Contrary to popular belief, you do not have to have a perfect credit history in order to buy a house. It’s more important to understand what an adverse credit event will require of you after it happens.

After an adverse credit event, you will generally:-

• Need to observe a waiting period before you take out a mortgage
• Need to use that time to rebuild your credit as much as possible
• Need to take out the right mortgage for your specific circumstances

A recent credit event loan offers more lenient eligibility criteria than conventional loans. These loans may also allow you to enter the home-buying market faster than FHA loan requirements or conventional loan requirements would allow. Nevertheless, it is useful to know what the FHA and conventional waiting periods look like. 

What counts as an adverse credit event?

Any of the following credit events can make it more difficult to qualify for certain mortgages.

• Chapter 7
• Chapter 13
• Short sales
• Foreclosure 
• Deed-in-lieu of foreclosure
• Mortgage charge offs

Our recent credit event loans are designed to help people who have suffered any of these events. 

Chapter 7

To buy a home using a FHA loan after a Chapter 7 bankruptcy, you must meet the following requirements.

• Observe a two-year waiting period
• Make every payment on time during those two years
• Achieve a minimum credit score of 580

Conventional loans require a four-year waiting period unless you can show evidence of extenuating circumstances and will generally require you to obtain much higher credit scores. Obtaining a high credit score is not impossible after Chapter 7, but you should be aware the requirements are more strenuous. 

Chapter 13 

Some people may apply for an FHA loan one year into their Chapter 13 repayment period, with trustee approval.

If you have finished your Chapter 13 repayment plan, you may apply for an FHA loan with no waiting period. 

You may apply for a Conventional loan two years from the discharge date. If your Chapter 13 bankruptcy was dismissed instead of discharged, you must wait four years from the dismissal date. 

Short Sales, Deed-in-Lieu, or Chargeoffs

FHA lenders will require you to undergo a three-year waiting period after the recorded date of the event. 

Conventional lenders will require a four-year waiting period after a deed-in-lieu event, a preforeclosure sale (short sale), or a charge-off of any mortgage account. If you can provide evidence of extenuating circumstances, you may be able to cut that down to a two-year waiting period.

Foreclosure

You may apply for an FHA loan three years after foreclosure. 

Conventional loans will require a seven-year waiting period after a foreclosure. If you can provide evidence of extenuating circumstances, you may be able to cut that down to a three-year waiting period. 

Rebuilding Credit

If you wish to purchase a house after an adverse credit event, it’s advantageous to increase your credit score as much as possible. 

Raising your score can open up options and qualify you for lower interest rates. 

In addition, the FHA loan might not be right for your circumstances, as they have lower loan limits and require you to use mortgage insurance even when putting down 20% or more.

You may be able to rebuild your credit by taking out a small, secured credit card, using a very small portion of your available credit, and paying off the card on time, in full, each month. 

Choosing the Right Loan 

Our recent credit event loans offer shorter waiting periods compared to conventional loans. 

We assess loans on a case-by-case basis and use more lenient eligibility criteria. Working around your credit issues may mean guiding you to apply for an FHA loan or it may mean helping you obtain a home loan through one of our other programs.  

If you are not taking out an FHA loan, you will need to plan accordingly. You may need a larger down payment, and you may have to pay higher interest rates. Nevertheless, you will have a second chance to own a home after recent hardships. 

Don’t give up hope. Find the right mortgage loan by scheduling a consultation with Alex Doce today.