Are you ready to buy a home again post Bankruptcy, Short Sale, Foreclosure or Deed in Lieu?
If buying a home in 2015 is on your mind yet you feel discouraged due to a recent bankruptcy, short sale or foreclosure, there are several things to be aware of and better yet, take action towards before beginning your search for the perfect home. When it comes to the financial side of buying a home, understanding what really matters and doing the work ahead of time can make all the difference, as stated in our recent blog post “Buying a Home in 2015? Be Prepared with these Five Steps”. The number one step you should always begin with is reviewing your credit at least six (6) months before you are ready to buy a home because quite often there are things left over on your credit report that can delay your ability to qualify.
Transparent Mortgage offers the most current information available in the industry when it comes to buying a home. Below are necessary facts and guidelines you need to understand as you begin your search to buy a new home.
2015 FHA Guidelines
The Department of Housing and Urban Development (HUD) changes the program on a regular basis. In fact, there have been more changes to the FHA requirements and guidelines in the last two years than in the previous ten years combined. The bottom line is that the 2015 FHA loan program will be markedly different from what it was five or ten years ago. Borrowers need to know how it’s different, and what it takes to qualify under current conditions. You can also find more information and the official guidelines for this program on the HUD.gov website.
- Bankruptcy: You may apply for a FHA insured loan after your bankruptcy has been discharged for TWO (2) years with a Chapter 7 Bankruptcy. You may apply for a FHA insured loan after your bankruptcy has been discharged for ONE (1) year with a Chapter 13 Bankruptcy.
- Foreclosure: You may apply for a FHA insured loan THREE (3) years after the sale/deed transfer date.
- Short Sale/Deed in Lieu: You may apply for a FHA insured loan THREE (3) years after the sale date of your foreclosure. FHA treats a short sale the same as a foreclosure for now.
- Credit Score: Credit must be re-established with a 640 minimum credit score
2015 VA Guidelines
New VA loan limits for 2015 go into effect on January 1, 2015. Different this year is that VA loan limits match conforming loan limits as announced by the Department of Veterans Affairs on December 9, 2014. Depending on where you live, you can expect differences from -42.8 percent to 8.1 percent compared to last year. Most areas of the country will keep their conforming loan limits at $417,000. However, pay close attention if you’re in a high-cost area, as your loan limits may have increased or decreased.
- Bankruptcy Ch 7: You may apply for a Veteran Affairs guaranteed loan TWO (2) years after a chapter 7 Bankruptcy
- Bankruptcy Ch 13: If you have finished making all payments satisfactorily, the lender may conclude that you have re-established satisfactory credit. If you have satisfactorily made at least 12 months worth of the payments and the Trustee or the Bankruptcy Judge approves of the new credit, the lender may give favorable consideration.
- Foreclosure: You may apply for a VA guaranteed loan TWO (2) years after a foreclosure
- Short Sale/Deed in Lieu: You may apply for a VA guaranteed loan TWO (2) years after a short sale, unless it was a VA loan then restrictions apply.
- Credit Score: Credit must be re-established with a minimum 620 credit score
NOTE: Mortgage debt included in bankruptcy will go by bankruptcy discharge date and subsequent foreclosure, short sale, or deed in lieu of foreclosure will not count as an additional waiting period, as long as you are off title for any defaulted mortgages. If credit was perfect and you had to move because of a relocation and had no choice but to ask for a deed in lieu of foreclosure you would be ok.
2015 Conventional (Fannie Mae)
The general loan limits for 2015 are unchanged from 2014 (e.g., $417,000 for a 1-unit property in the continental U.S.) and apply to loans delivered to Fannie Mae in 2015 (even if originated prior to 1/1/2015). Refer to Lender Letter LL-2014-08 for specific requirements. 2015 high-cost area loan limits have increased for 46 counties due to a high-cost area adjustment or the county being newly assigned to a high-cost area.
- Bankruptcy: You may apply for a Conventional Fannie Mae loan after your Chapter 7 bankruptcy has been discharged for FOUR (4) years, TWO (2) years from the discharge of a Chapter 13.
Foreclosure: You may apply for a Conventional Fannie Mae loan SEVEN (7) years after the sale date of your foreclosure. Additional qualifying requirements may apply.
- Short Sale/Deed in Lieu of Foreclosure:
- Effective 7/29/2014: Waiting period for subsequent foreclosure that was included in bankruptcy is waived. If mortgage is included in bankruptcy, waiting period defaults to FOUR (4) from the discharge date.
- Effective 8/16/2014: Short Sale or Deed in Lieu of Foreclosure not included in a bankruptcy has a new waiting period of FOUR (4) years from date your name is removed from title. This replaces the ability to buy in 24 months with 20% down payment and minimum 680 credit score.
- SEVEN (7) Years above 90% Loan to Value – with less than 10% Down Payment – Subject to Private Mortgage Insurance underwriting guidelines.
- Credit Score: Credit must be re-established with a minimum 620 credit score.
NOTE: Fannie Mae has reduced waiting periods in cases of extenuating circumstances – The death of a primary wage earner seems to be the only one I have been able to identify up to this point.
2015 Jumbo Mortgage Guidelines
- Bankruptcy: You may apply for a Jumbo mortgage loan once any chapter of bankruptcy has been discharged for FOUR (4) years, FIVE (5) years if multiple bankruptcy occurs on credit profile.
- Foreclosure: You may apply for a Jumbo mortgage loan SEVEN (7) years after the sale date of your foreclosure. Additional qualifying requirements may apply.
- Short Sale/Deed in Lieu of Foreclosure: You may apply for a Jumbo mortgage loan FOUR (4) Years from short sale or deed in lieu of foreclosure with Maximum 80% Loan to Value.
NOTE: If hardship is the result of an extenuating circumstance, waiting periods may be reduced.