How Long Must You Wait to Buy a Home After Foreclosure or Bankruptcy?

Real Estate Agent with Ridgway Real Estate 40037375

There's no question that a foreclosure or bankruptcy can advesrely affect your ability to buy a home, or completely eliminate the possibility.  However, it is often more a question of when than if  you can ever buy a home again.  Different loan types or programs have different waiting periods.

Generally speaking, government-insured loans, such as FHA and USDA Rural Developement have shorter waiting periods, e.g., 2-3 years.  In fact, if you had a short sale and can qualify for a VA loan, there is actually no waiting period, with certain restrictions. 

For conforming/conventional loans (Fannie Mae and Freddie Mac), periods are longer.  For foreclosures and short sales or DIL, it’s 7 years.  For Chapter 7 Bankruptcy, it’s 4 years, and 2 years for a Chapter 13 bankruptcy.

Below is a table from Cornerstone Home Lending, Inc., which provides a good overview of the different waiting periods.  

Waiting Periods

It is important to note that certain events trigger the start date of the waiting period, which sometimes can catch a borrower by surprise. This is particularly true of conventional loans. The event that starts the waiting period is when title is transferred from the borrower’s name. Sometimes this may take many months or even years after the foreclosure proceeding was initiated and the borrower abandoned the house. I have had borrowers tell me they had a foreclosure 3 years ago just to find out title transferred just last year, or not even yet!

Another complication is when a borrower has had a foreclosure followed by a bankruptcy.  Again, while the bankruptcy discharge may have occurred on a certain date, the title to real property may not have been transferred out of the borrowers name for several months or years following the discharge

The waiting period, of course, is just one factor in qualifying for a loan.  You still need to qualify based on other factors, such as credit score, assets, debt-to-income ratios, etc.  Fortunately, the further out from your foreclosure or bankruptcy, the less effect these events have on your credit score.  Of course, that assumes you have done all the right things to reinstate and maintain your good credit. 

If you’ve had a foreclosure, short sale, DIL or bankruptcy at any time in the past, the best thing to do before you start looking at homes or even thinking of buying again is to meet with your lender to ensure you have satisfied the waiting periods.  If it turns out you have not, at least, you’ll know how long it will take.  You can also then put together a game plan to ensure you meet all other requirements to qualify for a particular loan by the time the waiting period expires.

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Comments (1)

Debbie Laity
Cedaredge Land Company - Cedaredge, CO
Your Real Estate Resource for Delta County, CO

Hi, Ninah. This is great information. I know I will be sending anyway your way that has questions about buying a home again after a DIL, short sale or foreclosure. Great post. 

Apr 12, 2016 08:53 AM