What is a Default?

A default is when a person is unable to honor the terms of a payment contract they agreed on. Because the credit bureaus and mortgage lenders see that as an indicator of one’s creditworthiness, things such as a foreclosure, bankruptcy, short sale, or deed in lieu of foreclosure have waiting periods set before a borrower who has defaulted on an obligation can qualify for a home loan.

However, knowing the different waiting periods and programs is vital. Though a larger bank may not accept an application due to their own restrictions for a foreclosure, bankruptcy, short sale, or deed in lieu of foreclosure, a private lender like us (who follow the guideline requirements directly) may still be able to help you!

We can get some buyers financing in as little as 1-day after credit issues depending on the issue!

Waiting Periods:

Different programs have different waiting periods based on the type of default. Whether it was a foreclosure, bankruptcy, short sale, or deed in lieu of foreclosure, along with the program you’re trying to apply for, will all determine how long you have to wait after a default.

Conventional Loans

A conventional loan through Fannie May and Freddy Mac has a waiting period of 7  years after a foreclosure. However, if that foreclosure was part of a Chapter 7 bankruptcy, the waiting period is reduced to only 4 years after the discharge date. It is only 2 years after the discharge date if it was a Chapter 13 bankruptcy!

Additionally, the waiting period for conventional financing after a short sale or deed in lieu of a foreclosure is 4 years.

Low Credit FHA Loans

The waiting period for a foreclosure, short sale, or deed in lieu of foreclosure is 3 years for an FHA loan. The waiting period for a Chapter 7 bankruptcy is 2 years if it did not include a mortgage, and 3 years if it did include a mortgage. The waiting period for a Chapter 13 bankruptcy is only 1 year!

The FHA does, however, allow for certain exceptions to these waiting periods if someone experienced extreme hardship.

To find out more, visit the FHA website by clicking here.

Low Credit VA Loans

The waiting period after a foreclosure for a VA loan is 2 years. The waiting period after a Chapter 7 or 13 for new VA financing is 2 years. However, VA does not have a mandatory waiting period after a short sale!

You can learn more about VA loans by clicking here.

Give us a call at 813-229-0700 to see if we can help you today! Don’t let a credit issue stop you from financing a place to call home.