Fannie Mae Waiting Period After Housing Event

Fannie Mae Waiting Period After Housing Event And Bankruptcy

ByGustan Cho

This BLOG On  Fannie Mae Waiting Period After Housing Event And Bankruptcy Was UPDATED On May 4th, 2019

Home buyers or homeowners who had a prior deed in lieu of foreclosure or short sale used to be able to qualify for conventional loans after deed in lieu of foreclosure or short sale after two years. The waiting period clock started from the recorded date of the deed in lieu of foreclosure or from the short sale date reflected on the HUD settlement statement. This old Fannie Mae Waiting Period After Housing Event after two years was good as long as buyers had a 20% down payment for a home purchase or at least 80% loan to value on a conventional refinance mortgage loan.  Those Fannie Mae Guidelines has since changed. The two year waiting period to qualify for a conventional loan with a 20% down payment on a home purchase or 80% loan to value on a conventional refinance mortgage is no longer in effect.  Fannie Mae Waiting Period After Housing Event after deed in lieu and/or short sale is now four years. It is seven years after a standard foreclosure.

Fannie Mae Waiting Period After Housing Event (deed in lieu and short sale) on the two year waiting period after a deed in lieu of foreclosure and/or short sale increased from two year waiting period to four years effective August 15, 2014.

Fannie Mae Waiting Period After Housing Event For Conventional Loans Is 4 Years After Deed In Lieu Of And Short Sale

Fannie Mae Waiting Period After Housing Event to qualify for conforming loans after 4 years only applies to those who had a deed in lieu of foreclosure, short sale, and bankruptcy.  To qualify for a conventional loan after a bankruptcy was always four years from the discharge date of Chapter 7 bankruptcy and remains the same.  For those who had a prior standard foreclosure, the waiting period is 7 years from the recorded date of the foreclosure.

Down Payment Requirement With Fannie Mae Waiting Period After Housing Event

The great news with the extended waiting period after deed in lieu of foreclosure and/or short sale to 4 years to qualify for a conventional loan is that the home buyer no longer needs to come up with a 20% down payment.  Home buyers who had a prior bankruptcy, deed in lieu of foreclosure, or short sale can now purchase a home with as little as 5% down payment.  The 20% down payment requirement is no longer in effect.

Fannie Mae Guidelines With Mortgage Included In Bankruptcy

Great news for homeowners who had mortgage included in Chapter 7 bankruptcy.

  • New Fannie Mae Guidelines now state that if borrower had mortgage included in Chapter 7 bankruptcy, the waiting period will start from the discharge date of Chapter 7 bankruptcy and not the recorded date of housing event
  • Currently, if borrower has mortgage included in Chapter 7 bankruptcy, the housing waiting period does not start until the housing event has been finalized
  • This means that the deed needs to be transferred out of homeowners name and into the name of the mortgage lender or new home buyer
  • There are thousands of cases where homeowners included their mortgages as part of Chapter bankruptcy many many years ago and the waiting period after the foreclosure did not even start yet
  • This is because the mortgage lenders would not transfer the deed out of the homeowners name into the lenders name
  • With the new Fannie Mae Guidelines with regards to mortgage included part of bankruptcy, it will open doors to tens of thousands of home buyers qualify for a conventional loan
  • However, the mortgage cannot have been reaffirmed and the housing event needs to have been finalized
  • There is a two year waiting period to qualify for conventional loans after Chapter 13 Bankruptcy discharged date
  • There is a four year waiting period to qualify for conventional loans after Chapter 13 dismissal date

How Do I Qualify For Conventional Loan After 4 Year Waiting Period?

Just passing the 4 year after a deed in lieu of foreclosure, short sale, or bankruptcy does not automatically guarantee borrowers a conventional mortgage loan approval.  Conventional mortgage lenders will carefully review each mortgage applicant’s credit and income profile.  Lenders will not want to see any late payment history after a deed in lieu of foreclosure, short sale, or bankruptcy.  Lenders want to see established credit or re-established credit.  Strong compensating factors are required such as reserves, larger down payment, rental verification, and lower debt to income ratios.

 

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