Certain derogatory credit events are deemed more serious, and specific guidelines exist to determine a borrower's eligibility to obtain mortgage financing after such an event. Specifically, Bankruptcy, Foreclosure, and Charge-off of mortgage account, Short Sale, Deed-in-Lieu of Foreclosure will be addressed here.
After filing for bankruptcy or experiencing a foreclosure, short sale, etc, there are waiting periods that must be observed before you can be eligible for conventional or FHA real estate financing.
It’s important to note that these waiting periods are mandatory and cannot be waived. However, there are some extenuating circumstances that can shorten the waiting period. For example, if you experienced a significant adverse event such as job loss or medical debt, lenders may be willing to consider your situation and reduce the waiting period. These are referred to as Extenuating Circumstances. To prove extenuating circumstances, significant documentation must be provided proving without doubt that those circumstances were entirely responsible for the derogatory event.
Here is a guide to Fannie Mae and Freddie Mac guidelines on the waiting periods following major derogatory credit events:
Including other financing avenues in addition to conventional sources:
Navigating the waters following a major credit event requires individual attention and extensive documentation. If you’re considering applying for a mortgage after bankruptcy or foreclosure, it’s important to consult with a financial advisor to determine the best course of action. We can help you understand your options and guide you through the process.
