Buying again after a bankruptcy, foreclosure, or short sale

Most people who call me about buying again already have a number in mind. They have read that FHA is three years or that conventional is seven, and they are counting from the day they stopped paying, moved out, filed bankruptcy, or handed over the keys.

The number matters. The event and the dates matter more.

A bankruptcy, foreclosure, deed-in-lieu, and short sale do not start the same clock. FHA, VA, and conventional underwriting also do not test the end of that clock at exactly the same point. Using the wrong date can make you appear ineligible when you are not, or make you plan around an eligibility date that has not arrived.

The new loan program determines when the waiting period is tested.

FHA applies these tests at case number assignment. That usually happens after a lender has a property and enough information to begin the FHA file. It is not the application date and it is not the closing date.

VA generally measures the relevant period to the date of closing for the new purchase or refinance.

Fannie Mae conventional uses the disbursement date for a manually underwritten loan. Desktop Underwriter, or DU, does not receive the new loan's future disbursement date, so DU uses the credit report date when it evaluates the waiting period. Fannie permits the lender to use the actual disbursement date to confirm that the requirement will be met.

If you are close to a threshold, ask the lender which program and underwriting system will be used and which date must satisfy the rule.

The start date depends on what happened:

FHA may provide a shorter path than Fannie Mae for several of these events, but meeting the calendar is only one part of eligibility.

Chapter 7 bankruptcy

A Chapter 7 bankruptcy does not disqualify a borrower when at least two years have elapsed since the discharge date as of FHA case number assignment. During that period, HUD requires the borrower to have re-established good credit or chosen not to incur new credit obligations.

FHA can consider a period shorter than two years, but not shorter than 12 months, when the bankruptcy resulted from documented circumstances beyond the borrower's control and the borrower has since demonstrated responsible financial management. That is an exception, not an automatic one-year program.

A file inside the usual automated-underwriting lookback can also require a manual underwriting review or downgrade under FHA's TOTAL Mortgage Scorecard rules. The lender must confirm the current treatment before a borrower relies on an exception.

Chapter 13 bankruptcy

A borrower does not always have to wait for a Chapter 13 discharge. FHA permits consideration after at least 12 months of the payout period have elapsed, all required payments during that period were made on time, and the borrower has written permission from the bankruptcy court to enter into the mortgage transaction.

Court permission is a real step, not a closing-day formality.

Foreclosure and deed-in-lieu

FHA generally requires three years before case number assignment following a foreclosure or deed-in-lieu. HUD says the period begins on the date of the deed-in-lieu or the date the borrower transferred ownership to the foreclosing entity or its designee.

FHA allows a documented extenuating-circumstances exception in some cases. Serious illness or the death of a wage earner are examples in the handbook. The inability to sell a property because of a job transfer or relocation does not qualify.

Short sale

FHA generally uses a three-year period beginning on the date title transferred through the short sale.

There is an important exception. A borrower can be considered eligible without that waiting period when, for the 12 months before the short sale, all payments on the prior mortgage and all installment debts were made within the month due. The payment history has to satisfy the actual rule; the existence of a short sale by itself does not establish the exception.

For the broader program requirements, see FHA loans in Florida.

VA's handbook uses credit-risk guidance rather than presenting every event as a simple hard bar. Lender judgment and the complete credit history matter.

Chapter 7 bankruptcy

If a Chapter 7 bankruptcy was discharged more than two years before closing, the VA handbook says it may be disregarded.

When the discharge was one to two years before closing, the handbook says a satisfactory credit-risk conclusion is probably not possible unless both of these conditions are met:

When the discharge was within the previous 12 months, the handbook says a satisfactory conclusion generally will not be possible.

Chapter 13 bankruptcy

After all Chapter 13 payments have been completed satisfactorily, a lender may conclude that satisfactory credit has been re-established. While the plan is still in progress, favorable consideration may be possible after at least 12 months of satisfactory payments when the trustee or bankruptcy judge approves the new credit.

Foreclosure, deed-in-lieu, and short sale

A foreclosure finalized more than two years before closing may be disregarded under the VA handbook. A foreclosure finalized one to two years before closing requires the same two-part analysis used for a recent Chapter 7.

For a deed-in-lieu or short sale, the handbook says a waiting period from transfer may not be necessary when the prior payment history was not affected and the borrower voluntarily communicated with the servicer or holder.

If a foreclosure, deed-in-lieu, or short sale occurred with a bankruptcy, VA uses the later of the bankruptcy discharge date or the property's title-transfer date to establish the beginning of re-established credit.

If the loss involved a VA-guaranteed loan, timing is only half the analysis. The borrower may not have full entitlement available for the next VA loan, which can affect the structure and possible down payment.

See can I get a VA loan after bankruptcy for the short version, or VA loans in Florida for the broader program.

