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How Long Does a Debtor Have to Wait to Buy A Home After Filing Bankruptcy?

A common question that Seattle debt relief clients have when considering filing for bankruptcy or creating a debt settlement plan is how long do they have to wait until they can purchase a home. I am not a mortgage professional and the following information should not be taken as legal advice, however the following table may be used for informational purposes only to help you plan whether you think filing bankruptcy or completing a debt settlement plan is an option for you. The table summarizes the waiting period requirements for all significant derogatory credit events. These rules became effective October 1, 2010 with Fannie Mae.

Extenuating Circumstances Which May Cause a Further Wait to Buy a Home After Filing Bankruptcy:

Extenuating circumstances are nonrecurring events that are beyond the borrower’s control that result in a sudden, significant, and prolonged reduction in income or a catastrophic increase in financial obligations.

If a borrower claims that derogatory information is the result of extenuating circumstances, the lender must substantiate the borrower’s claim. Examples of documentation that can be used to support extenuating circumstances include documents that confirm the event (such as a copy of a divorce decree, medical reports or bills, notice of job layoff, job severance papers, etc.) and documents that illustrate factors that contributed to the borrower’s inability to resolve the problems that resulted from the event (such as a copy of insurance papers or claim settlements, property listing agreements, lease agreements, tax returns (covering the periods prior to, during, and after a loss of employment, etc.).

The lender must obtain a letter from the borrower explaining the relevance of the documentation. The letter must support the claims of extenuating circumstances, confirm the nature of the event that led to the bankruptcy or foreclosure-related action, and illustrate the borrower had no reasonable options other than to default on their financial obligations.

*It is also important to note that if a mortgage loan goes more than 120 days delinquent, it will more than likely be viewed as a foreclosure in the credit score system, even if the home ends up in a short sale.

If you have additional questions about how filing for bankruptcy will affect whether you qualify for a home loan call Symmes Law Group at 206-682-7975

  • Richard Symmes

    Hi, Richard here

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