obtained three years from discharge date.
Chapter 7 Bankruptcy
The waiting periods for obtaining various mortgage types after a Chapter 7 discharge are as follows:
1. Conventional Mortgage: You’ll generally need to wait four years from the discharge date to qualify for a conventional mortgage.
2. FHA Mortgage: FHA loans typically require a waiting period of two years from the Chapter 7 discharge date.
3. VA Mortgage: The VA typically requires a two-year waiting period following a Chapter 7 discharge.
4. USDA Mortgage: The USDA has a three-year waiting period after a Chapter 7 discharge.
A foreclosure occurs when a lender takes possession of a property due to mortgage default. Here’s when you can obtain different mortgage types after a foreclosure:
1. Conventional Mortgage: Typically, a seven-year waiting period is required to qualify for a conventional mortgage after a foreclosure. However, if you can prove extenuating circumstances then the waiting period is only three years after the foreclosure.
2. FHA Mortgage: FHA loans generally require a three-year waiting period after a foreclosure.
3. VA Mortgage: VA loans usually have a two-year waiting period following a foreclosure.
4. USDA Mortgage: The USDA imposes a three-year waiting period after a foreclosure.
A short sale involves selling a home for less than the outstanding mortgage balance. The waiting periods for different mortgage types after a short sale are as follows:
1. Conventional Mortgage: A conventional mortgage typically requires a four-year waiting period after a short sale. However, the waiting period is only two years with extenuating circumstances as required by Fannie Mae.
2. FHA Mortgage: FHA loans usually require a three-year waiting period following a short sale.
3. VA Mortgage: VA loans usually required a two-year waiting period.
4. USDA Mortgage: The USDA typically requires a three-year waiting period after a short sale.
Contact the Law Offices of Brenner Spiller & Archer Today!
While bankruptcy, foreclosure, and short sales can create hurdles on the path to homeownership, it’s essential to remember that these challenges are not insurmountable. Different mortgage types offer varying waiting periods and criteria for eligibility after these financial setbacks. Rebuilding your credit, maintaining stable income, and practicing responsible financial behavior are key steps to improving your chances of securing a mortgage after these events. For more information contact our bankruptcy attorney today either online or call us directly at 856-963-5000.