A straight answer
Can I buy or refinance after bankruptcy, foreclosure or a short sale?
The direct answer
Often, yes, once enough time has passed and the dates on your paperwork line up with the program's rule. What happened, when it ended, and which rulebook the loan follows decide it, and I read those three things before anything else. I'm Zach von der Linden (NMLS 1652805), a mortgage broker with West Capital Lending, based in San Clemente.
I arrange loans with lenders and put the financing together. A bankruptcy, a foreclosure, a short sale or a deed-in-lieu is a line on a credit report with a date on it, not a verdict on you, and each program writes down how long it waits after that date and what it wants to see since. Text or call me with what happened, roughly when it ended, and whether you are buying or refinancing, and I will tell you which doors are open now and which need more months. I work with homeowners in California, Utah, Oregon and Arizona.
Zach von der Linden, mortgage broker and Branch Manager, West Capital Lending · NMLS 1652805
Wholesale pricing · California, Utah, Oregon and Arizona
5.0 across 66 reviews on Experience.com (read on 2026-09-24) · Text reaches Zach directly · Last updated 2026-10-16
Been through a bankruptcy, foreclosure or short sale? Text me what happened and roughly when it ended, and whether you are buying or refinancing. I will tell you which rulebooks are open now and which need more time.
No credit pull happens from a conversation. Texts go to Zach's cell.
Which date starts my waiting period?
The date the event ended, not the day you first fell behind. Under Fannie Mae's rule, the waiting period starts on "the completion, discharge, or dismissal date (as applicable) of the derogatory credit event" and, for a manually underwritten loan, ends on the day the new loan funds (Fannie Mae Selling Guide B3-5.3-07). For a bankruptcy that is the discharge or dismissal date. For a foreclosure it is the completion date of the foreclosure action as reported on the credit report or in the foreclosure documents. For a short sale or a deed-in-lieu it is the completion date of that transaction.
When the lender runs the file through Fannie Mae's automated system, the system measures from the event date to the date of the credit report, because it does not know the funding date; the lender may then confirm the period using the funding date instead (Fannie Mae Selling Guide B3-5.3-09). FHA measures to a different point, the date its case number is assigned, which is covered below. That is why I ask for the paperwork: the credit report often shows the first missed payment or the filing date, and neither is the date that counts.
How long does Fannie Mae require after each event?
These are Fannie Mae's written periods for loans sold to Fannie Mae, read on October 16, 2026 from a topic dated August 7, 2019, and they are not a rule for every lender. Freddie Mac and jumbo programs keep their own. Bankruptcy under Chapter 7 or 11: four years from the discharge or dismissal date, or two years with documented extenuating circumstances. Chapter 13: two years from the discharge date, or four years from a dismissal date, and the guide says there are no exceptions to the two years after a discharge while a dismissal can be two years with extenuating circumstances. More than one bankruptcy filing within seven years: five years from the most recent discharge or dismissal, or three with extenuating circumstances (Fannie Mae Selling Guide B3-5.3-07).
Foreclosure: seven years from the completion date, or three years with documented extenuating circumstances. Between three and seven years the guide adds conditions: the purchase of a principal residence is permitted, a limited cash-out refinance is permitted for any occupancy, the loan must stay within a cap on the loan relative to the home's value that the guide states as a percentage and I do not print here, and the purchase of a second home or investment property and any cash-out refinance wait the full seven years. Short sale, deed-in-lieu or a charged-off mortgage: four years from the completion date, or two years with extenuating circumstances. The guide treats "preforeclosure sale" and "short sale" as the same thing.
Extenuating circumstances has a definition, and the lender has to document it: "nonrecurring events that are beyond the borrower's control that result in a sudden, significant, and prolonged reduction in income or a catastrophic increase in financial obligations," supported by papers that confirm the event and a written explanation from you (Fannie Mae Selling Guide B3-5.3-08). A job loss with severance papers, a medical event with bills, a divorce decree: those are the guide's own examples. Whether yours qualifies is the lender's call on the file, and I will tell you honestly whether I think the papers support it before you count on the shorter period.
