Obtaining Mortgage with Foreclosure

I filed bankruptcy where the mortgage debt was discharged 3 years ago but the bank has still not foreclosed on the property. I have worked hard to rebuild my credit and have been timely on all debts. Am I likely to ever qualify for a mortgage.

2 Answers

Typically a buyer must wait up to 2 years after a Chapter 7 or 13 bankruptcy is discharged before being able to qualify for a loan. Though there are loans out there that require less time, the loan terms (i.e. interest rate) could make the loan cost much more over the long term.

Once the 2 years has passed, the borrower will want to make sure that their credit score will not hold them back from being able to qualify for a loan. To qualify for a traditional loan, they are going to need a minimum credit score in the 620 - 640 range though most require 680. FHA loan approval requires a credit score of 580 though they have programs for scores above 500 though the terms are not very attractive.

To get a loan after bankruptcy, the borrower must make sure that the bankruptcy has been discharged.

Sure, you can get a loan again after a bankruptcy... But there are some automatic waiting times required, depending on the loan type you are applying for. The earliest is two years after the bankruptcy for programs like FHA, and 4-years after the bankruptcy for standard conventional loans like Fannie Mae and Freddie Mac back loans.

Next is the foreclosure... Again there are automatic waiting time, which depends on the new loan type. A major issue is that while the bankruptcy dismissed you ever owing anything on the house if you walk away from it, the lender still needs to do an actual foreclosure. Your waiting period for the foreclosure in your case hasn't even started yet because they haven't foreclosed.

This has been a major issue for many people. Just recently, new guidelines came out for Fannie Mae loans that will allow lenders to use the bankruptcy discharge date as also the foreclosure date in situation like yours where the bank still has not officially foreclosed on the home. For Fannie Mae loans, the minimum waiting period after a bankruptcy is 4-years.

In your case, sounds like you need to wait one more year. While you wait, make sure you have good re-established credit with no new blemishes, and you should be fine after 4-years.

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