2015 is already shaping up to be the year of the Boomerang buyer, or the repeat home buyer. As it is now 7 years since the housing crash, there are lots of buyers who suffered a financial hardship in the recent past who are getting back into the market to purchase a home again in 2015. Therefore it is important to know the rules when you can repurchase or refinance again after having a Foreclosure, short sale or bankruptcy. There were several 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 these waiting periods below.
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 2015 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 2015 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 2015 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.
FHA. It is 3 years before you can repurchase again using FHA financing.
*FHA TIP: 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.
New FHA Short Sale Rule for 2014 ” FHA BACK TO WORK PROGRAM”. The FHA announced in late 2013 they have 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 – twelve 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.
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 2015 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?
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 terms much better than private financing.
We have lenders who will provide financing for buyers less than 6 months out of a foreclosure, short sale or BK for example. A larger down payment will be required of course, and rates will be higher than traditional loans. Contact me for more details on how to qualify for these new mortgage programs.
Helping Borrowers Rebuild Their Credit Scores
As the housing downturn is now 6-7 years old, there are more borrowers coming back into the market to purchase a home or refinance, who suffered a financial hardship in the past.
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, the FHA and VA only require a 580 credit score to repurchase 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. You can go to www.annualcreditreport.com to get a FREE copy of your credit report (consumers are allowed 1 free credit report per year).
Then the next step is to start rebuilding your credit scores. I have a “Credit Education and Improvement” section on my website, which is devoted to helping you 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 send my clients to the e-credit Advisors. They are experts on credit repair and have helped my past clients.
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 just don’t know they can.
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!
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 702-326-7866.