Waiting is not the whole rule. Fannie Mae also wants credit re-established: the waiting period met, an acceptable automated recommendation or, if manually underwritten, the minimum credit score for the loan, and traditional credit rather than a thin file. Timeshare accounts are treated as installment loans and are not subject to these waiting periods.
Freddie Mac keeps its own periods in its own guide section. I could not open that section on the day this page was written, so I do not restate it. A 2021 Freddie Mac bulletin shows how different the details can be: for manually underwritten loans it added an option to measure the foreclosure recovery period from a Chapter 7 discharge date when the foreclosed mortgage was discharged in that bankruptcy, on conditions (Freddie Mac Bulletin 2021-31). The lender confirms which rulebook, and which version of it, your loan follows.
Can FHA, VA or a non-QM loan work sooner?
Sometimes, under FHA's own rules and dates. HUD's handbook measures to the date the FHA case number is assigned, not to closing. Under its manual underwriting rules, a Chapter 7 bankruptcy "does not disqualify a Borrower from obtaining an FHA-insured Mortgage if, at the time of case number assignment, at least two years have elapsed since the date of the bankruptcy discharge," with good credit re-established or no new credit taken on in those two years. Less than two years but not less than twelve months may be acceptable when the bankruptcy was caused by extenuating circumstances beyond the borrower's control and the borrower has since shown a documented ability to manage their finances. A foreclosure or a deed-in-lieu generally makes a borrower ineligible for three years from the date title transferred, and a short sale for three years from the transfer of title, each measured to case number assignment (HUD Handbook 4000.1).
FHA writes its exceptions narrowly. For a foreclosure, deed-in-lieu or short sale, the lender may grant an exception when the event was the result of documented extenuating circumstances beyond the borrower's control, such as a serious illness or the death of a wage earner, and good credit has been re-established since. The handbook says divorce is not an extenuating circumstance, with one carve-out where the mortgage was current at the divorce and the ex-spouse who received the property later lost it, and that being unable to sell because of a job transfer does not qualify. A short sale has one more exception: a borrower whose mortgage payments and installment payments were all made within the month due for the twelve months before the short sale is considered eligible. When the file runs through FHA's automated scorecard, a bankruptcy discharged within two years of case number assignment, or a foreclosure, deed-in-lieu or short sale with title transferred within three years, sends the file to manual underwriting, where these rules are applied by hand.
VA's lender handbook is written as judgment rather than a table, and it measures from the date of closing. A Chapter 7 bankruptcy "discharged more than 2 years ago from the date of closing for purchases and refinances" may be disregarded. One discharged within the last one to two years is, in the handbook's words, "probably not possible" to approve unless the borrower has obtained and paid consumer credit since and the bankruptcy was caused by verified circumstances beyond the borrower's control, such as unemployment, prolonged strikes or uninsured medical bills; divorce is generally not viewed that way, and within the past twelve months approval will generally not be possible. A foreclosure, deed-in-lieu or short sale finalized more than two years before closing may be disregarded, with the same one-to-two-year test. For a deed-in-lieu or short sale where the payment history was not affected beforehand and the borrower was communicating with the servicer, the handbook says a waiting period "may not be necessary." A foreclosure or short sale on a prior VA loan can also reduce the entitlement available for the new one (VA Lenders Handbook, Chapter 4).
Outside the agency rulebooks, some lenders offer shorter paths after a credit event, and terms vary. I make no promise about those programs on this page: no period, no price and no name. If the agency clocks have not run, I check whether such a program fits your file, tell you plainly what it asks of you in conditions, and say whether waiting is the better move. Requirements vary by program and lender, and each one depends on how long ago it happened and your credit since.
Can I buy while I'm still in Chapter 13?
Under some rulebooks, yes, with the court involved. FHA's manual underwriting rule: a Chapter 13 "does not disqualify a Borrower from obtaining an FHA-insured Mortgage, if at the time of case number assignment at least 12 months of the payout period under the bankruptcy has elapsed," the payments during the most recent twelve months have been satisfactory and on time, and the borrower "has received written permission from bankruptcy court to enter into the mortgage transaction" (HUD Handbook 4000.1). VA's handbook says that if the borrower has satisfactorily made at least twelve months' worth of the payments and the trustee or the bankruptcy judge approves the new credit, the lender may give favorable consideration, and that a borrower who has finished all the payments may be treated as having re-established satisfactory credit (VA Lenders Handbook, Chapter 4).
