I get asked this question quite frequently myself. This blog is very useful in helping a client understand when they can use their credit again and become home owners once more.
When can I buy a home again I just did a.........
You fill in the blank - but I am constantly asked this question and with recent changes wanted all my agent partners to have the most current info to print off, have by the phone or just copy my link to this blog and send it out to their clients.
The following information is paramount to helping all of our clients currently in our Credit Restoration Unit - our way of helping any of your clients with a blemish, hiccup or ding that we can donate our time to them for you to get them back into buying a home or just simply re-establishing their FICO scores as quickly as possible!
When can I buy a home again I just did a......... using Conventional Financing
- Credit – Distressed Sale
- Deed-in-Lieu of Foreclosure and Preforeclosure Sale (Short Sale)
- Two Years – 80% maximum LTV
- Four Years – 90% maximum LTV
- Seven Years – LTV ratios per Eligibility Matrix
- A seven-year waiting period is required, and is measured from the completion date of the foreclosure action as reported on the credit report or other foreclosure documents provided by the borrower.
- Exceptions for Extenuating Circumstances - A three-year waiting period is permitted if extenuating circumstances can be documented, and is measured from the completion date of the foreclosure action. Additional requirements apply between three and seven years, which include:
- Maximum LTV, CLTV, or HCLTV ratios of the lesser of 90% or the maximum LTV, CLTV, or HCLTV ratios for the transaction per the Eligibility Matrix.
- The purchase of a principal residence is permitted.
- Limited cash-out refinances are permitted for all occupancy types pursuant to the eligibility requirements in effect at that time.
- Credit – Bankruptcy
- Chapter 7
- A four-year waiting period is required, measured from the discharge or dismissal date of the bankruptcy action.
- Exceptions for Extenuating Circumstances - A two-year waiting period is permitted if extenuating circumstances can be documented, and is measured from the discharge or dismissal date of the bankruptcy action.
- Chapter 13
- Two years from the discharge date.
- Four years from the dismissal date.
- Exceptions for Extenuating Circumstances - A two-year waiting period is permitted after a Chapter 13 dismissal, if extenuating circumstances can be documented. There are no exceptions permitted to the two-year waiting period after a Chapter 13 discharge.
When can I buy a home again I just did a......... using FHA
- Credit – Distressed Sale – Short Sale
- NOTE: A borrower is not eligible for a new FHA-insured mortgage if he/she pursued a short sale agreement on his/her principal residence simply to:
- Take advantage of declining market conditions, and
- Purchase a similar or superior property within a reasonable commuting distance at a reduced price as compared to current market value.
- Borrower Current at the time of Short Sale
- A borrower is considered eligible for a new FHA-insured mortgage if, from the date of loan application for the new mortgage, all
- Mortgage payments on the prior mortgage were made within the month due for the 12-month period preceding the short sale, and
- Installment debt payments for the same time period were also made within the month due.
- Borrower in Default at the time of Short Sale
- A borrower in default on his/her mortgage at the time of the short sale (or pre-foreclosure sale) is not eligible for a new FHA-insured mortgage for three years from the date of the pre-foreclosure sale.
- NOTE: A borrower who sold his/her property under FHA's pre-foreclosure sale program is not eligible for a new FHA-insured mortgage from the date that FHA paid the claim associated with the pre-foreclosure sale.
- Exception: A lender may make an exception to this rule for a borrower in default on his/her mortgage at the time of the short sale if the:
- Default was due to circumstances beyond the borrower's control, such as death of primary wage earner or long-term uninsured illness, and
- A review of the credit report indicates satisfactory credit prior to the circumstances beyond the borrower's control that caused the default.
- Credit – Distressed Sale - Foreclosure – 3 years
- Exception: The lender may grant an exception to the three-year requirement if the foreclosure was the result of documented extenuating circumstances that were beyond the control of the borrower, such as a serious illness or death of a wage earner, and the borrower has re-established good credit since the foreclosure.
- Divorce is not considered an extenuating circumstance. An exception may, however, be granted where a borrower's loan was current at the time of his/her divorce, the ex-spouse received the property, and the loan was later foreclosed.
- Note: The inability to sell the property due to a job transfer or relocation to another area does not qualify as an extenuating circumstance.
- Credit – Bankruptcy
- Chapter 7
- Two years from the date of discharge, during this time the borrower must have:
- Re-established good credit, or
- Chosen not to incur new credit obligations.
- Exception: An elapsed period of less than two years, but not less than 12 months, may be acceptable for an FHA-insured mortgage, if the borrower
- Can show that the bankruptcy was caused by extenuating circumstances beyond his/her control, and
- Has since exhibited a documented ability to manage his/her financial affairs in a responsible manner.
- Note: The lender must document that the borrower's current situation indicates that the events which led to the bankruptcy are not likely to recur.
- Chapter 13
- One year of the pay-out period under the bankruptcy has elapsed
- The borrower's payment performance has been satisfactory and all required payments have been made on time, and
- The borrower has received written permission from bankruptcy court to enter into the mortgage transaction.
- Lender documentation must show two years from the discharge date of a Chapter 13 bankruptcy. If the Chapter 13 bankruptcy has not been discharged for a minimum period of two years, the loan must be downgraded to a Refer and evaluated by a Direct Endorsement (DE) underwriter.
When can I buy a home again I just did a......... using VA
- Credit – Short Sale, Foreclosure, Deed-in-Lieu of Foreclosure
- Follow Chapter 7 guidelines – Two years
- Develop complete information on the facts and circumstances of the foreclosure.
- NOTE: If the foreclosure was on a VA loan, the applicant may not have full entitlement available for the new loan. Ensure that the applicant’s Certificate of Eligibility reflects sufficient entitlement to meet any secondary marketing requirements of the lender.
- Credit Bankruptcy
- Chapter 7
- Two years from discharge date
- Exception: If the bankruptcy was discharged within the last 1 to 2 years, it is probably not possible to determine that the applicant or spouse is a satisfactory credit risk unless both of the following requirements are met:
- The applicant or spouse has obtained consumer items on credit subsequent to the bankruptcy and has satisfactorily made the payments over a continued period, and
- The bankruptcy was caused by circumstances beyond the control of the applicant or spouse such as unemployment, prolonged strikes, medical bills not covered by insurance, and so on, and the circumstances are verified. Divorce is not generally viewed as beyond the control of the borrower and/or spouse.
- Exception 2: If the bankruptcy was caused by failure of the business of a self-employed applicant, it may be possible to determine that the applicant is a satisfactory credit risk if
- The applicant obtained a permanent position after the business failed,
- There is no derogatory credit information prior to self-employment,
- There is no derogatory credit information subsequent to the bankruptcy, and
- Failure of the business was not due to the applicant’s misconduct.
- Chapter 13
- Immediately after discharge if all payments made satisfactorily.
- If not discharged one year of satisfactory Trustee payments AND the Trustee or the Bankruptcy Judge approves of the new credit.
When can I buy a home again I just did a......... using USDA
- Credit – Distressed Sale – Short Sale and Foreclosure – Three years from date of sale or foreclosure.
- Credit – Bankruptcy – Three years from date of discharge.
- Adverse Credit Waivers: May be granted for mitigating factors to establish the applicant’s intent to good credit. Lenders must document these circumstances which were beyond the borrower’s control and have been removed:
Disclaimer: The information here has been researched from corresponding underwriting guidelines (Allregs, FHA, VA, USDA). I have attempted to provide the most current and accurate information available, as of Nov 28th 2011.
Thanks for reading my blog on; When can I buy a home again I just did a.........