Buy After Bankruptcy, Foreclosure or Short Sale

This is the year to come back! Buy after Bankruptcy, Short Sale or Foreclosure. It's possible!

New regulations are in place to return entitlement to buyers who want to move their families back to homes they qualify for. While these rulings in place can be informational, they are still changing. Each case is unique, contact Tony Leocadio (714) 673-7363 for all your specific questions and needs. Find out of you qualify for a mortage loan.




VA Conventional
Chapter 7 2 years           3 years          4 years
Chapter 13 2 years 2 years 2-4 years
Foreclosure 3 years 2 years 3 years
Short/Sale                3 years 2 years 2-3 years







At least two years must have elapsed since the discharge date of the borrower and / or spouse's Chapter 7 Bankruptcy, according to FHA guidelines. This is not to be confused with the bankruptcy filing date. A full explanation will be required with the loan application. In order to qualify for an FHA loan, the borrower must qualify financially, have re-established good credit, and have a stable job.


FHA will consider appoving a borrower who is still paying on a Chapter 13 Bankruptcy if those payments have been satisfactorily made and verified for a period of one year. The court trustee's written approval will also be needed in order to proceed with the loan. The borrower will have to give a full explanation of the bankruptcy with the loan application and must also have re-established good credit, qualify financially and have good job stability.


FHA insured mortgages are generally not available to borrowers whose property was foreclosed on or given a deed-in-lieu of foreclosure within the previous three years. However, if the foreclosure of the borrower's main residence was the result of extenuating circumstances, an exception may be granted if they have since established good credit. This does not include the inability to sell a home when transferring from one area to another.

Short Sale

You may not have to wait to apply for a FHA-insured mortgage loan following the short sale if you were not in default on the prior mortgage at the time of the short sale, and you made all of your old mortgage and other installment debt payments on time for at least 12 months leading up to the short sale.

If you were in default on the old mortgage loan at the time of the short sale, then you must wait at least three years before applying for another FHA loan. The three-year waiting period starts to run from the date of the short sale, or if the prior mortgage was also an FHA-insured loan, from the date that FHA paid the claim on the short sale.

You may be able to qualify sooner than three years if you can show that extenuating circumstances caused the mortgage default. Extenuating circumstances might include serious illness or death in the family, usually involving a primary wage earner, divorce (in limited situations), or job loss.




Chapter 7

VA loan qualification guidelines for individuals with a bankruptcy vary depending on a Chapter 7 or Chapter 13 bankruptcy. With a Chapter 7, the VA requires that an individual must wait no less than two years from the discharge date of the bankruptcy before qualifying for loan approval. Additionally, the individual must provide a full explanation of the Chapter 7 bankruptcy and have re-established good credit. Proof of job stability will also be necessary for approval.

Chapter 13

With a Chapter 13 bankruptcy, the guidelines vary slightly. An individual may still receive approval for a VA loan even while still paying on their Chapter 13 bankruptcy. The borrower simply must have made their payments on time for at least one year. In order to verify this, the court trustee must give written approval before the loan can be approved. Like the Chapter 7 bankruptcy, a full explanation of the bankruptcy is required in addition to re-establishing good credit and proving job stability.

While individuals with a history of bankruptcy are not prime candidates for VA loan approval, they can still prove their capability to repay their VA loan and gain approval. It is important for individuals who qualify for VA loans through their VA benefits take the necessary steps to be able to take full advantage of these benefits to which they are entitled.


If the foreclosure involved a VA loan, then not only must the borrower wait two years and repair credit before reapplying, but entitlement is affected as well. In order for a VA borrower to have full entitlement restored after foreclosure, he or she must repay the loss (the guarantied amount) suffered by the VA as a result of the foreclosure before being considered for another VA mortgage. If the entire amount of the loss is repaid, then the VA borrower may have full entitlement restored.   

After the two-year period following foreclosure, a VA borrower may apply for a VA loan. However, if the loss from the previous VA loan foreclosure has not been repaid, then there may not be enough entitlement remaining to reap all the benefits the Program has to offer. In this situation the remaining entitlement may or may not be sufficient for a VA loan with zero money down.

Short Sale

The waiting period to obtain a VA loan after a short sale is typically 2 years. If you have late payments prior to the short sale, most banks will expect you to wait 2 years and have no late payments on your credit cards in the last 12 months prior to applying for a VA loan.

However there are cases where veterans can get another VA loan within a year after a short sale. Veterans who have paid their mortgage for the 12 months prior to the short sale and have a 660 or higher credit score may be eligible for a VA loan immediately following a short sale if the short sale is recorded as being paid in full on the credit report.


Chapter 7

After a four-year wait period after your bankruptcy, you can apply for a Conventional, Fannie Mae loan. Credit should be re-established to 680 or higher and have 12 months record on-time payments.

Chapter 13

With re-established credit you may apply for a Conventional, Fannie Mae loan after your bankruptcy has been discharged for two years. If your Chapter 13 case was dismissed without a discharge, you must wait four years from the date of the dismissal.


You must wait seven years from the completion of the foreclosure. This lowers to three years if you accept a 10 percent down payment and can prove extenuating circumstance. Extenuating circumstances are similar to with a VA loan, but everything is considered on a case-by-case basis. This is often at the discretion of the individual lender.

Short Sale

  • TWO (2) Years up to Maximum 80% Loan to Value | 20% Down Payment
  • FOUR (4) Years up to Maximum 90% Loan to Value | 10% Down Payment – Subject to Private Mortgage Insurance underwriting guidelines.
  • SEVEN (7) Years above 90% Loan to Value | with less than 10% Down Payment – Subject to Private Mortgage Insurance underwriting guidelines.




Based on information from California Regional Multiple Listing Service, Inc. as of July 27th, 2017 at 3:30pm PDT. This information is for your personal, non-commercial use and may not be used for any purpose other than to identify prospective properties you may be interested in purchasing. Display of MLS data is usually deemed reliable but is NOT guaranteed accurate by the MLS. Buyers are responsible for verifying the accuracy of all information and should investigate the data themselves or retain appropriate professionals. Information from sources other than the Listing Agent may have been included in the MLS data. Unless otherwise specified in writing, Broker/Agent has not and will not verify any information obtained from other sources. The Broker/Agent providing the information contained herein may or may not have been the Listing and/or Selling Agent.