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How Soon Can I Buy A Home After Credit Problems?

Getting A Mortgage with Bad Credit History

We all know that having a good credit score is important, particularly when it comes to taking out loans like mortgages. But sometimes life happens and events in your past have had a negative implant on your credit score, making it more difficult for you to take out a home loan.

In many cases, it can take at least two years after a negative credit event to be eligible for a mortgage, either as a first-time buyer or having had a previous mortgage. How long it takes to get a mortgage after credit issues all depends on why you ran into credit problems in the first place and how severely your score was impacted.

Here are a few of the most common bad credit loan examples for homeowners, along with how long you’ll need to wait to buy another home.

Mortgage Write Off

Also known as a “charge off”, a mortgage write off is where your existing mortgage lender closes your loan account and writes off whatever amount is left on the loan as a loss. In many cases, this loan balance is sold to a debt buyer or moved to a collection agency.

That doesn’t take you off the hook for payments, though. Instead, you’ll be responsible for paying the new holder of the loan—either the collection agency or debt buyer.

As this situation comes up for people who have fallen behind on mortgage payments, a charge off will often show up on your credit report twice, first as the original loan and then as the new collection amount. Like any other late or missed payments, the amount will be reflected on your credit score for up to 7 years.

Conventional Mortgage

To take out a conventional mortgage after a charge off, you’ll likely be looking at a 4-year wait. However, if you have extenuating circumstances for your mortgage write off, you could cut that wait in half to only 2 years.

There are strict criteria to be eligible for this. Circumstances beyond the borrower’s control like divorce, a severe medical issue, or a job layoff are all sudden and can significantly reduce your income. These all impact your ability to pay your mortgage, so any write offs as a result mean that you won’t have to wait as long to be eligible for another home loan.


If you’re looking to take out an FHA, VA, or USDA loan after a mortgage write off, you won’t be subject to any wait times before being able to apply for a new loan.

Deed-in-Lieu of Foreclosure

Wherever possible, avoiding a foreclosure will be better for your long term credit. A deed-in-lieu of foreclosure can be a good middle ground option, where the title of the property is transferred from the owner to the lender in exchange for payment relief on the mortgage.

This step is usually a last resort option before either a foreclosure or bankruptcy and should only be considered when all other loan repayment, modification, or short sale options have been explored.

Convention Mortgage

Like with a mortgage write off, a deed-in-lieu of foreclosure means that you’ll have to wait 4 years before you can take out a new conventional mortgage. With extenuating circumstances, this time is reduced to 2 years.


For an FHA loan after a deed-in-lieu of foreclosure, you’ll be required to wait 3 years before taking out a new loan, or 12 months with extenuating circumstances.


VA loan applicants are not eligible for new loans after a deed-in-lieu of foreclosure for 2 years, or 12 months with extenuating circumstances.


For USDA loan applicants, the wait time is the shortest—36 months from your deed-in-lieu of foreclosure to a new loan application. 

In many cases, it can take at least two years after a negative credit event to be eligible for a mortgage.


A foreclosure is a serious legal situation, where the lender takes ownership of the property and sells it as a way to reclaim the lost amount on a defaulted loan. This is usually a last resort effort by the lender, as many will try to work with the borrower first to help them catch up on payments and avoid the foreclosure process.

Conventional Mortgage

Wondering when you can get a mortgage after foreclosure? For most people, you’ll be looking at the full 7 years that a foreclosure stays on your credit report, if there was no bankruptcy filed during this period.

With extenuating circumstances, you could cut that wait time to 3 years, but you’ll be limited to a new loan of only 90% of the loan-to-value ratio. This amount compares the amount of your mortgage to the appraisal value of the property, so the higher your down payment, the lower your LTV will be.

If your foreclosed home was included in a bankruptcy disclosure, you may be eligible for a shorter wait that aligns with other bankruptcy measures through your lender. Whichever is the greater waiting period, either the foreclosure or bankruptcy, is typically the wait time you should expect.


For a new FHA loan after a foreclosure, you’re looking at a 3-year wait, or 1 year with extenuating circumstances. If the home mortgage was disclosed as part of a bankruptcy, the wait time will be the same as a standard foreclosure.


New VA loans require a 2-year wait period, or 1 year with extenuating circumstances. For homes included in a bankruptcy, borrowers must use the later of the loan discharge date or the date of the title transfer as the starting point for their wait period.


