I frequently get asked…….I had to short sale my home, or, I went into bankruptcy during the recession…..How long before I can borrow again? You might be surprised at the answer. With today’s tighter credit requirements, you might think it impossible to re-enter the housing market as a buyer again. Think again! Read more…..
I am going to stick with the 3 heavy weight mortgage underwriters/ insurers in the mortgage field…..FHA, Freddie Mac and Fannie Mae for the answers. If you lost your home during the downturn in the market, and if you can remember what year that took place, you may be ready to re-enter the housing market as a buyer sooner than you think.
If you had a bankruptcy. If you went thru a Chapter-7 or 13 bankruptcy, FHA says you can re-enter the market in 2 years, if your last 12 month’s of credit history shows on-time payment. Fannie Mae and Freddie Mac both say Chapter 7 & 11 bankruptcy require 4 years.
If you had a foreclosure. If you went thru the foreclosure process, FHA will allow you to make application for a mortgage in 3 years as long as you have a 12 month on time payment history with your bills. Fannie and Freddie are not so generous and are still requiring 7 full years for a foreclosure. There are a few exceptions, and may qualify after 3 years, but they require extenuating circumstances.
If you had a short sale. FHA in general says 3 years, depending on the payment history prior the filing for the short sale. Fannie May says 4 years, with one exception of extreme hardship or serious medical situation forcing the sale. Freddie Mac now requires no waiting period before attempting a new mortgage.
These guidelines should be considered flexible to some degree, based on the actual front end lender’s requirements, personal hardships that caused the issue in the first place, as well as on-time credit payments since the default. It would be wise to see a loan consultant before jumping into a car with a realtor to look at homes. No need to get excited only to find out your going to need to wait a bit longer.
PS. Deed-in-Lieu [Surrendering the deed back to the lender] We did not see many situations like this during the downturn and was not an acceptable lender model during the recession. However if you were able to get your mortgage holder to accept the deed and you just walk away, your probably looking at 3-4 years before you can apply for a new home loan.