What happens after a foreclosure or bankruptcy?

So can you ever buy a home again after a foreclosure?  What happens if you file bankruptcy?  I have had clients call asking if they can ever do anything and I've had clients call thinking that everything was perfect now that they filed bankruptcy.  In fact a client once called and told me his credit was fine, that his lawyer told him everything was fine – he had filed a bankruptcy 3 months before that.  Wrong!!  There are several rules about what you can and can't do and it all depends on when you file the bankruptcy or foreclosure.

For a bankruptcy, everything is based off the discharge date.  So about 3 months after you file, your bankruptcy is discharged and we will use that date.  The foreclosure is based on the final date of the foreclosure and we need your foreclosure papers for that information.

Foreclosures:

• Conventional – 7 years unless there are extenuating circumstances, then 3 years
• FHA – 3 years
• VA – 2-3 years
• USDA rural development – 3 years

Bankruptcies:

• Conventional – 4 years for a Chapter 7, sometimes 2 years for a Chapter 13
• FHA – 2 years for a Chapter 7, 1 year for a Chapter 13 – as long as you have the trustee's approval, you can get a FHA loan when you are in the process of paying off your Chapter 13, if you are current on the Chapter 13 payments
• VA – 2 years
• USDA  rural development – 3 years

Short Sales:

• Conventional – typically 4 years, with extenuating circumstances possibly 2 years
• FHA – 3 years
• VA – 2-3 years – depends on the investor also
• USDA rural development – 3 years

These are guides based off of Fannie Mae, Freddie Mac, FHA, VA and USDA policies.  Individual investors may have overlays that will mean you have to wait longer.  There are a couple banks that require you to wait 7 years after a foreclosure for a new FHA or conventional loan.

The most important thing is to make sure you re-establish your credit and keep all your payments on time after a bankruptcy or foreclosure.  You also need to keep all the documentation, the underwriter will want to see your bankruptcy and foreclosure documents.  You will need to write a letter of explanation so the underwriter understands what happened and they can make a determination that it shouldn't happen again.

Leslie Vanderwerf,  NMLS ID#335509, Advisors Mortgage - Email – Website