New changes from Fannie Mae will make it easier for people to get approved
for a mortgage after a bankruptcy, foreclosure, or short sale. The mortgage-backer
has reduced the mandatory waiting period for reapplying for a loan, which
used to be four years, down to only two years with documentation of extenuating
circumstances. This is one year longer than the FHA’s minimum waiting
period through the FHA Back to Work program, in which certain borrowers
are eligible to apply for a loan just 12 months after any of the following events:
- A short sale
- A pre-foreclosure
- A mortgage loan charge-off
- A deed-in-lieu of foreclosure
- A bankruptcy
These circumstances can impact a credit score by 100 points or more, so
keep in mind that just because you qualify for a conventional mortgage
through Fannie Mae does not necessarily mean it is the best option. It
is important to compare rate quotes against FHA mortgage rates to ensure
that you are getting the best deal.
This change allows flexibility for borrowers who can demonstrate that the
above actions were due to extenuating circumstances, which Fannie Mae
defines as situations that 1) occur one time only, 2) are beyond the borrower’s
control, and 3) result in a significant and prolonged reduction in income.
Examples of extenuating circumstances may include an illness, job loss,
Borrowers who wish to reapply for a loan should be prepared to provide
documentation to prove their claim, which can include things like medical
bills, job severance papers, a divorce decree, etc. They should then be
prepared to draft a letter explaining their hardship and that since then,
all financial obligations have been paid on-time.
Effective Bankruptcy & Foreclosure Defense in Chicago, IL
If you are facing foreclosure or are considering filing for bankruptcy,
it is important that you know that you can start over much sooner than
you think. We encourage you to speak with a Chicago bankruptcy attorney
at Sulaiman Law Group, LTD about your options for regaining your financial
footing and protecting your future.
schedule a consultation, please call us at (312) 313-1613.