Fannie Mae's rule does not provide for a loan during an active plan. Its waiting period runs from the discharge or dismissal date, and its automated system marks a Chapter 13 "filed but neither discharged nor dismissed within the last four years" ineligible (Fannie Mae Selling Guide B3-5.3-09). So a buyer still in a plan is looking at FHA or VA, each on the conditions above and each the lender's decision, or at waiting for the discharge. Bring the plan, the trustee's payment history and any court order; the permission has to be in writing before anything is submitted.
My mortgage was discharged in bankruptcy, then foreclosed. Which clock applies?
Under Fannie Mae's rule, possibly the bankruptcy clock, which is usually the shorter one. The guide says: "If a mortgage debt was discharged through a bankruptcy, the bankruptcy waiting periods may be applied if the lender obtains the appropriate documentation to verify that the mortgage obligation was discharged in the bankruptcy. Otherwise, the greater of the applicable bankruptcy or foreclosure waiting periods must be applied" (Fannie Mae Selling Guide B3-5.3-07). The documentation is the point: the bankruptcy schedules and discharge order showing that mortgage, and whether it was reaffirmed.
FHA's handbook has no rule on this combination that I could find; it measures a bankruptcy from the discharge date and a foreclosure from the transfer of title, each to case number assignment, and the lender applies both. VA's handbook answers it directly: "If a foreclosure, deed in lieu, or short sale process is in conjunction with a bankruptcy, use the latest date of either the discharge of the bankruptcy or transfer of title for the home to establish the beginning date of re-established credit" (VA Lenders Handbook, Chapter 4). On a discharged mortgage, the transfer of title often comes months or years after the discharge, so the later date can be the foreclosure's, and I check the recorded deed before counting.
What changes if I'm refinancing or taking cash out?
The same clocks apply, and the loan purpose can lengthen them. Under Fannie Mae's foreclosure exception, a limited cash-out refinance is allowed between three and seven years after the completion date with the conditions above, while a cash-out refinance waits the full seven years regardless of occupancy. For a bankruptcy, short sale or deed-in-lieu, the Fannie Mae periods are the same for a purchase and a refinance, and the rest of the file is reviewed as usual: payment history on the mortgage you have now, equity, income and debts.
If the event is recent and the goal is cash from your equity, a home equity line is a different product with the line lender's own rules, and some lenders weigh the time since the event differently from an agency program. The late mortgage payment page covers what a recent late payment does to a refinance or a line, and what to do when a bank says no covers reading a denial notice.
What should I have ready for Zach to review?
- What happened, in a sentence, and the month and year it ended: the discharge or dismissal order for a bankruptcy, the trustee's deed or the credit report's completion date for a foreclosure, the closing statement for a short sale, the recorded deed for a deed-in-lieu.
- For a bankruptcy, the schedules showing which debts were included, and whether any mortgage was reaffirmed.
- If you believe extenuating circumstances apply, the papers that show the event and a short written account of what happened and why there was no other option.
- Your credit report, so we can see how the event is reported and what has been paid on time since.
- Whether you are buying or refinancing, which state the property is in, and whether you will live there.
- Your income documents and monthly debts, because the file is qualified on them like any other.
Send documents through the secure process I give you when we talk, not by ordinary text. A conversation does not pull your credit, and nothing is filed with a lender until a program is a real fit. Buying a home? Get pre-approved once we have reviewed the dates. The pre-approval uses a soft credit check, never a hard pull for the first look, and a credit event needs the review first because the online letter does not by itself confirm that a program is open to you.
The hard-to-qualify hub lists the income situations I can review alongside the credit history, and if the tax returns understate what you earn, the bank statement loan page explains the documentation route.
Questions people ask next
How long after bankruptcy can I buy a house?
It depends on the chapter, the rulebook and the dates. Under Fannie Mae's written rule, a Chapter 7 or 11 is four years from discharge or dismissal, or two with documented extenuating circumstances, and a Chapter 13 is two years from discharge or four from dismissal. FHA and VA set shorter periods under their own conditions, described above, and other programs vary. Text me the discharge date and I will tell you where each clock stands.
