Bonita Beach Sunset

Foreclosure Bankruptcy Deed-in-Lieu Short Sales

All frightening words of despair but also words of hope.  Without these concepts, ideas such as a fresh start, renewed vigor or hope for tomorrow would simply cease to exist.

Unfortunately, some families erroneously believe that no one will lend to them in the future and turn strictly to renting. This is simply not true. While having one of these derogatory items on your credit will certainly be a challenge to getting financing in the future it is in no way the end of home ownership.

There are many keys to success to owning a home after a difficult past. It is important to remember that you are not alone (especially today!) and must learn from the experience. The next most important key for your success is to come up with a concrete plan that gives you enough time to reestablish your credit. This usually involves realistically assessing your current financial and credit situation. Once you have done this you should establish a budget you can live with, get involved in credit repair or a solid maintenance program, and commit to being disciplined to follow your plan.

Last but not least, it helps to have an idea about current residential lending rules.  For your convenience, below are listed some fairly generic information that you can share with your clients who are interested.  Please remember that this information is subject to change and different lenders may be more restrictive.  I do wonder however if some of these rules may be eased in the future if congress feels too many disadvantaged borrowers are being excluded.  Just a thought…

Fannie Mae and Freddie Mac

Financing will be allowed after the following terms.  It is not guaranteed and does require good credit behavior after the derogatory occurrence.  Having a late payment shortly after a bankruptcy or foreclosure can be a deal killer!


Chapter 7 - 4 years after discharge/dismissal

(liquidation) - 5 years if more than 1 bankruptcy in the last 10 years.

Chapter 13 - 2 years after discharge

(workout) - 4 years after dismissal, 5 years if more than 1 bankruptcy in the last 10 years.

Bankruptcy with extenuating circumstances – Extenuating circumstances are defined as non-recurring events that were beyond the Borrower’s control, resulting in a sudden, significant, and prolonged reduction in income (extended illness, unemployment, and death of a spouse or Co-Borrower). They are not defined solely by one event.
The severity of the hardship and efforts to resolve the situation must be considered. Documentation provided to support claims of extenuating circumstances should confirm the nature of the event that led to the bankruptcy or foreclosure and illustrate that the Borrower had no reasonable options other than to default on his or her financial obligations.

2 years after discharge/dismissal

3 years after discharge/dismissal if more than 1 bankruptcy in the last 10 years


5 years after discharge/dismissal (some lenders require 7 years)

3 years with extenuating circumstances

Deed in lieu

4 years

2 years with extenuating circumstances

Short Sale

4 years

No extenuating circumstances



Chapter 7

2 years after discharge/dismissal

2 years if extenuating circumstances

Chapter 13

1 year after satisfactory payment plan has occurred, plus permission from the court

Foreclosure & Deed in lieu -

3 years

< 3 years with extenuating circumstances

Short Sale

Not specifically addressed but similar timeframes

If you have any questions do not hesitate to call.

William Dukes

Senior Mortgage Banker

With more than 25 years of financial advising experience including 10 years in mortgage lending Will Dukes understands clients’ borrowing needs and concerns. More importantly, being a "survivor" in the current mortgage lending atmosphere speaks volumes about Will's integrity and ability to navigate rapidly changing conditions. If you have questions about finance contact Will at Summit Home Mortgage, Inc. 239.272.2241.