Denver Real Estate Law and Family Law Blog. (Vol 1.42) September 1, 2014
By Craig Franklin Chambers Esq. 7851 S. Elati Street #204, Littleton, CO 80120
The Littleton Lawyer.
As a Colorado real estate and divorce attorney, practicing in Arapahoe, Jefferson, Denver, and Douglas Counties, including Denver, Littleton (including Columbine and Ken Caryl), Highlands Ranch, Lone Tree and Lakewood, I recently wrote a blog about the length of time required to wait to acquire financing after a foreclosures or a bankruptcy.
This is important because when I review real estate contracts and real estate transactions, I verify the buyer can qualify for the loan proposed in the real estate contract. Loan requirements are always changing, and on August 16, 2014 the guidelines were once again changed.
Just to be clear, all of these exit strategies arise from financial hardship and all severely impact your credit. A bankruptcy is a statutory process that wipes away most of your debts and enables a borrower to start over. A foreclosure occurs when you fail to make the payments and the house goes to sale by the public trustee. A deed in lieu of foreclosure is when you negotiate with the bank to give the home back to the bank to avoid foreclosure. A short sale is when you negotiate with the bank to sell the home to a third party buyer. In a deed in lieu of foreclosure, or a short sale, any loan deficiency may or may not included in the negotiations.
According to a mortgage broker, under the revised loan requirements, a home-buyer can purchase a home with a new FHA or VA loan within 2 years of discharge of a Chapter 7 bankruptcy and within 1 year after dismissal of a Chapter 13 bankruptcy. However, the wait for a FHA loan is 3 years after a deed in lieu or short sale a foreclosure. For a VA loan, the wait is two years for a foreclosure and a deed in lieu.
For a conventional loan, it is a 4 year wait after discharge for a Chapter 7 bankruptcy and 2 years after a Chapter 13 bankruptcy. The wait after a foreclosure is 7 years and 4 years for a short sale or a deed in lieu of a foreclosure
Of course, home loan qualification underwriting requirements are always changing, and there are different loan underwriting requirements depending on the type of loan you are seeking and other factors such as the loan-to-value ratio and what efforts you have made to re-establish your credit.
Given the recent turn-around in the real estate market, another strategy could just be to sell the property. It is easy to assume a home is upside down, but with the appreciating market, it is better to make sure before making a big financial decision. You might be surprised how much your home is now worth.