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Waiting periods for home loans after bankruptcy, foreclosure may vary

Many Cincinnati area homeowners have been hit hard by the economic downturn. One of the difficult decisions financially distressed Ohio residents face is what future potential effect a foreclosure, short sale or bankruptcy petition may have on an individual's credit rating. Credit scores do affect the ability to obtain car and home loans, but many people are unaware that is possible to restore credit after adverse credit issues that many have faced, or are facing, in today's economic climate.

A waiting period is generally required after such events as foreclosure, entering a short sale or filing for bankruptcy before an individual or couple will qualify again for a mortgage. However, the length of the waiting period can vary in length depending upon what decisions are made while facing financial trouble. What happens after the event while rebuilding credit is also of vital importance, according to many experts.

There are many factors that are involved in bank's decisions to issue credit. While waiting periods can vary widely based upon what actions are taken during a household financial crisis, subsequent credit related activity, like late payments, also influence the ability to obtain credit down the road. However, waiting periods can generally vary greatly depending upon what actions are taken, and the type of loan sought after a waiting period has elapsed.

For example, if a person filed for chapter 13 bankruptcy, complied with the plan and later has a good credit score based upon post-bankruptcy credit habits, the individual can sometimes get a new loan insured through either the U.S. Department of Veterans or the Federal Housing Administration in as little as a year after the completion of their bankruptcy.

However, some sources say, for those who have gone through foreclosure, the waiting period could be as long 7-years before the individual would qualify for a conventional loan. Many variables do exist, and a number of waiting periods exist depending on the individual circumstances.

It is important to speak with an experienced legal professional when facing unmanageable debt during a rough economy to be able to make informed decisions on how to proceed.

Source: Fox Business, "How to Get a Home After a Foreclosure," Marcie Geffner, Oct. 11, 2011

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