Waiting Periods Required For Significant Derogatory Credit Events

    CONVENTIONAL MORTGAGE

    Derogatory Item  Waiting Period
    Foreclosure Home was given back to the bank – No owner participation

    • 7 years from date foreclosure completed and transferred back to bank if they had NO extenuating circumstances.
    • 3 years from date foreclosure completed and transferred back to bank with acceptable extenuating circumstances AND 10% Down Payment. Primary home purchase and rate/term refinance only. Non-owner and second homes not allowed.
     Short SaleDeed in Lieu of Foreclosure Short Sale:Home sold but sales price didn’t cover amount owedDeed in Lieu: Home returned to lender in exchange for canceling loan

    • 7 years from date sale closed and transferred to new owner or transferred back to back with 10% down payment
    • 4 years  from date sale closed and transferred to new owner or transferred back to bank with 10% down payment
    • 2 years from date sale closed and transferred to new owner or transferred back to bank with 20% down payment
    • 2 years from date sale closed and transferred to new owner or transferred back to bank possible with acceptable extenuating circumstance and 10% down payment.
     Bankruptcy Chapter 7  Debts are discharged through BK, client does not pay any debts owing

    • 4 years from discharge date
    • 2 years from discharge date possible with acceptable extenuating circumstance
     Bankruptcy Chapter 13  Debts are paid back on a monthly scheduled payment plan by client

    • 2 years from discharge date
    • 4 years from dismissal date

     

    FHA

    Derogatory Item Waiting Periods
     ForeclosureDeed in Lieu of Foreclosure
    • 3 years from date foreclosure completed and transferred back to the bank
    • Less than 2 years, but not less than 12 months from date foreclosure completed and transferred back to bank may be acceptable if the result of acceptable extenuating circumstances.
     Short Sale
    •  3 years from date sale closed and transferred to new owner
    • No waiting period if the borrower had no late payments on any mortgages and consumer debts within the 12 month period preceding the short sale AND they are not taking advantage of declining market conditions.
     Bankruptcy Chapter 7
    •  2 years from date of discharge with re-established credit paid as agreed or no new credit obligations incurred.
    • Less than 2 years, but not less than 12 months from date of discharge may be acceptable if the bankruptcy was caused by acceptable extenuating circumstances and borrower has since exhibited a documented ability to manage financial affairs in a responsible manner.
     Bankruptcy Chapter 13
    •  1 year payout period under bankruptcy has elapsed and the borrower’s payment performance has been satisfactory and all required payments made on time.

     

    Examples of acceptable extenuating circumstances

    (circumstances must be verified and documented):

    Conventional: nonrecurring events that are beyond the borrower’s control that result in a sudden, significant, and prolonged reduction in income or a catastrophic increase in financial obligations.

    FHA: Serious illness or death of a wage earner. Divorce and the inability to sell a property due to a job transfer or relocation to another area does not qualify as an acceptable extenuating circumstance.