2015 Waiting Periods for Repurchasing or Refinancing After a Short Sale, Foreclosure or BK
2015 is already shaping up to be the year of the Boomerang buyer, or the repeat home buyer. As it is now 7 years since the housing crash, there are lots of buyers who suffered a financial hardship in the recent past who are getting back into the market to purchase a home again in 2015. Therefore, it is important to know the rules of when you can repurchase or refinance again after having a Foreclosure, short sale or bankruptcy.
There were several changes recently to the waiting periods when a buyer or homeowner is able to obtain a new mortgage and repurchase a home after a Foreclosure, short sale or bankruptcy. Here is a summary of these waiting periods below.
Most Borrowers Use One of These Three Financing Options
Borrowers today essentially have 3 options when it comes to obtaining financing to purchase a home, so if you are looking to purchase and need financing, it is more than likely that you will be using one of these 3 financing options. Here are the current 2015 waiting periods when you can repurchase a home or refinance after either a short sale, foreclosure or bankruptcy.
Here are the current 2015 waiting periods when you can repurchase or refinance again after a Foreclosure and want to obtain either Conventional, FHA or VA financing.
1. When Can I Repurchase or Refinance Again After a Foreclosure?
It is 7 years before you can repurchase again using Conventional financing.
*New Rule added. There was a new change implemented recently (see below) whereby if you included the foreclosure in a bankruptcy, you can qualify after 4 years, instead of 7 years. Contact me for more details on how to qualify under this new rule.
For conventional financing, the bankruptcy guidelines have been updated to indicate that if a mortgage debt has been discharged through bankruptcy, even if a foreclosure action is subsequently completed to reclaim the property in satisfaction of the debt, the borrower is held to the bankruptcy waiting periods and not the foreclosure waiting period. This means a buyer can now qualify for conventional financing after 4 years from the bankruptcy date, instead of the foreclosure date of 7 years. However, with lender overlay guidelines, some lenders still prescribe to the original 7 years.
It is 3 years before you can repurchase again using FHA financing, or see below for how an FHA buyer can qualify again after just 1 year if they experienced an economic event.
It is only 2 years before you can repurchase again using VA financing.
Here are the current 2015 waiting periods of when you can repurchase or refinance again after a Short Sale and want to obtain either Conventional, FHA or VA financing.
2. When Can I Repurchase or Refinance Again after a Short sale?
It is 4 years before you can repurchase again using Conventional financing. Please note, it used to be 2 years if you had 20% down, but this was updated recently to 4 years, no matter how much the down payment is.
It is 3 years before you can repurchase again using FHA financing.
*FHA TIP: The FHA has a loophole that not many people know about. If the FHA buyers did not have any late payments before their short sale, they are allowed to automatically qualify again for FHA financing.
New FHA Short Sale Rule for 2014. The FHA announced in late 2013 that they have reduced the time line that buyers must wait after a bankruptcy, foreclosure or short sale before qualifying for an FHA-backed mortgage if a buyer experienced an “economic event”, whereby their household income fell by 20% or more for a period of at least six months.
The period had previously been two years following a bankruptcy and three years following a foreclosure, or short sale. The agency has now reduced the waiting period to ONE YEAR.
It is only 2 years you can repurchase again using VA financing.
Here are the current 2015 waiting periods when you can purchase or refinance again after a Bankruptcy and want to obtain either Conventional, FHA or VA financing.
3. When Can I Repurchase or Refinance Again After Bankruptcy?
For a chapter 7 Bankruptcy it is 4 years and 2 years for a chapter 13 bankruptcy before you can repurchase again using Conventional financing.
For a chapter 7 Bankruptcy it is 2 years and 1 year for a chapter 13 before you can repurchase again using FHA financing, or see above for how you can qualify again after just 1 year if you experienced an economic event.
For a chapter 7 Bankruptcy it is 2 years and 1 year for a chapter 13 bankruptcy before you can repurchase again using VA financing.
What if I don’t fit the rules above?
There are new mortgage options available for borrowers who do not fit these more traditional mortgage options above.
Portfolio lenders are stepping in to provide mortgage options for buyers who cannot qualify for conventional, FHA and VA financing with terms much better than private financing. We have lenders who will provide financing for buyers who are less than 6 months out of a foreclosure, short sale or BK, for example. A larger down payment will be required, of course and rates will be higher than traditional loans.
Helping Borrowers Rebuild Their Credit Scores
As the housing downturn is now 6-7 years old, there are more borrowers coming back into the market to purchase a home, or refinance, who suffered a financial hardship in the past. Part of the puzzle to helping you get into a position to purchase again is ensuring you have started to re-establish your credit since the financial hardship. For example, even though the required time line of say 2 or 3 years may have passed, so you can qualify for conventional or FHA financing again, it is important you have also started to rebuild your credit and have the required credit scores to qualify again for financing. For example, the FHA and VA only require a 580 credit score to repurchase a home.
The first step is to get a copy of your credit report to verify if the financial hardship or discharge is reporting correctly and to also see what your scores are. You can go to www.annualcreditreport.com to get a FREE copy of your credit report (CA consumers are allowed 1 free credit report per year).
The next step is to start rebuilding your credit scores.
Tips for borrowers
There are many people who suffered a financial hardship in the past who are already getting back into the market again to purchase a home. As the VA only requires 2 years from a short sale or a foreclosure and the FHA only 1 year, in some cases, there are a lot more people who are eligible to purchase again, but just don’t know they can. A lot of buyers that I talk to who suffered a financial hardship in the past are genuinely surprised when they realize that the FHA or VA, for example, allows them to purchase again after just 2-3 years!