1 Day Out of Short Sale, Bankruptcy, & Foreclosure Purchase and Refinance
Getting a mortgage so soon after defaulting can be difficult, and the requirements and terms of the loan are likely to be much stricter than loans received under other circumstances. Every lender is going to have different regulations for these loans, of course, but here are some of the requirements you may see:
- A minimum credit score between 600 and 650.
- A larger down payment than with other mortgages – often as much as 20%.
- A reserve of funds from which to make mortgage payments – often six months minimum.
- The debt-to-income ratio may be stricter.
- Borrowers may have to submit explanations as to why they defaulted on their previous mortgage or did a short sale and how, if at all, their financial circumstances will change.
- The property will have to serve as the borrower’s primary residence.
- The bankruptcy has to be done in correlation with a foreclosure or short sale. It cannot be a separate event.
- The mortgage will most likely have a higher interest rate and may be either a fixed or an adjustable rate mortgage. Again, this differs from lender to lender. Some require the mortgage to be a 5/1 or 7/1 adjustable rate mortgage.
- If the borrower had late mortgage payments prior to the sale or foreclosure, those missed payments must be explained. Some lenders will place a limit on how many missed payments the borrower could have had within the past 12 months.
- Borrowers will need to provide all documentation for their income.
- Those who have other blemishes on their credit may need to take steps to correct them, such as by paying off judgments or making accounts current, before lenders will consider giving them a new mortgage.