Clients pondering their own housing situation have asked the question:
"How long will it take to recover from a foreclosure, a short sale, bankruptcy, etc." and "When will I be able the buy again?"
The answer is crucial in making the right decision for their financial future. We, as agents, are not lawyers or accountants and always advise our clients to seek legal advice, but the following simple guidelines were offered by Haley Farnam at Coldwell Banker Home Loans. These are the guidelines for obtaining a new mortgages:
Action: Conforming/Non Conforming
Bankruptcy (except chapter 13) 4 years from the dismissal date of the bankruptcy action
Chapter 13 Bankruptcy 2 years from either the discharge date or 4 years from the dismissal date
Foreclosure 5 years from the completion date, Additional requirements that apply after 5 years up to 7 years following the completion date:
The purchase of a primary residence is permitted with a minimum of 10%f down payment and a minimum respresentative score of 680
Purchase of a second home or investment property is not permitted
Limited Cash-out refinances are permitted for all occupancy types pursuant to the eligibility requirements in effect at that time
Cash out refinances are not permitted for any occupancy type
Deed-in-Lieu of Foreclosure 4 years from completion date (date deed in lieu executed)
Additional requirements that apply after 4 years up to 7 years following the completion date:
Borrower may purchase a property secured by a primary residence, second home, or investment property with the greater of 10% minimum down payment or the minimum down payment required for the transaction
Limited cash-out and cash-out transactions secured by a primary residence, second home or investment property are permitted pursuant to the eligibility requirements in effect at that time.
Time Period after a Pre-Foreclosure (short sale) 2 years from the completion date. This will show on the credit report as a comment to the reporting of delinquency and will typically be reflected as "Paid in Full Less Than Full Balance" or as a "Deficient Payoff/Settlement."
Bankruptcies (Chapter 7) Fully discharged at least 2 years
Schedule of debtors and discharge date. The borrower must have re-established good credit or chosen not to incur new credit obligations. The borrower also must have demonstrated a documented ability to responsibly manage his or her financial affairs. Not delinquent credit after the bankruptcy. Detailed credit explanation.
Bankruptcies (Chapter 13) 1 full year timely payments made. Trustee approved. No delinquencies. Detailed credit explanation
Foreclosures/Deed in Lieu Released at least 3 years. Detailed Credit explanation.
Everyone needs a little hope in life right now. There's a rainbow waiting in knowing that you or your clients will recover.
This information was provided by Haley Farnam, Mortgage Advisor, Coldwell Banker Home Loans. These guidelines may have changed or will be changing in the future. As always, we recommend you or your clients seek legal advise.