I have had several people ask about buying a home after a bankruptcy or a foreclosure. I have also had people think that they could never buy a home due to a bankruptcy or foreclosure. Then I have had people call me and say they are ready to buy a home, in the conversation something doesn't sound right and when I ask about credit and bankruptcies, I have had the potential buyer say, I'm ready, I filed bankruptcy last month, but my lawyer said everything was good to go! So the reality is you can buy a home after you file for bankruptcy or after a foreclosure, but there is a waiting period!
How long do you have to wait? It depends on your situation. The standard guidelines for buying a home after a bankruptcy are:
- FHA loans: 2 years
- VA home loans: 2 years
- Conventional loans: 4 years
- USDA home loans: 3 years
If you have extenuating circumstances, you may be able to buy sooner – but we need to prove extenuating circumstances. Those are usually something outside a borrower's control or a one time event that caused an income loss. It may have been a death to a family member such as a spouse that was a wage earner. A divorce is not considered an extenuating circumstance.
If your home was included in the bankruptcy, it can affect those dates. When your home is included in the bankruptcy, it is considered a foreclosure and the dates vary based on when the home was foreclosed on. It may mean you need to wait 7 years to get a conventional loan or three years for FHA.
For those with a foreclosure, the waiting periods vary depending on the type of mortgage you want to get:
- FHA loans: 3 years from Sheriff sale, FHA foreclosure is 3 years from the date HUD paid the claim
- Conventional loans: 7 years from the completion date
- VA loans: 2 years from sheriff sale
- USDA loans: 3 years from sheriff sale.
As with bankruptcies, if you can prove extenating circumstances, you may be able to purchase a home sooner.
Keep copies of your foreclosure and bankruptcy documents, your lender will want them. You may be able to get information at the county to show when the sheriff sale was or to get bankruptcy documents. Make sure you make all your payments on time after a bankruptcy or foreclosure. You will want to work on rebuilding your credit to show you are credit worthy. If you have questions on what you need to do, contact your lender to make sure you are on the right path.