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Bankruptcy and Foreclosure- When Can I Buy or Refi?

[These are the guidelines as of September, 2013. If you are reading this after that date, please call me or your mortgage broker/banker as the rules and requirements continue to change and the information below, though basic, in reality has probably changed.]

Qualifying for a mortgage after bankruptcy or a foreclosure/short sale/deed in lieu requires timing as well as re-building credit.

Rebuilding credit means actually USING credit responsibly. That means having at least two GOOD lines of credit like 2 small limit and small charged up balance credit cards being paid on time, paying meticulously on time and keeping the amount charged up very low. That also means NOT closing any account, PAYING OFF collections and judgements and PAYING DOWN-- NOT OFF--- USING the minimum payment asked in the bill (NOT paying the entire amount off every month) and keeping the balance charged up to only max 20% or so of the limit given.

Timing is as follows and is to the day-- and possibly per decision of any given bank:

FHA Loans

* Foreclosure or Deed-in-Lieu or Short Sale: 3 years from the final sale to a NEW BUYER (not the day you signed the foreclosure paperwork or were evicted)

* Chapter 7 Bankruptcy: 2 years from Discharge

* Chapter 13 Bankruptcy: Totally an underwriter/lender decision AND must get at least a one-year history of making on-time payments from your Trustee, Court or BK Attorney or who ever is receiving your payments AS WELL AS written approval from the same Trustee, Court etc. receiving payments to add new debt.

(other loans, open the rest of the Post)

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VA Loan

* Foreclosure or Deed-in-Lieu or Short Sale: 2 years from the final sale to a NEW BUYER (not the day you signed the foreclosure paperwork or were evicted)

* Chapter 7 Bankruptcy: 2 years from Discharge

* Chapter 13 Bankruptcy: Totally an underwriter/lender decision AND must get at least a one-year history of making on-time payments from your Trustee, Court or BK Attorney or who ever is receiving your payments AS WELL AS written approval from the same Trustee, Court etc. receiving payments to add new debt.

Fannie Mae/Freddie Mac (Conventional) Loan

* Foreclosure: 7 years from the final sale to a NEW BUYER

* Deed-in-Lieu of Foreclosure: (an Underwriter/lender call) but from the final sale to a NEW BUYER:

2 years if putting 20% or more of the purchase price as down payment
4 years if putting 10% to 19% of the purchase price down
7 years if putting less than 10% down


* Short Sale: (an Underwriter/lender call) but from the closing date of final sale to a NEW BUYER

2 years if putting 20% or more of the purchase price as down payment
7 years if putting less than 20% down payment

* Chapter 7 Bankruptcy: 4 years from Discharge

* Chapter 13 Bankruptcy: Totally an underwriter/lender decision AND must get at least TWO-year history of making on-time payments from your Trustee, Court or BK Attorney or who ever is receiving your payments AS WELL AS written approval from the same Trustee, Court etc. receiving payments to add new debt.

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This page contains a single entry from the blog posted on January 9, 2013 9:58 AM.

The previous post in this blog was Freddie Mac: Most refis don't shorten mortgage duration.

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