I did a short sale three years ago. Can I buy now?
Possibly, depending on the program. Fannie Mae's rule is four years from the completion date, or two with documented extenuating circumstances, so three years meets the shorter period only with that documentation. FHA's rule for a short sale runs from the date of title transfer with its own exceptions, and the VA chapter asks for its own review. The closing statement from the sale gives me the date that counts.
I am still making Chapter 13 payments. Can I get a mortgage?
Possibly, under FHA's or VA's rules and with the court's written permission. FHA's manual underwriting rule asks for at least twelve months of the payout period elapsed at case number assignment, on-time payments over those twelve months and written permission from the bankruptcy court; VA's handbook gives favorable consideration after at least twelve months of satisfactory payments when the trustee or the judge approves the new credit. Fannie Mae's rule runs from the discharge or dismissal, so a conventional loan generally waits. The lender decides each file.
Does discharged mean the same thing as dismissed?
No, and the difference changes the clock. A discharge means the court released you from the debts covered by the plan; a dismissal means the case was closed without that release, usually because the plan was not completed. Under Fannie Mae's rule a Chapter 13 discharge carries a two-year period and a dismissal four, and the two-year period after a discharge has no exception. The order from the court tells us which one you have.
My foreclosure was included in my bankruptcy. Which date counts?
Under Fannie Mae's rule, the bankruptcy dates may be used when the lender documents that the mortgage was discharged in the bankruptcy; otherwise the longer of the two periods applies. VA's handbook uses the later of the discharge date and the transfer of title. FHA's handbook has no rule on the combination that I could find, so the lender applies each clock. The recorded deed and the discharge order settle it.
Can I refinance or take cash out after bankruptcy?
The same waiting periods apply to a refinance, and under Fannie Mae's foreclosure exception a cash-out refinance waits the full seven years while a limited cash-out refinance can proceed after three with the conditions. After a bankruptcy alone, the period is the same for a purchase and a refinance. The mortgage you have now has to be current and its payment history is part of the review.
Does the waiting period start at my first missed payment?
No. It starts when the event ended: the discharge or dismissal date of a bankruptcy, the completion date of a foreclosure, the closing of a short sale or the recording of a deed-in-lieu. The first missed payment and the filing date both show on the credit report, which is why people count from the wrong day. Send me the paperwork and I will count from the right one.
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Sources and checked dates
Sources: Fannie Mae Selling Guide, B3-5.3-07, Significant Derogatory Credit Events: Waiting Periods and Re-establishing Credit (checked 2026-10-16) · Fannie Mae Selling Guide, B3-5.3-08, Extenuating Circumstances for Derogatory Credit (checked 2026-10-16) · Fannie Mae Selling Guide, B3-5.3-09, DU Credit Report Analysis (checked 2026-10-16) · HUD Handbook 4000.1, Update 18 (last revised August 12, 2026), II.A.4.a.v, II.A.4.b.iii(F) to (I) and II.A.5.a.iii(H) to (J) (checked 2026-10-16) · VA Lenders Handbook, VA Pamphlet 26-7, Chapter 4, Credit Underwriting, Topic 7 (checked 2026-10-16) · Freddie Mac Bulletin 2021-31, Selling Updates (October 6, 2021) (checked 2026-10-16).
