Fannie Mae recently changed their policies regarding the purchase of a home after a major credit event like a foreclosure, short sale and bankruptcy. The changes are both positive and negative, but seem to focus on reducing the wait times for those that encountered an “extenuating circumstance” or in layman’s terms a one-time or temporary event that led to the negative credit event. These changes show Fannie Mae’s focus on helping those that were hit hard by the recession.
|Derogatory Event||Waiting Period Requirements||Waiting Period with Extenuating Circumstances|
|Bankruptcy Chapter 7||4 Years||2 Years|
|Bankruptcy Chapter 13||2 Years from discharge date|
4 Years from dismissal date
|2 Years from discharge date
2 Years from dismissal date
|Foreclosure Included in Bankruptcy||4 Years||2 Years|
|Short Sale or Deed in Lieu||4 Years||2 Years|
|Foreclosure||7 Years||3 Years|
After bankruptcy, foreclosure, or short sale a borrow must re-establish credit in order to meet minimum Fannie Mae guidelines. For specific down payment and documentation needed please contact me directly.
What’s considered an extenuating circumstance?
Extenuating Circumstances must be verifiable hardships that are considered out of the borrower’s control that significantly reduce income or expense. This can be anywhere from job loss to health issues.
I foreclosed when my property lost substantial value, is that an extenuating circumstance?
Unfortunately no, that falls under a strategic default and is exactly why Fannie Mae is drawing a line in the sand. If you fall into this category waiting 3 years and using FHA may be the best option for you.