USDA applicants must wait 36 months prior to a new loan application from the date of foreclosure. To help make the process simpler and faster, USDA loans go through the Guaranteed Underwriting System, or GUS. This determines how trustworthy the borrower is.

If you’re flagged as a “Refer” or “Refer with Caution” borrower, there may be a credit exception if a temporary or unanticipated situation occurred that was beyond the applicant’s control.

Short Sale of a Previous Home

Short sales happen when a property owner sells their home at a value less than the remaining balance on the mortgage. Typically, this is done to avoid a foreclosure and to pay off a significant amount on the mortgage balance quickly. The remaining amount on the home loan is still owed by the borrower to the lender but can sometimes be forgiven by the lender.

Conventional Mortgage

For borrowers who sold their last home under a short sale, you’ll usually be looking at a 4-year wait for a new mortgage, or 2 years with extenuating circumstances.


New FHA loans after a short sale are a 3-year waiting period, or 1 year with extenuating circumstances.


VA loans don’t have any required waiting period from a short sale being made to taking out a new loan. However, borrowers will likely be required to show 12 months or more of satisfactory credit before being eligible for a new VA loan.


As with foreclosures, USDA loans require a 36-month wait from the short sale to the loan application. You may be eligible for a credit exception through the GUS program if you’re flagged as a “Refer” borrower.

Federal Tax Lien with Payment Agreement

Federal tax liens happen when you fail to pay tax debts, like real estate, personal property, or financial asset taxes. The government can place a lien, or legal claim, against your home and can rightfully seize it if you fail to make payments. While payments are being made under a fixed agreement, though, no action will be taken to remove your ownership in the property.

Conventional Mortgage

To take out a conventional mortgage, a payment agreement must be made and one payment made against the federal tax lien before the application can be processed.


VA loans work similarly to conventional mortgages in this situation, where an agreement must be put in place and one payment made.


For FHA and USDA borrowers, a payment agreement must be put in place and 3 payments made. The payments cannot be prepaid and must be paid according to the agreement schedule.

Chapter 7 Bankruptcy

Declaring bankruptcy is a serious financial decision and impacts much more than your ability to take out a home loan. But if you find yourself in this situation, you might be wondering “how soon can I get a mortgage after a bankruptcy?” This all depends on the type of bankruptcy you have.

A chapter 7 bankruptcy is where a debtor’s nonexempt property is liquidated, or sold, and the proceeds used to pay off creditors. This typically has a long-lasting negative impact on your credit score.

Conventional Mortgage

To get a conventional mortgage after a bankruptcy, you’re looking at a minimum wait of 4 years from the discharge date, or 2 years with extenuating circumstances.

FHA and VA

For either FHA or VA loans after a chapter 7 bankruptcy, the wait is 2 years or 1 year with extenuating circumstances.


USDA loans typically follow a similar pattern for many borrowers with financial problems. After a chapter 7 bankruptcy, you’ll be looking at 36 months of waiting before a new loan application and a GUS reference for a credit exception.

A fresh start or second chance loan can be a great alternative for borrowers looking to move beyond credit issues as quickly as possible.

Chapter 13 Bankruptcy

Chapter 13 bankruptcies are slightly different to chapter 7’s and known as “reorganization bankruptcy.’ This is where a debtor is able to keep their property, like a home or car, if you complete a court-mandated repayment plan for the next 3 to 5 years. This is the better option if you’re hoping to be able to catch up on your missed payments.

Conventional Mortgage

To take a new conventional mortgage after a chapter 13 bankruptcy, borrowers need to wait 2 to 4 years from the dismissal date, depending on circumstances, or 2 years from the discharge date.


For FHA, VA or USDA loans, borrowers must be 12 months into their payout schedule and have made timely payments throughout that time. There also needs to be permission from the court that assigned the payment plan.

Multiple Bankruptcies

If you have multiple bankruptcies on your credit report, it can be several years until you become eligible for another mortgage.

Conventional Mortgage

If you’ve had more than one bankruptcy in the previous 7 years, you’ll be looking at a wait time of around 5 years before you can apply for a new conventional mortgage. Your application will only be processed after 3 years have passed since your last discharge date.


There’s no set wait time for a FHA, VA or USDA loans if you have multiple bankruptcies on your credit report.

Questions About Your Mortgage Eligibility?

If you’re thinking about taking out a new mortgage, contact the team at CS Bank today to discuss your eligibility. Every financial situation is unique and our lenders have years of experience working with borrowers from all backgrounds, even those with bad credit.