At a glance
- For
- Past bankruptcy, foreclosure, short sale
- Waiting period
- Varies by lender
- Occupancy
- Any
Educational overview, not a loan offer. Requirements vary by lender and borrower.
Overview
Agency and government loans require waiting periods after a bankruptcy, foreclosure, short sale or deed-in-lieu. Non-QM credit event programs can lend sooner, based on how you have managed credit since.
Each lender sets its own seasoning rules, so options depend on the type of event and how long ago it happened.
How a credit event loan works
A credit event loan is a Non-QM mortgage: it falls outside the federal qualified mortgage rules, so the lender writes its own guidelines. It is meant for borrowers whose history includes a bankruptcy, foreclosure, short sale or deed-in-lieu that is too recent for agency or government rules. Instead of applying a fixed agency waiting period, the lender uses its own seasoning schedule and looks closely at how you have handled credit since the event, your current income and your equity.
These are still fully underwritten loans. For a home you live in or a second home, the lender must make a reasonable, good-faith determination that you can repay, using verified income or assets. Many programs use standard income documents, and some pair a shorter waiting period with alternative documentation for self-employed borrowers.
See also
Who a credit event loan can fit
These programs are designed for people whose finances have recovered faster than the calendar allows under agency rules. They are generally not a fit when credit problems are ongoing, such as recent late payments or unresolved collections, because programs look for a clean record after the event.
Examples of who a credit event loan can fit:
- A homeowner who lost a home to foreclosure after a job loss, has worked steadily since and does not want to wait out the full agency period.
- A borrower discharged from a Chapter 7 bankruptcy more recently than conventional rules allow, with on-time payments since.
- Someone who completed a short sale during a relocation and has rebuilt savings.
- A self-employed owner whose business failed, who now has a new income source and an event that is still recent.
Waiting periods: agency rules and lender rules
Agency and government waiting periods are the benchmark. Fannie Mae generally requires four years after a Chapter 7 bankruptcy, two years after a Chapter 13 discharge, four years after a short sale or deed-in-lieu and seven years after a foreclosure, with shorter periods when extenuating circumstances are documented. FHA generally requires two years after a Chapter 7 discharge and three years after a foreclosure, deed-in-lieu or short sale, with exceptions. VA reviews each case under its credit standards, and a discharge within the past year generally prevents a favorable decision.
Non-QM credit event programs set their own schedules. Some lenders consider events far more recent than agency rules allow, while others require nearly as long. Some tie the equity required to how long ago the event happened, and some treat a loan modification, forbearance or notice of default as an event too.
Rebuilding credit after the event
Accounts paid as agreed since the event are the evidence lenders look for, along with no new collections, judgments or late housing payments. A burst of new accounts just before you apply can raise questions, so steady use of a few accounts usually tells a clearer story.
The event will show on your credit report for some time. The CFPB explains that most negative information can generally be reported for seven years and bankruptcies for up to ten. Lenders set score minimums by program, and some Non-QM credit event programs accept lower scores than expanded prime programs, usually in exchange for more equity.
See also
Equity and cash after a credit event
Equity is the main lever in credit event lending. The more recent the event, the more of your own money many programs require, and some accept newer events only on purchases or rate-and-term refinances, not cash-out. A few programs aimed at very recent events are limited to borrowers with very large equity and are not offered in every state.
Agency rules show the same pattern. After a foreclosure, Fannie Mae allows a principal residence purchase or a limited cash-out refinance between three and seven years only with documented extenuating circumstances and a lower maximum loan-to-value, and it does not allow second home or investment purchases or cash-out refinances until seven years have passed.
Income and event documentation
Income is documented under the program's normal rules, whether full documentation or an alternative such as bank statements. Dates matter. For manually underwritten loans, Fannie Mae counts its waiting period from the completion, discharge or dismissal date to the date the new loan is disbursed, while FHA measures from the discharge date, or the date title transferred, to the date the FHA case number is assigned. Non-QM lenders choose their own measuring points.
What sets these files apart is the paperwork about the event itself:
- Bankruptcy petition, schedules and discharge or dismissal order
- Foreclosure, deed-in-lieu or short sale documents showing the completion date
- A written explanation of what happened and what has changed
- Proof of extenuating circumstances if you rely on them, such as a layoff notice or medical bills
- Evidence that debts not discharged in bankruptcy are paid or on a repayment plan
Property types for credit event loans
Credit event programs commonly cover primary residences, second homes and investment property, with property types that follow the lender's general Non-QM list. Occupancy can change how much equity is required and whether cash-out is available.
If you are buying a rental soon after a credit event, investor programs that qualify on the property's rent have their own seasoning rules, which can be stricter or looser than consumer programs. Ask your loan officer to compare both, and say early how you plan to use the property, because that choice shapes which programs and waiting periods apply.
