The Fannie Mae Bankruptcy Waiting Period: What You Need to Know

Are you struggling to get back on your feet after a Fannie Mae bankruptcy? You’re not alone. The bankruptcy process can be overwhelming and leave you uncertain about your financial future. One of the most significant concerns for individuals who have undergone bankruptcy is the waiting period before they can apply for a mortgage again.

The Fannie Mae bankruptcy waiting period is critical for those wishing to re-enter the housing market. This waiting period might seem daunting, but understanding the rules and regulations can help you better prepare for homeownership post-bankruptcy.

In this blog post, we’ll outline the problem of navigating the Fannie Mae bankruptcy waiting period, the agitation that comes with uncertainty about your eligibility for a mortgage, and the solution to overcoming these challenges. We will provide you with valuable information and tips to help you make informed decisions as you embark on the journey to homeownership once again.

Which Loans Are Fannie Mae Loans?

When discussing Fannie Mae’s requirements, we generally talk about conventional loans. FHA loans have a different set of standards. Conventional loans require higher credit scores, larger down payments, and lengthier waiting periods.

That can be a little confusing. Just remember that conventional loans must conform to the requirements and regulations set out by Fannie Mae. Fannie Mae regulates mortgage servicing in the United States.

What is the Fannie Mae Bankruptcy Waiting Period?

The waiting period for a Fannie Mae loan is four years from the discharge date of the bankruptcy. If you show that extenuating circumstances, such as illness, caused bankruptcy, the waiting period may be shortened to two years.

What Is an Extenuating Circumstance?

Extenuating circumstances are events beyond your control that led to bankruptcy. Examples of extenuating circumstances include:

  • Job loss.
  • Divorce.
  • Medical bills.

You must provide documentation to your lender to prove that an extenuating circumstance caused your bankruptcy. Essentially, they want reassurance that whatever happened to cause your previous bankruptcy is not likely to happen again.

In addition to documenting the extenuating circumstance, you should be prepared to show that you were paying your mortgage on time until then.

Fannie Mae Foreclosure Waiting Period

A foreclosure is considered more serious than bankruptcy. The Fannie Mae foreclosure waiting period is seven years from the foreclosure date. This waiting period is for a conventional loan.

The waiting period is three years if you are applying for an FHA loan. So, if you have a foreclosure on your record, getting an FHA rather than a conventional loan may be better.

Waiting Periods for a Short Sale, Preforeclosure, or Charge-Offs

Short sales, preforeclosures, and charge-offs are all considered adverse events requiring a four-year waiting period. But, again, you can get this down to two years if you can show that there were extenuating circumstances involved.

How to Get a Fannie Mae Loan After Bankruptcy

Once you have completed your waiting period, you can do a few additional things to improve your chances of getting approved for a Fannie Mae loan.

  • First, improve your credit score. You can do this by paying your bills on time and keeping your balances low. Start tracking your credit score before you intend to get a mortgage; it takes some time to improve your credit.
  • Second, save up for a larger down payment. A larger down payment generally represents a lower risk for mortgage lenders. Larger down payments will also reduce your mortgage rate, which increases home affordability.
  • Third, work with a lender with experience helping people get loans after bankruptcy. They will be able to guide you through the process and help you understand what you need to do to get approved.

As long as you’re upfront about your history and your bankruptcy, a lender should be able to get you qualified. You may need to wait a little longer for your waiting period to be complete.

Once your bankruptcy has dropped off your credit report, it will be as if it never happened. So, if you wait long enough, your bankruptcy won’t affect your loan. But bankruptcy takes longer than the mandatory waiting period to drop off a credit report. 

Generally, a bankruptcy can stay on a credit report for up to 10 years. But it doesn’t usually impact you longer than seven years.

Fannie Mae Loans, Chapter 7 Bankruptcy vs. Chapter 13 Bankruptcy

Note that if you have filed for Chapter 13 bankruptcy, you may be able to get a loan as soon as you complete your repayment plan. A Chapter 13 bankruptcy differs slightly from a Chapter 7 bankruptcy insofar as you are still paying back your debts; you are simply restructuring them. An FHA loan might even let you qualify if you are still making payments on a Chapter 13 bankruptcy.

Repairing Your Credit After Bankruptcy

It isn’t just the bankruptcy you need to concern yourself with. You also need to think about your credit score.

If you hope to get a Fannie Mae loan after bankruptcy, it’s important to repair your credit as soon as possible. The sooner you start, the better your chances will be.

There are a few things you can do to help repair your credit:

  • Pay all of your bills on time. This includes utility bills, credit card bills, and any other type of bill you may have.
  • Keep your balances low. This means owing less than 30% of the credit limit on your credit cards.
  • If you have collection accounts, try to pay them off. If you can’t pay them off, contact the collection agency and try to negotiate a payment plan.
  • Get a secured credit card. A secured credit card is backed by a deposit you make. They are easier to get than regular credit cards following bankruptcy.

By following these tips, you can repair your credit and improve your chances of getting approved for a Fannie Mae loan after bankruptcy.

Waiting Periods for Other Types of Loans

As mentioned, FHA loans have shorter waiting periods. USDA loans also have a shorter waiting period, three years for bankruptcy. VA loans require a two-year waiting period.

A USDA loan is a 0% down loan available for rural properties. A VA loan is a 0% down loan available to veterans. Either way, these loan products are easier to qualify for than conventional loans—especially for those who have experienced bankruptcy.

Conclusion

Bankruptcy doesn’t have to keep you from getting the home you want. As long as four years have passed, you can safely acquire a conventional loan. You may even be able to get a conventional loan after two years if you suffered from adverse circumstances.

If you go with an FHA loan rather than a conventional loan, you might even be able to get a loan after 12 months.

Bottom line:

  • The Fannie Mae bankruptcy waiting period is four years.
  • Extenuating circumstances may reduce this to two.

FAQs

What is the Fannie Mae waiting period after Chapter 7?

The Fannie Mae bankruptcy waiting period is four years after the discharge date of your Chapter 7 bankruptcy. Mortgage lenders want to see that your financial situation has recovered; otherwise, you may be considered high risk.

How long after bankruptcy can you get a Fannie Mae loan?

If you show that extenuating circumstances, such as job loss or illness, caused your bankruptcy, the waiting period may be shortened to two years. Otherwise, the waiting period will be four years.

Can you get a Fannie Mae loan with bankruptcy?

Yes, you can get a Fannie Mae loan after bankruptcy. The waiting period is four years from the discharge date of your bankruptcy. If you show that extenuating circumstances, such as job loss or illness, caused your bankruptcy, the waiting period may be shortened to two years.

What is the waiting period for bankruptcy?

The waiting period for bankruptcy is four years from the discharge date of your bankruptcy. If you show that extenuating circumstances, such as job loss or illness, caused your bankruptcy, the waiting period may be shortened to two years.

Similar Posts

Leave a Reply

Your email address will not be published. Required fields are marked *