The table below is Fannie Mae's framework. It should not be presented as the rule for every conventional loan or every investor.

The three-to-seven-year foreclosure exception has conditions. Fannie Mae limits the LTV, CLTV, or HCLTV to the lesser of 90 percent or the maximum otherwise allowed for the transaction. A principal-residence purchase is permitted, and limited cash-out refinances are permitted for all occupancy types under the applicable requirements. A second-home or investment-property purchase and any cash-out refinance are not permitted until the full seven-year period has elapsed.

When a foreclosure followed a bankruptcy

If a mortgage debt was discharged through bankruptcy, Fannie Mae allows the bankruptcy waiting period to be used when the lender obtains appropriate documentation verifying that the mortgage obligation was discharged in the bankruptcy. Otherwise, the lender must apply the greater of the applicable bankruptcy or foreclosure waiting periods.

That can be a material difference. A Chapter 7 may have been discharged years before a later foreclosure sale completed. Bankruptcy schedules, the discharge order, the credit report, and other case records may help establish what happened, but no single document automatically decides the result. The lender must determine that the mortgage obligation was discharged and document the applicable event dates.

For a focused answer, see can I get a conventional loan after bankruptcy. For the larger program, see conventional loans in Florida.

What about Freddie Mac?

Freddie Mac has its own Guide. Section 5202.1 establishes separate recovery-period rules for manually underwritten mortgages and distinguishes between extenuating circumstances and financial mismanagement.

The practical point is simple: do not assume the Fannie Mae table is universal because a loan is called conventional. Ask whether the file is being evaluated under Fannie Mae, Freddie Mac, or another investor's rules and whether automated or manual underwriting applies.

Fannie Mae defines extenuating circumstances as nonrecurring events beyond the borrower's control that caused a sudden, significant, and prolonged reduction in income or a catastrophic increase in financial obligations.

The lender must obtain documents that confirm the event, documents that show what prevented the borrower from resolving the problem, and a written explanation supporting the claim. That explanation must show that the borrower had no reasonable option other than default.

Divorce does not automatically qualify

Fannie Mae lists a divorce decree as one example of documentation a lender may obtain. That does not mean divorce automatically qualifies as an extenuating circumstance. The event must still meet the definition, and the documentation must still support why default was the only reasonable option.

FHA states that divorce is not considered an extenuating circumstance, then provides a narrow exception when the mortgage was current at the time of divorce, the ex-spouse received the property, and the property was later foreclosed or sold short. VA says divorce is not generally viewed as beyond the control of the borrower or spouse.

The word “divorce” on a timeline is therefore not enough for any of the three analyses. The facts, payment history, property transfer, and program-specific documents decide whether an exception is even available.

Florida is a judicial foreclosure state. Section 702.01 of the Florida Statutes requires mortgages to be foreclosed in equity. In a completed judicial foreclosure sale, section 45.031 provides that title passes when the clerk files the certificate of title.

That makes the filed certificate of title a key document for a completed Florida judicial foreclosure. It is not the start date for a bankruptcy, and it ordinarily is not the document that completes a short sale.

Use the document that matches the event:

Do not count from the day payments stopped, the complaint was filed, the borrower moved out, or the keys changed hands unless the governing program specifically uses that date. Retrieve the records first.

The following is an illustration, not a client file.

A couple in Orange County stops making mortgage payments in early 2021 during unemployment. The lender files a foreclosure action later that year. The case is contested, the sale occurs in 2023, and the clerk files the certificate of title in July 2023.

For a completed judicial foreclosure, July 2023 is the date to test first against the foreclosure rules. Under the general FHA rule, three years would need to elapse before FHA case number assignment, putting that point in July 2026. Under Fannie Mae's standard foreclosure rule, seven years would run to July 2030, subject to the exact completion evidence, underwriting method, and any properly documented exception.

Now add a Chapter 7 discharge in 2022 that included the mortgage debt. If the lender obtains appropriate documentation verifying that the mortgage obligation was discharged, Fannie Mae may apply the bankruptcy waiting period instead of the foreclosure period. If the lender cannot verify that treatment, Fannie requires the greater applicable period.

The foreclosure date did not become the bankruptcy date. They remain two separate events, and the documentation determines which rule applies.

Work in this order:

Sometimes waiting is the better financial decision. That is professional judgment, not a program rule.

Reaching a date on the calendar does not repair every credit issue or make every lender comfortable with the file. An exception that cannot be documented is not a reliable purchase plan. A higher-cost alternative should be compared with the cost and practicality of waiting, not chosen solely because it is available sooner.

The right comparison includes the expected time in the loan, total borrowing costs, housing needs, credit recovery, and the likelihood that the required documents will support the proposed program. It should not begin with an assumption that buying immediately is always better.