2018 Mortgage Waiting Periods for Repurchasing or Refinancing After a Short Sale
As it is now 8-10 years since the housing downturn during the great recession, there are more and more borrowers who suffered a financial hardship in the recent past who are getting back into the market to purchase a home or refinance again in 2018. There were some positive changes recently to the waiting periods, when a buyer or homeowner can obtain a new mortgage and repurchase a home again after a foreclosure, short sale or bankruptcy, here is a summary of the 2018 Mortgage Waiting Periods below.
Buyers Coming Back into the Market.
As the housing downturn started back in 2008, there are many buyers who suffered a financial hardship who are now back in the market to purchase a home. Here are some results from a survey by Afterforeclosure.com.
The survey reports that 79% of those who lost their home are interested in buying again, 41% of buyers have higher incomes than before the housing crash, 63% report their debts are lower than before the crash, and 46% want to purchase in a lower price range.
The survey also reports that buyers are unaware of programs available to them to help them purchase after just a year or two, therefore knowing the time lines when buyers can repurchase again after foreclosure or short sale is very important.
9 Out of 10 Borrowers Use One of These Three Financing Options
Borrowers today essentially have 3 options when it comes to obtaining financing to purchase a home. In fact, more than 9 out of 10 mortgages are either funded by Fannie Mae/Freddie Mac, the FHA or VA!
So if you are looking to purchase and need financing, it is more than likely you will be using one of these 3 financing options. Here are the current 2018 waiting periods when you can repurchase a home or refinance, after either a short sale, foreclosure or bankruptcy.
1. When Can I Repurchase or Refinance Again After a Foreclosure?
Here are the current 2016 waiting periods when you can repurchase or refinance again after a Foreclosure and want to obtain either Conventional, FHA or VA financing.
Conventional. 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.
FHA. It is 3 years before you can repurchase again using FHA financing. Or, see below for how a FHA buyer can qualify again after just 1 year if they experienced an economic event.
VA. It is only 2 years before you can repurchase again using VA financing.
2. When Can I Repurchase or Refinance Again After a Short sale?
Here are the current 2016 waiting periods when you can repurchase or refinance again after a Short Sale and want to obtain either Conventional, FHA or VA financing.
Conventional. It is 4 years before you can repurchase again using Conventional financing. Please note, it is 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.
*New Rule added. There was a new change implemented recently (see below), whereby if you included the short sale in a bankruptcy 13, you can qualify after 2 years instead of 4 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 short sale action is subsequently completed on the property, the borrower is held to the bankruptcy waiting periods and not the short sale waiting period. This means a buyer can now qualify for conventional financing after 2 years from the bankruptcy date, instead of the short sale date of 4 years.
FHA. It is 3 years before a buyer can repurchase again using FHA financing. But here are 2 loopholes to help you qualify less than 3 years.
*Tip #1: The FHA has a loophole that not many people know about, if the FHA buyer did not have any late payments before their short sale, they are allowed to automatically qualify again for FHA financing.
Tip #2. The FHA 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. For additional information on how to qualify under this new rule, I wrote an article recently on this subject for the San Diego Union Tribune newspaper, click HERE.
VA. It is only 2 years you can repurchase again using VA financing.
3. When Can I Repurchase or Refinance Again After Bankruptcy?
Here are the current 2016 waiting periods when you can purchase or refinance again after a Bankruptcy and want to obtain either Conventional, FHA or VA financing.
Conventional. 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.
FHA. 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.
VA. 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.
4. What if I don’t fit the rules above? New Portfolio Mortgage Options.
What if I don’t meet the waiting period 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, and with much better terms than private financing.
For example, we have lenders who will provide financing for buyers who are as little as one month out of a foreclosure, short sale or BK. These lenders will require a larger down payment, depending on your credit scores, and assets etc.
Mortgage rates will also be higher than traditional loans and the rates you hear on TV and the radio. But these new programs are a great option for borrowers who until recently, probably only had an option of private (hard money) financing with very high rates and costs. Contact me for more details on how to qualify for these new mortgage programs.
But another part of the puzzle to helping you get in a position to repurchase again, is ensuring you have also started to re-establish your credit again 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, conventional financing requires a minimum credit score of 620. Whereas the FHA and VA only require a 580 credit score to qualify for financing again.
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. We can provide you with a copy of your credit report if needed.
The next step is to start rebuilding your credit scores. I have a “Credit Education and Improvement” section on my website, click HERE, which will help you better understand how credit works and how to improve your scores, so you are able to score the best rates and financing terms.
If you need major credit repair, I have several credit repair experts I can put you in touch with.
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 repurchase again, but probably don’t know they are.
A lot of buyers 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!
I also wrote a piece for the San Diego Union Tribune discussing these topics above, which explain the “Guidelines for repurchasing a home after a Financial Hardship'”, click HERE.
As mortgage rates are still near record lows, and it is cheaper to buy a home than rent in some areas of California, purchasing a home is a good financial decision.
If you have any questions about any of these waiting periods above, or you would like to get approved for financing, please do not hesitate to contact me directly at 858-442-2686.
This entry was posted on Saturday, January 18th, 2014 at 6:51 pm and is filed under 2018 Mortgage Waiting Periods for Repurchasing or Refinancing After a Bankrutpcy, 2018 Mortgage Waiting Periods for Repurchasing or Refinancing After a Foreclosure, 2018 Mortgage Waiting Periods for Repurchasing or Refinancing After a Short Sale. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.