Show each claim on this page, what it depends on, and the date it was checked (6)
| What we say, and what it depends on | Source | Checked |
|---|---|---|
| Fannie Mae Selling Guide B3-5.3-07, Significant Derogatory Credit Events: Waiting Periods and Re-establishing Credit (08/07/2019): "Examples of significant derogatory credit events include bankruptcies, foreclosures, deeds-in-lieu of foreclosure, preforeclosure sales, short sales, and charge-offs of mortgage accounts." "The waiting period commences on the completion, discharge, or dismissal date (as applicable) of the derogatory credit event and ends on the disbursement date of the new loan for manually underwritten loans." Bankruptcy (Chapter 7 or 11): "A four-year waiting period is required, measured from the discharge or dismissal date of the bankruptcy action"; "A two-year waiting period is permitted if extenuating circumstances can be documented". Chapter 13: "two years from the discharge date, or" "four years from the dismissal date"; "A two-year waiting period is permitted after a Chapter 13 dismissal, if extenuating circumstances can be documented. There are no exceptions permitted to the two-year waiting period after a Chapter 13 discharge." Multiple filings: "For a borrower with more than one bankruptcy filing within the past seven years, a five-year waiting period is required, measured from the most recent dismissal or discharge date"; three years with extenuating circumstances. Foreclosure: "A seven-year waiting period is required, and is measured from the completion date of the foreclosure action as reported on the credit report or other foreclosure documents provided by the borrower"; "A three-year waiting period is permitted if extenuating circumstances can be documented", with additional requirements between three and seven years: a maximum loan-to-value ratio (stated in the guide as a percentage, not printed on this site, or the Eligibility Matrix maximum if lower), "The purchase of a principal residence is permitted", "Limited cash-out refinances are permitted for all occupancy types", and "The purchase of second homes or investment properties and cash-out refinances (any occupancy type) are not permitted until a seven-year waiting period has elapsed." Deed-in-lieu, preforeclosure sale or charge-off of a mortgage account: "A four-year waiting period is required from the completion date of the deed-in-lieu of foreclosure, preforeclosure sale, or charge-off as reported on the credit report or other documents provided by the borrower"; "A two-year waiting period is permitted if extenuating circumstances can be documented." "The terms “preforeclosure sale” and “short sale” are used interchangeably in this Guide and have the same meaning." Same mortgage: "If a mortgage debt was discharged through a bankruptcy, the bankruptcy waiting periods may be applied if the lender obtains the appropriate documentation to verify that the mortgage obligation was discharged in the bankruptcy. Otherwise, the greater of the applicable bankruptcy or foreclosure waiting periods must be applied." Re-established credit requires the waiting period and related requirements to be met, an acceptable DU recommendation or, if manually underwritten, the minimum credit score for the loan, and traditional credit: "Nontraditional credit or “thin files” are not acceptable." "Timeshare accounts are considered installment loans and are not subject to the waiting periods described below." | Fannie Mae Selling Guide, B3-5.3-07, Significant Derogatory Credit Events: Waiting Periods and Re-establishing Credit | 2026-10-16 |
| Fannie Mae Selling Guide B3-5.3-08, Extenuating Circumstances for Derogatory Credit (12/16/2014): "Extenuating circumstances are nonrecurring events that are beyond the borrower’s control that result in a sudden, significant, and prolonged reduction in income or a catastrophic increase in financial obligations." "If a borrower claims that derogatory information is the result of extenuating circumstances, the lender must substantiate the borrower’s claim." Examples of documentation: "a copy of a divorce decree, medical reports or bills, notice of job layoff, job severance papers, etc." and "a copy of insurance papers or claim settlements, property listing agreements, lease agreements, tax returns (covering the periods prior to, during, and after a loss of employment), etc." "The lender must obtain a written explanation from the borrower explaining the relevance of the documentation. The written explanation must support the claims of extenuating circumstances, confirm the nature of the event that led to the bankruptcy or foreclosure-related action, and illustrate that the borrower had no reasonable options other than to default on his or her financial obligations." | Fannie Mae Selling Guide, B3-5.3-08, Extenuating Circumstances for Derogatory Credit | 2026-10-16 |