Why borrowers consider credit event programs
For some households, buying or refinancing sooner can mean stable housing earlier. It can also mean paying more for credit than waiting would, so it is worth comparing both paths.
- A possible path to a mortgage before agency waiting periods end.
- Lenders weigh your recovery, not just the date of the event.
- Full or alternative documentation options at many lenders.
- Several occupancy types at many lenders.
- A later refinance into another program may be possible once agency waiting periods pass, though it is not assured.
See also
Cost and limits after a bankruptcy, foreclosure or short sale
Credit event loans usually carry noticeably higher rates and costs than agency loans and often require substantial equity and reserves. Over several years those added costs can add up, so compare borrowing now with waiting until an agency waiting period ends.
Stretching to buy soon after a financial setback also adds risk. Build a budget that leaves room for emergencies, and be wary of anyone who promises approval regardless of your history. If a later refinance is part of your plan, remember that it depends on future rates, home values and your credit at that time.
Talk it through with Ruben
Credit event loans compared with agency and government loans
Government programs can be more forgiving than conventional loans after a credit event, so they belong in the comparison if you are eligible. The table compares features only.
FHA loans are for homes you live in and carry FHA mortgage insurance, and VA loans require eligible service. If a government option fits your timing, it is often worth comparing before a Non-QM loan; if none does, a credit event program can bridge the gap. Your loan officer can line up your exact dates against each program.
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| Feature | Credit event (Non-QM) | Conventional | FHA | VA |
|---|---|---|---|---|
| Who sets the waiting period | Each lender | Fannie Mae or Freddie Mac | HUD | VA, case by case |
| Hardship exceptions | Lender's discretion | Documented extenuating circumstances | Documented extenuating circumstances | Circumstances beyond your control |
| Credit since the event | Clean record expected | Re-established traditional credit | Good credit or no new debt | Satisfactory payments since |
| Occupancy | Often primary, second home or rental | Primary, second home or rental | Home you live in | Home you live in |
| Who can use it | Eligible borrowers | Eligible borrowers | Eligible borrowers | Eligible veterans, service members and surviving spouses |
| Typical fit | Event too recent for agencies | Waiting period has passed | Shorter waits than conventional | Veterans recovering from an event |
Compare with
Credit event scenarios: a foreclosure, a discharge, a repayment plan
Illustrations only; real outcomes depend on exact dates, documents and the lender's guide.
- A teacher went through a foreclosure two years ago after a divorce. FHA generally does not treat divorce as an extenuating circumstance, but it may grant an exception when the mortgage was current at the time of the divorce, the former spouse received the home and it was foreclosed later. Fannie Mae's waiting period has not passed, so her loan officer checks whether the FHA exception fits and compares a Non-QM credit event program.
- A contractor received a Chapter 7 discharge eighteen months ago after his business failed and now has a salaried job. FHA could consider a period between one and two years with documented circumstances beyond his control; otherwise a Non-QM program may fit.
- A veteran in a Chapter 13 plan has made a year of on-time plan payments. With trustee or court approval VA may consider him, and his loan officer compares that with a Non-QM option after discharge.
- A couple completed a deed-in-lieu two years ago and wants a rental property, so their loan officer compares investor programs with credit event options.
Preparing a file after a credit event
Preparation matters more than usual in a credit event file. Errors on credit reports, such as a discharged debt still showing a balance, can slow things down, and disputing them early helps. Typical steps:
- Pull your credit reports and confirm the event dates and that discharged debts show a zero balance.
- Gather the court or servicer documents that prove completion dates.
- Write a short, factual explanation of what happened and what has changed.
- Your loan officer compares agency, government and Non-QM timelines for your exact dates.
- Underwriting reviews the event, your recent credit and your income while the appraisal and title work proceed.
Credit event myths about waiting periods and short sales
Lenders look harder when new late payments appear after the event, when there were multiple events, or when debts that survived the bankruptcy remain unpaid. Common myths:
- Myth: I have to wait seven years for any mortgage. Reality: Waiting periods depend on the event and the program, and many are shorter.
- Myth: A short sale is treated like a foreclosure everywhere. Reality: Fannie Mae gives short sales and deeds-in-lieu a shorter wait than foreclosure, and FHA has an exception for borrowers who were current before the sale.
- Myth: Once the waiting period ends, approval follows. Reality: Lenders still review re-established credit, income and equity.
- Myth: Non-QM lenders ignore the event. Reality: They price and limit loans based on it.
Common questions
14 questions
How soon after a bankruptcy can I buy?
It depends on the type of bankruptcy, when it was discharged or dismissed, and the program. Conventional, FHA and VA each measure the wait differently, and Non-QM lenders set their own schedules, which are often shorter but usually come with higher costs and larger equity requirements. The waiting periods section on this page compares them, and your loan officer can line up your exact dates against each.
