May 18th, 2011

When Can I Get Another Home Loan?

A common question I get is how long a person must wait after a foreclosure, short sale or bankruptcy before that person will qualify for another home loan.  First and foremost, an Arizona real estate lawyer or Arizona bankruptcy lawyer is not a “credit expert”.  Just because an Arizona attorney specializes in bankruptcy or real estate does not mean the attorney has cracked the secret CIA algorithm used by the credit bureaus and lenders to compute a person’s credit score.

That being said, many mortgage lenders won’t give you a loan if you don’t meet Fannie Mae’s credit status requirements.  Fannie Mae has established a number of different waiting periods for so called “derogatory credit events”, such as foreclosure, short sales and bankruptcy.  Once a derogatory credit event shows up on your credit report, a waiting period must be satisfied before many mortgage lenders will give you a home loan.  That does not mean you will qualify for a loan after the expiration of the waiting period.  It just means that you will at least be considered and not automatically disqualified.  Depending on what the lending standards are by the time the waiting period has expired will determine whether a person will qualify for a home loan and how favorable the loan terms will be.  The chart below summarizes current waiting periods (as of May 18, 2011), but such waiting periods are constantly changing.  For more information, go to the Fannie Mae Selling Guide.

Waiting Periods for Derogatory Credit Events

Derogatory Event Waiting Period Requirements Waiting Period with Extenuating Circumstances
Bankruptcy Chp. 7 or 11 4 years 2 years
Bankruptcy Chp. 13 2 years from discharge date, or

4 years from dismissal date

2 years from discharge date, or 2 years from dismissal date
Multiple Bankruptcy Filings 5 years if more than one filing within the past 7 years 3 years from the most recentdischarge or dismissal date
Foreclosure 7 years 3 years (there are additional requirements after the 3 years regarding loan-to-value ratios
Deed-in-Lieu of Foreclosure, Pre-foreclosure, and Short Sale * 2 years - 80% maximum LTV ratios

* 4 years - 90% maximum LTV ratios

*7 years - LTV ratios per the Eligibility Matrix

2 years- 90% maximum LTVRatios
The maximum loan-to-value (LTV) ratios permitted are the lesser of the LTV ratios in this table or the maximum LTV ratios for the transaction per the eligibility matrix published by Fannie Mae.

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