| Fannie Mae Selling Guide B3-5.3-09, DU Credit Report Analysis (08/05/2026): "The waiting period commences on the completion, discharge, or dismissal date (as applicable) of the derogatory credit event and ends on the disbursement date of the new loan. Because DU does not have the disbursement date of the subject loan, DU uses the date of the credit report to measure whether or not the applicable waiting period has been met. However, because the credit report date may not result in an accurate calculation of the waiting period (it is earlier than the disbursement date), the lender may use the disbursement date to confirm that the waiting period has been met." "If a Chapter 13 bankruptcy was discharged within the last two years, dismissed within the last four years, or filed but neither discharged nor dismissed within the last four years, the loan casefile will receive an Ineligible recommendation and will be ineligible for delivery to Fannie Mae." "DU is not able to identify whether the borrower’s derogatory credit event(s) was the result of extenuating circumstances." For a deed-in-lieu, preforeclosure sale or mortgage charge-off, "the lender must confirm the waiting period requirement has been met, and may base its determination on the disbursement date of the new loan." | Fannie Mae Selling Guide, B3-5.3-09, DU Credit Report Analysis | 2026-10-16 |
| HUD Handbook 4000.1 (Update 18, issued August 12, 2026; every page footer "Last Revised: 8/12/2026"). TOTAL Mortgage Scorecard, II.A.4.a.v: the lender must downgrade and manually underwrite a Mortgage that received an Accept if "the date of the Borrower's bankruptcy discharge as reflected on bankruptcy documents is within two years from the date of case number assignment", or if "the case number assignment date is within three years of the date of the transfer of title through a Pre-Foreclosure Sale (Short Sale)", a foreclosure sale, or a Deed-in-Lieu (DIL) of foreclosure. Manual underwriting, II.A.5.a.iii(H)(1), Chapter 7: "A Chapter 7 bankruptcy (liquidation) does not disqualify a Borrower from obtaining an FHA-insured Mortgage if, at the time of case number assignment, at least two years have elapsed since the date of the bankruptcy discharge. During the most recent two years, the Borrower must have: reestablished good credit; or chosen not to incur new credit obligations. An elapsed period of less than two years, but not less than 12 months, may be acceptable, if the Borrower: can show that the bankruptcy was caused by extenuating circumstances beyond the Borrower's control; and has since exhibited a documented ability to manage their financial affairs in a responsible manner." II.A.5.a.iii(H)(2), Chapter 13: "A Chapter 13 bankruptcy does not disqualify a Borrower from obtaining an FHA-insured Mortgage, if at the time of case number assignment at least 12 months of the payout period under the bankruptcy has elapsed. The Mortgagee must determine that during the most recent 12 months, the Borrower's payment performance has been satisfactory and all required payments have been made on time; and the Borrower has received written permission from bankruptcy court to enter into the mortgage transaction." II.A.5.a.iii(I)(2), foreclosure and deed-in-lieu: "A Borrower is generally not eligible for a new FHA-insured Mortgage if the Borrower had a foreclosure or a DIL of Foreclosure in the three-year period prior to the date of case number assignment. This three-year period begins on the date of the DIL or the date that the Borrower transferred ownership of the Property to the foreclosing entity/designee." Exceptions: "The Mortgagee may grant an exception to the three-year requirement if the foreclosure was the result of documented extenuating circumstances that were beyond the control of the Borrower, such as a serious illness or death of a wage earner, and the Borrower has reestablished good credit since the foreclosure. Divorce is not considered an extenuating circumstance. An exception may, however, be granted where a Borrower's Mortgage was current at the time of the Borrower's divorce, the ex-spouse received the Property, and the Mortgage was later foreclosed. The inability to sell the Property due to a job transfer or relocation to another area does not qualify as an extenuating circumstance." II.A.5.a.iii(J)(2), short sale: "A Borrower is generally not eligible for a new FHA-insured Mortgage if they relinquished a Property through a Short Sale within three years from the date of case number assignment. This three-year period begins on the date of transfer of title by Short Sale." "(a) Exception for Borrower Current at the Time of Short Sale: A Borrower is considered eligible for a new FHA-insured Mortgage if, from the date of case number assignment for the new Mortgage: all Mortgage Payments on the prior Mortgage were made within the month due for the 12-month period preceding the Short Sale; and installment debt payments for the same time period were also made within the month due." The short-sale extenuating-circumstances exception repeats the foreclosure wording. Required documentation includes the bankruptcy and discharge documents, the Closing Disclosure, deed or other legal documents evidencing the date of property transfer, and, for an exception, an explanation of the circumstance; for a bankruptcy "The Mortgagee must also document that the Borrower's current situation indicates that the events which led to the bankruptcy are not likely to recur." | HUD Handbook 4000.1, Update 18 (last revised August 12, 2026), II.A.4.a.v, II.A.4.b.iii(F) to (I) and II.A.5.a.iii(H) to (J) | 2026-10-16 |