How long do conventional loans make you wait after a bankruptcy or foreclosure?
Under Fannie Mae rules, the standard wait is four years after a Chapter 7 bankruptcy discharge or dismissal, two years after a Chapter 13 discharge, and seven years after a foreclosure. Documented extenuating circumstances can shorten some of these, for example to three years after a foreclosure. Non-QM credit event programs set their own timelines, which are often shorter.
Can I buy a home while I am still in a Chapter 13 plan?
Possibly. FHA allows it once at least 12 months of plan payments have been made on time and the bankruptcy court gives written permission, and VA rules are similar with trustee or court approval. Conventional loans sold to Fannie Mae instead measure the wait from the discharge or dismissal date.
What counts as an extenuating circumstance?
Fannie Mae defines it as a one-time event beyond your control, such as a layoff or a serious medical problem, that caused a sudden, significant and lasting drop in income or a large jump in expenses. You will need documents showing the event and a written explanation of why you had no reasonable option other than to default. When documented, it can shorten conventional waiting periods.
Does a short sale or deed-in-lieu count the same as a foreclosure?
Not for conventional loans. Fannie Mae asks for four years after a short sale or deed-in-lieu, or two with documented extenuating circumstances, compared with seven years after a foreclosure. Many Non-QM programs use one timeline for all of these events.
What do lenders look for after the waiting period?
They want to see rebuilt credit: on-time payments since the event and no new serious problems. Fannie Mae also requires traditional credit accounts rather than a thin or nontraditional credit file, and VA generally looks for 12 months of satisfactory payments after the last credit problem when no bankruptcy is involved.
When does the waiting period start and end?
It depends on the program. Fannie Mae starts the clock on the completion, discharge or dismissal date of the event and, for manually underwritten loans, stops it on the date the new loan is disbursed. FHA measures from the bankruptcy discharge date, or the date title transferred in a foreclosure or short sale, to the date the FHA case number is assigned. Non-QM lenders set their own measuring points, and some count only to your application date.
Does a loan modification or forbearance count as a credit event?
Sometimes. Fannie Mae's waiting periods focus on bankruptcies, foreclosures, deeds-in-lieu, short sales and mortgage charge-offs, but lenders still review your payment history around a modification or forbearance. Some Non-QM guides treat a modification or a notice of default as a credit event with its own waiting period, while others look mainly at whether payments have been on time since. Bring the agreement and your payment records to your loan officer.
How long will a bankruptcy or foreclosure stay on my credit report?
The CFPB explains that credit reporting companies can generally report most negative information for seven years, and bankruptcies for up to ten years. Lenders usually care more about the event's date and your record since than about whether it still appears. Accounts paid on time after the event start building a better picture right away, even while the older item remains on your report.
What if my old mortgage was included in my bankruptcy and the home was foreclosed later?
Fannie Mae addresses this directly. If documents show the mortgage debt was discharged in the bankruptcy, the lender may apply the bankruptcy waiting period instead of the longer foreclosure period. Without that documentation, the longer of the two applies. Non-QM lenders have their own rules for overlapping events, so keep the bankruptcy schedules that list the mortgage along with the discharge order.
Can I take cash out or buy a rental soon after a credit event?
It is harder. After a foreclosure, Fannie Mae does not allow cash-out refinances or second home and investment purchases until seven years have passed, even with extenuating circumstances. Some Non-QM programs also limit cash-out or require more equity when an event is recent. Investor programs that qualify on rent have their own seasoning rules, so your loan officer can compare those separately.
Does divorce count as an extenuating circumstance?
It depends on the program. FHA says divorce is generally not an extenuating circumstance, with an exception when the mortgage was current at the divorce, the former spouse kept the home and it was later foreclosed. VA also does not generally view divorce as beyond your control. Fannie Mae's guide lists a divorce decree among documents that can support an extenuating circumstance if the event meets its definition. Non-QM lenders decide under their own guides.
Can I get another VA loan after a foreclosure on a VA loan?
Possibly. VA's rules say a past foreclosure does not by itself disqualify you, and lenders review it much like a bankruptcy. If VA paid a claim on the old loan, though, the entitlement used on it cannot be restored until the government's loss is repaid, so you may have only your remaining entitlement for the new loan. Your loan officer can review your Certificate of Eligibility with you.
Can my spouse apply alone if only I had the credit event?
Sometimes that works. Federal rules bar a creditor from refusing an individual account to a creditworthy applicant because of marital status, so a spouse can apply alone. Only that person's income, assets and credit then count, and they must meet the program's requirements on their own. Title, state property laws and the lender's rules for non-borrowing spouses can also matter, so compare applying jointly and individually with your loan officer.
This page explains how this type of loan generally works. Programs, guidelines and availability vary by lender and change often. Contact Ruben to see which options are available for your scenario today.