Guidelines for Obtaining a Mortgage After a Negative Credit Event

We have put together a guide below to help people who have recently had a foreclosure, short sale, bankruptcy, deed in lieu, or loan modification to figure out the timeline for when they are next able to purchase a home.

Step 1: Fix Your Credit and Plan Ahead

Returning buyers must meet minimum credit thresholds to obtain mortgage finance. The credit repair process ranges from simple to complex. Central Coast Lending is hands-on in helping our clients with credit repair.

“We worked with a client for well over a year on repairing their credit from a bankruptcy and short sale,” said Grote. “When they first came in they had a 560 credit score and by the time we finished up our work, the final score was 671.”

Grote and Central Coast Lending helped comb through the client’s finances to find cases of misreported debt.

[Read our credit repair guide for mortgage qualification]

Credit repair cases for foreclosure and bankruptcy tend to take longer than short sales. Central Coast Lending can help, but the process can take time. Give us a call at 805.543.LOAN to get started.

Step 2: Get Educated


Different loan programs have different guidelines. Let’s start here:

FHA Back-to-Work Program

  • 12 months after a foreclosure, short sale, or bankruptcy, providing they had extenuating circumstances prohibiting their ability to repay the loan.
  • “Extenuating circumstances” include loss of job (economic reasons), health difficulties, death in the family, or divorce.


  • 12 months (FHA Back-to-Work)
  • 36 months (FHA, VA, and USDA)
  • As low as 36 months (Conventional with extenuating circumstances)
  • 84 months (Conventional without extenuating circumstances)

Short Sales

  • 24 months (Conventional with extenuating circumstances)
  • 36 months (FHA, USDA, and VA if borrower was delinquent at time of transfer)
  • 48 months (Conventional without extenuating circumstances)

Deed in Lieu

  • 36 months (FHA, USDA, VA)
  • 48 months (Conventional)

Chapter 7 Bankruptcy

  • 24 months (FHA and VA – from discharge date)
  • 36 months (USDA – from discharge date)
  • 48 months (Conventional – from discharge date)

Chapter 13 Bankruptcy

  • 24 months (Conventional from discharge date, FHA, and VA)
  • 36 months (USDA)
  • 48 months (Conventional from dismissal date)

Loan Modification

  • 24 months (if no principal reduction)
  • DU / LP Approval (FHA, VA, Conventional)

Step 3: Get Creative

Central Coast Lending recently helped map out a path to affordable ownership that took two loans and over six months to complete.

The clients were 18 months removed from a short sale, and wanted to return to the market while the window of affordable buying conditions (low interest rates and low home prices) was open.

Central Coast Lending used the FHA Back-to-Work program to get them in the door and purchase a home.

Over the following six months, market appreciation helped improve the value of their new property. At the 24 month threshold, the borrowers had built a 20% equity stake in their now property – an 80% loan-to-value on the home.

The clients now qualified for a conventional loan, and Central Coast Lending helped them refinance to eliminate the monthly mortgage insurance charged by their initial FHA-backed loan.

In conclusion… Keep Your Options Open!

We have offered education, expertise, and creativity as important steps to take in returning to the market. The final step is to shop around and learn about the possibilities before agreeing to anything.

Central Coast Lending is a California mortgage broker and direct lender based on the Central Coast of California in San Luis Obispo County. Call us at 805.543.LOAN or email us here to set up a free pre qualification. We are happy to help.

Step 1. Get Pre-Approved.

Getting pre-approved is as easy as 1-2-3!

Create an Account

Creating an account is fast, easy, secure and FREE! Your account enables you to easily modify your loan application and view the status of your loan anytime day or night.

Submit Information

When you register for a Loan Center account, you can submit a loan application online and the sensitive information that you provide will be transmitted securely.

Get Pre-Approval

Pre approval can be done in as little as an hour if you have thoroughly completed the loan application and have all the needed paperwork to support the information on the application.

You have questions? We have answers.
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