Mortgage companies will require a time period to show re-established credit after things like a bankruptcy, foreclosure and short sales. The time periods will vary based on the type of loan and the type of derogatory item.
For conventional loans, the time period for most banks are:
- Foreclosure - 7 years from the date the foreclosure was completed. If there were extenuating circumstances and you have a 10% down payment, you may be allowed to get a new mortgage after 3 years.
- Short Sale or a deed in lieu of foreclosure - 7 years from the date the sale closed and transferred to the new owner for less than 10% down. 4 years from date sale closed with a 10% down payment. 2 years from date sale closed with 20% down.
- Bankruptcy - Chapter 7 requires 4 years from date of discharge. If there are extenuating circumstances, it may be as little as 2 years. A chapter 13 requires 2 years from discharge date.
FHA time periods are:
- Foreclosure - 3 years from the date the foreclosure was completed.
- Short sale - 3 years from the date the sale closed and transferred to the new owner. No waiting period if the borrower had no late payments and they are not taking advantage of declining market conditions
- Bankruptcy - Chapter 7 requires 2 years from the date of discharge. A Chapter 13 requires 1 year of payback and all required payments on time.
VA time periods:
- Foresclosure - 2 years from the date foreclosure was completed and transferred back to the bank
- Short Sale - 2 years from date closed and transferred to the new owner. No waiting period if the borrower had no late payments within 12 months of the sale and they are not taking advantage of declining market values.
- Bankruptcy - Chapter 7 requires 2 years from date of discharge. Chapter 13 requires 1 year of payback with all payments on time.
If you have filed a bankruptcy or had a foreclosure, you will be able to get a new mortgage, it's just a matter of time. The most important thing is to remember to re-establish new credit and not to have any late payments after the bankruptcy or foreclosure.
