Waiting Periods and Extenuating Circ*mstances After a Short Sale, Foreclosure, Bankruptcy (2024)

FAQs

Waiting Periods and Extenuating Circ*mstances After a Short Sale, Foreclosure, Bankruptcy? ›

A four-year waiting period is required from the completion date of the deed-in-lieu of foreclosure, preforeclosure sale, or charge-off as reported on the credit report or other documents provided by the borrower. A two-year waiting period is permitted if extenuating circ*mstances can be documented.

Extenuating Circ*mstances May Shorten the Wait

With documented hardships, conventional lenders may approve borrowers after a shorter waiting period. The most commonly accepted types of extenuating circ*mstances include: Divorce or death of a spouse. Loss of employment not due to termination for cause.

Extenuating circ*mstances are nonrecurring events that are beyond the borrower's control that result in a sudden, significant, and prolonged reduction in income or a catastrophic increase in financial obligations.

Minimum waiting period to get a mortgage after a short sale

Conventional loan – You could qualify for a conventional loan after a short sale in as little as two years, but you'll likely need to demonstrate “extenuating circ*mstances” that led to the sale, such as job loss.

FHA considers serious illness or death of a wage earner extenuating circ*mstances that justify a previous foreclosure. The borrower must have re-established good credit since the foreclosure.

For example: Medical issues (including mental health/wellbeing) Death of a close friend or relative. Personal problems e.g. divorce, burglary, fire, major court proceedings, financial difficulties.

The FHA recognizes that sometimes, events beyond an individual's control lead to bankruptcy. These events, referred to as 'extenuating circ*mstances,' could include serious illness, death of a wage earner, or a natural disaster, among others. In such cases, the FHA may consider reducing the bankruptcy waiting period.

If a borrower submits a complete loss mitigation application after the servicer has made the first foreclosure notice or filing but more than 37 days before a foreclosure sale, the servicer cannot conduct a foreclosure sale or move for foreclosure judgment or sale unless one of the following occurs: (i) the servicer ...

The 120-day rule doesn't apply in the following situations: If the borrower violated a due-on-sale clause. (Many loan contracts contain a “due-on-sale” provision, which states that if the borrower transfers the property's title to a new owner, then the lender may accelerate the full loan balance.

Does a short sale stay on a borrower's record? ›

In many cases, you'll be able to obtain a mortgage for a new home in two years, and even less time if you continued paying the mortgage until your house sold, as opposed to five to seven years after a foreclosure. Short sales, like foreclosures, can remain on your credit report for as long as seven years.

A lender may refuse to approve a short sale in the following circ*mstances: 1) if the homeowner is not in default on mortgage payments yet; 2) if they believe more money can be recovered from foreclosing on the property; 3) if there is a cosigner they can hold responsible for payment.

Real Estate Short Sale Process. The short sale process has multiple steps, and it's common for a short sale to take 4-6 months to complete from the time the offer is accepted, and in rare cases, even longer. Below are the steps commonly found within the short sale process.

Extenuating circ*mstances–also called mitigating factors–are facts or details that are important for fully understanding a situation. With this understanding, the actions a person took in that event might be viewed as less severe, or that person's culpability in those actions diminished.

If you've gone through a foreclosure, you might qualify for a new FHA-insured mortgage loan after waiting three years. After a Chapter 7 bankruptcy, the waiting period is generally two years. If you file for Chapter 13 bankruptcy, you might be able to get a new FHA-insured mortgage before you complete the plan.

FHA First Mortgage

Borrower must have owned property for 12 months AND if encumbered by a mortgage made payments for the last 12 months within the month due.

You can buy a house one to two years after filing for bankruptcy if you rebuild credit and avoid new debt. Filing a Chapter 7 or Chapter 13 bankruptcy will show on your credit report and negatively affect your credit score, but that does not mean you can't own a home while you work to improve your credit.

A Chapter 7 bankruptcy wipes out your financial debt, including your mortgage, but you could lose your house. A Chapter 13 bankruptcy is more of a reorganization, and you can even catch up on payments as long as these are included in your plan.

Mitigating circ*mstances are any serious circ*mstances beyond your control which may have adversely affected your academic performance. These include but are not limited to: Medical conditions. Personal and domestic circ*mstances.

If you sign a reaffirmation agreement with a secured creditor, then they will usually report your payments to the credit bureaus after the bankruptcy. This is usually a good idea for first mortgages, but not necessarily a good idea for second mortgages and car loans.