Mortgage Guidelines on Foreclosure and Bankruptcy

This blog on mortgage guidelines on foreclosure and bankruptcy was updated on January 3rd, 2025.

• If a mortgage loan borrower had a prior bankruptcy, there is a 2-year waiting period from the date of the bankruptcy discharge before a home buyer has to wait to qualify for FHA and VA Loans

If you have foreclosure but not bankruptcy, the following applies:

• there is a mandatory 3-year waiting period from the date of the sheriff’s sale
• or the date the deed of your house was transferred out of your name before a home buyer can qualify for FHA and USDA Loans
• The 3-year waiting period also applies for short sales and a deed in lieu of foreclosure as well

In this article, we will cover and discuss mortgage guidelines on foreclosure and bankruptcy.

Having a Foreclosure and Bankruptcy in Mortgage Qualification

What if you had a foreclosure and bankruptcy at the same time?

• If you had a foreclosure and bankruptcy at the same time and your foreclosure was part of personal bankruptcy, the 3-year waiting period will apply
• Unfortunately, I get many calls from potential home buyers who think they are able to qualify for a home loan who had a foreclosure and bankruptcy 2 years prior
• Unfortunately, these potential homeowners get the bad news that they need to wait an extra year

Gustan Cho Associates NMLS 873293 offers non-QM loans. There are no waiting period requirements after bankruptcy and/or foreclosure with non-QM loans.

Home Loan After Foreclosure and Bankruptcy in Mortgage Qualification

Gustan Cho Associates specializes in helping borrowers with prior bad credit. We also help borrowers with high debt-to-income ratios. There is nothing anyone can do to exempt waiting period guidelines on government and/or conventional loans. However, Gustan Cho Associates Mortgage Group can help home buyers qualify for mortgages with no waiting period after bankruptcy and/or foreclosure with our non-QM loans.

• Borrowers with open collections, unsatisfied judgments, credit scores as low as 500, short-term on the job, or are self-employed can qualify for home loans
• However, under FHA Mortgage Guidelines On Foreclosure And Bankruptcy borrowers who has a foreclosure and/or bankruptcy at the same time, there is a three-year waiting period after the recorded date of the foreclosure to qualify for FHA Loans
• Under Fannie Mae and Freddie Mac Mortgage Guidelines On Foreclosure And Bankruptcy, borrowers with mortgage part of Chapter 7 bankruptcy can qualify for conventional loans four years from the discharged date of Chapter 7

The foreclosure can be recorded after the discharged date of Chapter 7 bankruptcy.

Rebuilding Credit After Foreclosure And Bankruptcy In Mortgage Qualification

Mortgage Guidelines On Foreclosure And Bankruptcy on government and conventional loans have a mandatory waiting period. However, with NON-QM Loans, there are no waiting periods to qualify for a mortgage after bankruptcy and/or foreclosure. There are no maximum loan limits with non-QM loans. There is no private mortgage insurance required. Down payment requirements are 5% to 20%. The amount of the down payment depends on the borrower’s credit scores. Mortgage rates depend on down payment and credit scores. Gustan Cho Associates has 5% down payment NON-QM Jumbo Loans with no mortgage insurance requirement.

• Even though mortgage applicants have waiting period requirements on government loans, they should consult with a loan officer if they qualify for non-QM loans
• Loan officers can advise borrowers on how to rebuild credit and some will assist and advise on how to improve credit scores

Frequently Asked Questions (FAQs) on Mortgage Guidelines on Foreclosure and Bankruptcy

1. Can I qualify for a mortgage after foreclosure?

Yes, but most loan programs require a waiting period of 2–7 years, depending on the loan type and circumstances.

2. How long is the waiting period after foreclosure for FHA loans?

FHA loans typically require a 3-year waiting period from the foreclosure completion date.

3. Can I get a mortgage after bankruptcy?

Yes, depending on loan type and whether the bankruptcy was Chapter 7 or Chapter 13, you can qualify after a waiting period.

4. What is the waiting period for a conventional loan after foreclosure?

A conventional loan usually requires a 7-year waiting period after foreclosure, which can be reduced to 3 years with extenuating circumstances.

5. What are the guidelines for FHA loans after Chapter 7 bankruptcy?

FHA loans require a 2-year waiting period from the bankruptcy discharge date, provided the borrower has re-established good credit.

6. How soon can I get a VA loan after bankruptcy or foreclosure?

VA loans generally require a 2-year waiting period after bankruptcy or foreclosure, with certain exceptions for extenuating circumstances.

7. Does Chapter 13 bankruptcy affect mortgage eligibility?

Yes, but FHA and VA loans allow borrowers to qualify in Chapter 13, provided they have made on-time payments for at least 12 months with court approval.

8. Are there exceptions for extenuating circumstances?

Many programs reduce waiting periods if the foreclosure or bankruptcy was caused by factors beyond your control, such as a medical crisis or job loss.

9. Can I qualify for a non-QM loan after bankruptcy or foreclosure?

Yes, non-QM loans often have no waiting periods, focusing instead on recent financial stability and alternative documentation.

10. How does foreclosure or bankruptcy impact credit scores?

Both can significantly lower your credit score by 100-200 points. Still, scores can recover with consistent, on-time payments over time.

Borrowers who need more information on Mortgage Guidelines on Foreclosure and Bankruptcy or need to qualify for a mortgage, please contact us at 1-800-900-8569 or text us for a faster response. Or email us at gcho@gustancho.com. We are available 7 days a week, evenings, weekends, and holidays.