A mortgage after bankruptcy or foreclosure.
A bankruptcy, foreclosure, short sale, deed in lieu or loan modification in the past does not rule out a home loan. Some programs lend as little as a year or two after the event, with a larger down payment, and the longer ago it was, the closer the terms get to a standard loan. Here is how it works.
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- Several programs, different waitsWe compare programs to find the one whose waiting period fits your dates.
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How a home loan works after a credit event
A bankruptcy, foreclosure, short sale, deed in lieu or loan modification in the past does not rule out a home loan. Conventional and government programs set long waiting periods after an event. The programs on this page shorten the wait, in exchange for a larger down payment, a smaller maximum loan and, at some, more savings after closing.
You still show that you can repay the loan: income is documented with tax returns or a written verification of employment, or for the self-employed with bank statements, 1099s or a profit and loss statement. A short written explanation of the event and proof that it was resolved are part of the file, and re-established credit since the event is expected.
The longer ago the event, the smaller the required down payment and the larger the loan available. After about two years many programs offer their full terms. These loans are not sold to Fannie Mae or Freddie Mac, so each program sets its own rules.
Who it suits
- Buyers with a past bankruptcy, foreclosure, short sale, deed in lieu or loan modification who have steady income now
- Homeowners with late mortgage payments in the last year, accepted by some programs with a larger down payment
- Borrowers with lower credit scores, accepted with a larger down payment
- First-time buyers and people who have been renting, eligible at several programs
This page describes loan programs. It is not advice about bankruptcy, debt or credit repair; for those, talk to a qualified professional.
A mortgage after a credit event, at a glance
- What it is: a home loan program with a shorter waiting period after a bankruptcy, foreclosure, short sale, deed in lieu or loan modification, with the income, credit, assets and home fully verified.
- How long after the event: as little as a year or two at some programs, and after about two years many programs offer their full terms; the wait depends on the kind of event and the program.
- What it costs you: a larger down payment and a smaller maximum loan the closer the event is, and savings after closing at most programs.
- What you need: income documents, a short letter explaining the event, the papers that show it was resolved, and credit re-established since.
- Not: a promise. Each program sets its own rules, and an underwriter’s review of your file decides.
Waiting periods after a bankruptcy or foreclosure
Waiting periods run from the day the event was settled or discharged, and they differ by program. In words, this is the range we see.
| The event | The earliest some programs lend | Terms close to a standard loan |
|---|---|---|
| Bankruptcy, chapter 7 or chapter 13 | Some programs lend as soon as the bankruptcy is discharged, on a main home, with a larger down payment and no cash out. Others lend a year after the discharge. | About two years after the discharge, many programs offer their full terms. |
| Foreclosure | Some programs lend as soon as the foreclosure sale is settled, on a main home, with a larger down payment and no cash out. Others lend a year after it. | About two years after the sale, many programs offer their full terms. |
| Short sale or deed in lieu | One program needs no waiting period at all, with a larger down payment. Others lend a year after the sale. | About two years after the sale, many programs offer their full terms. |
| Loan modification | One program needs no waiting period at all, with a larger down payment. Others lend a year after the modification. | About two years after the modification, many programs offer their full terms. |
| Late mortgage payments in the last year | Accepted by some programs, with a larger down payment. The more recent and the more serious the lates, the fewer the programs. | A year of on-time payments opens most programs. |
A second home or a rental property can be financed after a credit event at some programs, usually after a longer wait than for a main home. The shortest waiting periods are for a home you will live in, and they do not allow cash out.
What the programs look at
Each program has its own rules. These are the ones they share, in words; a loan officer can tell you which program fits you.
- The event itself: a short written explanation and proof that it was resolved: the discharge papers, the settlement statement or deed, or the modification agreement with the payments made since.
- Credit since the event: re-established credit is expected, and lower credit scores are accepted with a larger down payment.
- Housing payments: late mortgage payments in the last year are accepted by some programs, with a larger down payment.
- Income: tax returns or a written verification of employment, or for the self-employed bank statements, 1099s or a profit and loss statement.
- Savings after closing: reserves are required at most programs; one asks for none at lower financing.
- First purchases: first-time buyers and buyers who have been renting are eligible at several programs.
- What usually makes a loan ineligible: more than one credit event, an active notice of default, or a debt-management plan that is still running.
The steps to a loan after a credit event
Tell us the dates
What the event was, when it was discharged or settled, and what has happened with your credit and housing payments since. The dates decide which programs are open.
Apply and document
Income documents, statements for the down payment, closing costs and savings after closing, and the papers for the event with your short written explanation.
The program is matched
A loan officer compares the programs whose waiting period fits your dates and explains the down payment and reserves each one asks for.
Appraisal, underwriting and closing
The home is appraised, an underwriter reviews the file against the program’s rules, and you review your closing disclosure and sign.
What to prepare
Each program has its own list. Most borrowers can start with these.
- A short letter explaining the event, in your own words
- The papers that show it was resolved: the bankruptcy discharge, the trustee’s payment history for a chapter 13, the settlement statement or deed, or the modification agreement
- Your housing payment history for the last year: mortgage statements, cancelled checks or a verification of rent
- Income documents: tax returns or a written verification of employment, or for the self-employed bank statements, 1099s or a profit and loss statement
- Bank statements for the down payment, closing costs and savings after closing, and a gift letter if family is helping
- Photo identification for each borrower
Common questions about a mortgage after a credit event
How soon after a bankruptcy can I get a mortgage?
It depends on the program. Some lend as soon as the bankruptcy is discharged, on a main home, with a larger down payment and no cash out; others lend a year after the discharge; and about two years after it many programs offer their full terms. A loan officer can tell you which programs your dates open.
How soon after a foreclosure?
The same pattern. Some programs lend as soon as the foreclosure sale is settled, on a main home, with a larger down payment and no cash out; others a year after; and after about two years many programs offer their full terms.
Does a short sale, deed in lieu or loan modification count as a foreclosure?
Programs treat them as credit events of their own, with their own waiting periods. After a short sale, deed in lieu or loan modification, one program needs no waiting period at all, with a larger down payment; most ask for a year or two.
I have late mortgage payments in the last year. Is a loan still possible?
Some programs accept late mortgage payments in the last year, with a larger down payment. The more recent and the more serious the lates, the fewer the programs. Tell your loan officer the dates.
Does the waiting period change what I pay?
Yes. The closer the event, the larger the down payment and the smaller the maximum loan. The longer ago the event, the closer the terms get to a standard loan, and after about two years many programs offer their full terms.
What credit score do I need?
Lower credit scores are accepted with a larger down payment. Credit re-established since the event is expected, and your housing payments since the event matter as much as the score.
How is my income documented?
With tax returns or a written verification of employment, or for the self-employed with bank statements, 1099s or a profit and loss statement, within each program’s list.
Can I buy a second home or a rental property after a credit event?
At some programs, usually after a longer wait than for a main home. The shortest waiting periods are for a home you will live in.
What makes a loan ineligible?
More than one credit event, an active notice of default, or a debt-management plan that is still running usually make a loan ineligible. A loan officer can tell you where you stand.
Do you lend in my state?
Fidelity Residential is licensed in many states. The full, current list is on NMLS Consumer Access (opens in a new tab), or call us at 732-686-9999.
Ready to find out where you stand?
Get a quote, apply online, or talk it through with a licensed loan officer.
This page is general information, not a commitment to lend. Programs, terms and eligibility depend on credit, income, property and underwriting review and are subject to change without notice.
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