Waiting period after deed in lieu of foreclosure
If you have a deed in lieu of foreclosure, FHA treats it like a regular foreclosure and the waiting period is 3 years from the recorded date of the deed in lieu of foreclosure in order for you to apply for a new mortgage loan. The key here is the date your name was transferred out of the deed into the mortgage lender’s name.
Recorded date of deed in lieu of foreclosure
Most folks think that the deed in lieu of foreclosure is finalized when they sign the paperwork and turn over the keys to the mortgage lender. That is absolutely not the case. You can turn over the keys to the mortgage lender and sign all the necessary paperwork but the deed can still be in your name for months if not years later. This will hurt your ability to purchase a new home because the waiting period does not officially begin until the date the mortgage lender’s name on the deed is recorded at the Recorder of Deeds in your particular county. Most mortgage lenders are in no hurry to transfer their names into the deed and are well aware that your waiting period does not start until they transfer the deed out of your name into theirs.
Deed in lieu of foreclosure as part of your bankruptcy
There are many homeowners who have included their deed in lieu of foreclosure in their bankruptcy and waited three years and think they are eligible to purchase a home. That is not always the case. I get dozens of phone calls from potential home buyers who have rigorously and diligently re-established their credit and have waited three years and contact me to get pre-approved. Many times I give them the bad news that the deed in the deed in lieu of foreclosure they included in their bankruptcy has not transferred into the lender’s name. Three years later, they still have the deed in their names. Unfortunately, to these folks the 3 year waiting period did not even started.
How can I get the mortgage lender to transfer the deed out of my name into the mortgage lender’s name
If you included the deed in lieu of foreclosure in your bankruptcy, technically you own the house free and clear with no mortgage or lien on the home. If the mortgage lender will not transfer the deed from your name to theirs, one quick way to get their attention is to list the house and sell it. Technically, the bank does not want the house because they do not want to transfer it to their name and the only option for you is to sell the home. No mortgage. You sell, you keep all the proceeds. When you tell the bank of your intentions, I will guarantee you that the deed will be transferred into their name and recorded in a matter of hours.
2015 Update With Qualifying For Home Loan After Deed In Lieu Of Foreclosure And Short Sale
The 2 year waiting period after deed in lieu of foreclosure and short sale to qualify for a conventional loan with a 20% down payment is no longer in effect as of last August 2014. Fannie Mae and Freddie Mac now changed the waiting period to qualify for a conventional loan after a deed in lieu of foreclosure and short sale to a 4 year waiting period with 5% down payment. Another new positive conventional loan guideline that Fannie Mae implemented in 2014 is that if you have a mortgage part of bankruptcy, the waiting period starts from the discharge date of the bankruptcy and not the recorded date of the foreclosure. This will open up many doors for home buyers who had mortgage part of bankruptcy but the foreclosure did not recorded at a later date. The mortgage part of bankruptcy lending guidelines only applies to Conventional Loans and not FHA Loans.