The program requires a minimum of three years from the date of a bankruptcy, foreclosure, or short sale prior to the borrower being eligible for a USDA Loan. For a Chapter 7 bankruptcy, the borrower must allow three years from the discharge date prior to submitting a new loan request. For a Chapter 13 bankruptcy the waiting period is 12 months after the completion of the court ordered repayment plan. If the bankruptcy included a property, whether a primary residence or investment property, the earliest a new loan can be obtained is based on USDA Loan short sale and foreclosure guidelines.
When the borrower experienced either a short sale, foreclosure, or surrenders the property through the bankruptcy process, there will be a three year waiting period between the date of property transfer from the borrower to a new entity, and the date the new loan application can be processed. The most conservative stance by a USDA Loan Underwriter for defining the date of the negative occurrence is the legal recorded transfer date, which is the date the property has been transferred out of the borrowers name and either back to the bank that holds the mortgage note or a subsequent home buyer. From this date the borrower will not be eligible for a USDA Loan for a period of time no less than three years.
However, one of my investors will allow a Chapter 7 bankruptcy discharge date to be considered the date of foreclosure, provided the borrower didn't re-affirm the mortgage liability. This differs from when the property transfer date is recorded at the County Clerks Office. This is especially helpful in circumstances where the home owner legally removed their ownership rights to a property, through a Chapter 7 bankruptcy, but the mortgage lien holder was slow to transfer the mortgage back into the name of the bank or sell the property.
If the foreclosed property was secured by a government backed mortgage loan such as a FHA or VA Loan, the property transfer date is no longer considered the only variable in determining the timeframe for buying a new house. Another important date, is the date when the mortgage lender that held the mortgage note received compensation for their mortgage insurance claim through either The Department of Housing and Urban Development for a FHA Loan or The Veterans Administration for a VA Loan. The date of the mortgage insurance claim is identified through a CAIVRS search, which is required on all USDA Loans.
Joel Lobb (NMLS#57916)
Senior Loan Officer
Text/call 502-905-3708
American Mortgage Solutions, Inc.
10602 Timberwood Circle Suite 3
Louisville, KY 40223
Company ID #1364 | MB73346
kentuckyloan@gmail.com
If you are an individual with disabilities who needs accommodation, or you are having difficulty using our website to apply for a loan, please contact us at 502-905-3708.
Disclaimer: No statement on this site is a commitment to make a loan. Loans are subject to borrower qualifications, including income, property evaluation, sufficient equity in the home to meet Loan-to-Value requirements, and final credit approval. Approvals are subject to underwriting guidelines, interest rates, and program guidelines and are subject to change without notice based on applicant's eligibility and market conditions. Refinancing an existing loan may result in total finance charges being higher over the life of a loan. Reduction in payments may reflect a longer loan term. Terms of any loan may be subject to payment of points and fees by the applicant
Equal Opportunity Lender. NMLS#57916