| VA Lenders Handbook (VA Pamphlet 26-7), Chapter 4, Credit Underwriting, Topic 7, Credit History: Required Documentation and Analysis (change date August 24, 2026), subsection b: "The fact that a bankruptcy exists in a borrower (or spouse's) credit history does not in itself disqualify the loan. Develop complete information on the facts and circumstances of the bankruptcy." Chapter 7: "If the bankruptcy was discharged more than 2 years ago from the date of closing for purchases and refinances, it may be disregarded. If the bankruptcy was discharged within the last 1 to 2 years, it is probably not possible to determine that the borrower or spouse is a satisfactory credit risk unless both of the following requirements are met": consumer credit obtained since the bankruptcy and paid satisfactorily over a continued period, and "The bankruptcy was caused by circumstances beyond the control of the borrower or spouse such as unemployment, prolonged strikes, medical bills not covered by insurance, and so on, and the circumstances are verified. Divorce is not generally viewed as beyond the control of the borrower and/or spouse." "If the bankruptcy was discharged within the past 12 months, it will generally not be possible to determine that the borrower(s) is a satisfactory credit risk." A bankruptcy caused by the failure of a self-employed borrower's business may be acceptable on four stated conditions. Chapter 13: "If the borrower(s) has finished making all payments satisfactorily, the lender may conclude that the borrower has re-established satisfactory credit. If the borrowers) has satisfactorily made at least 12 months' worth of the payments and the Trustee or the Bankruptcy Judge approves of the new credit, the lender may give favorable consideration." Foreclosures: "The fact that a home loan foreclosure (or deed-in-lieu or short sale in lieu of foreclosure) exists in a borrower(s) history does not in itself disqualify the loan." "You may disregard a foreclosure finalized more than 2 years from the date of closing. If the foreclosure was finalized within the last 1 to 2 years from the date of closing, it is probably not possible to determine that the borrower(s) is a satisfactory credit risk unless both of the following requirements are met": consumer credit obtained since and paid satisfactorily, and a cause beyond the borrower's control, verified. "If a foreclosure, deed in lieu, or short sale process is in conjunction with a bankruptcy, use the latest date of either the discharge of the bankruptcy or transfer of title for the home to establish the beginning date of re-established credit." Deed in lieu or short sale: "If the borrower's payment history on the property was not affected before the short sale or deed in lieu and was voluntarily communicating with the servicer or holder, then a waiting period from the date transfer of the property may not be necessary." "If the foreclosure, deed and lieu or short sale was on a VA-guaranteed loan, then a borrower may not have full entitlement available for the new VA loan." | VA Lenders Handbook, VA Pamphlet 26-7, Chapter 4, Credit Underwriting, Topic 7 | 2026-10-16 |
| Freddie Mac Bulletin 2021-31 (Selling Updates, October 6, 2021), "Credit underwriting: recovery time periods for reestablishment of credit after foreclosure": "For Manually Underwritten Mortgages, we have revised the recovery time periods for reestablishment of credit following foreclosure to provide flexibility when the foreclosure resulted from a Mortgage that was extinguished in a Chapter 7 bankruptcy." The option reduces the minimum recovery period from 36 months from the foreclosure completion date to 24 months from the bankruptcy discharge date for Chapter 7 bankruptcies caused by extenuating circumstances, and from 84 months from the foreclosure completion date to 48 months from the bankruptcy discharge for Chapter 7 bankruptcies caused by financial mismanagement, on condition that "The Seller must document that the foreclosure resulted from the inclusion and discharge of the Mortgage in the bankruptcy", "The foreclosure proceedings did not begin before the bankruptcy filing", and "The Mortgage was not reaffirmed through the bankruptcy". "As a reminder, for Loan Product Advisor® Mortgages with Risk Class of Accept, Loan Product Advisor has assessed the Borrower’s credit reputation and determined that the time period for reestablishment of credit following a derogatory credit event, when applicable, is acceptable." Guide impact: Section 5202.5. | Freddie Mac Bulletin 2021-31, Selling Updates (October 6, 2021) | 2026-10-16 |
Written for and accountable to: Zach von der Linden, Mortgage broker and Branch Manager, West Capital Lending.
Last updated 2026-10-16.
Verify him: NMLS Consumer Access, ID 1652805 · 66 reviews on Experience.com.
Sources for product claims are listed on this page, with the date each was checked.
Talk it through with Zach
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