Foreclosure After Bankruptcy: How long is the Wait to Buy a Home?
This is a fairly simple question but one that has a few answers depending on your situation:
Let’s look at some different scenarios:
Conventional loan ( Up to $625k depending on the county, 5% minimum downpayment)
This is where the biggest changes were made on Aug 16th 2014. In the past it was a 7 year wait after the foreclosure date. This was the actual date that the lender took back the property, which in many cases was years past the bankruptcy date when the borrower surrendered the property and was relieved of the debt. Now if the mortgage debt has been discharged through bankruptcy, the borrower is held to the bankruptcy waiting period NOT the foreclosure date. This is a huge change. Currently the waiting periods are 4 years after Chapter 7 or 11, 2 years after Chapter 13 discharge, or 4 years after Chapter 13 dismissal.
Jumbo loan ( varies, but always above $417k )
Jumbo loans vary the most on waiting periods. Every lender has different guidelines and they are always changing. The industry standard is 5-7 years after Foreclosure. We have a “2nd Chance” Jumbo loan that requires a 2 year wait after bankruptcy, but no minimum waiting period after Foreclosure, Deed-in-Lieu, or Short-Sale. Because the FHA and Conventional loans are mostly sold on the secondary market to one of the large GSE aggregators there is consistency in the guidelines. Jumbo loans do not have the same consistency.
FHA loan ( lower loan limits in most of the country, up to $625k in some high cost areas, 3.5% minimum down-payment)
If you are looking to buy a starter home or a less expensive home with a low down-payment an FHA loan may be your best bet. In that case you can buy a home 3 years after the foreclosure. This means the new loan can be funded anytime after the 3 year anniversary. You do not have to wait until the 3 year mark to get pre-approved.