First Time Home Buyers Network

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Buy a home after bankruptcy

Buy a home after bankruptcy

Many first time home buyers are wondering if they can buy a home after bankruptcy, foreclosure or short sale. Even if you are a previous homeowner there is hope for you

Many are now wondering if owning their first home is in the future.

Having one of these events doesn’t have to be a “life sentence” away from homeownership, but you do have to know how lenders will review your loan application when the time is right for you.

Related: Did you know you have 49 credit scores

What is a Significant Derogatory Credit Event?

While many things can cause your credit to suffer a major hit. The 5 most significant events that lenders consider are:

Foreclosure – Home was given back to the bank – no owner participation

Short Sale – Home sold but sales price less than amount owed

Deed in Lieu of Foreclosure – Home returned to lender in exchange for canceling loan

Bankruptcy Chapter 7 – Debts are discharged, with no payments

Bankruptcy Chapter 13 – Debts are paid back on a monthly schedule

Each has their own waiting period depending on the type of first time home buyer loan. We’ll give you a breakdown of each event by loan type along with explanations.

FHA (Determined by Date of Credit Approval)

Derogatory Item

Waiting Period


  • 3 years from date foreclosure completed and transferred back to the bank
  • 12-24 months from foreclosure sale with acceptable extenuating circumstances

Short Sale

  • 3 years from date sale closed and transferred to new own
  • No waiting period if no late payments on any mortgage and consumer debts within 12 months preceding short sale AND they are not taking advantage of declining market conditions

Deed in Lieu of Foreclosure

  • Same guidelines as Foreclosure

Bankruptcy Chapter 7

  • 2 years from date of discharge with re-established credit paid as agreed
  • 12-24 months – may be acceptable if bankruptcy caused by verifiable”extenuating circumstances” AND credit has been managed in a responsible manner.

Bankruptcy Chapter 13

  • 1 year has elapsed since bankruptcy filing and payment plan begun, all payments made on time AND written permission from bankruptcy trustee.

What are “extenuating circumstances” for FHA loans?

FHA: Serious illness or death of a wage earner. Divorce or inability to sell a property due to a job transfer or relocation to another area does not qualify as an acceptable extenuating circumstance. Circumstances must be documentable.

Related: 42 million Americans may have errors on their credit report

We have helped countless first time home buyers and their families overcome their credit challenges to make the dream of homeownership a reality. They all have one thing in common, they contacted us.

Contact a First Time Home Buyer Specialist




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