Many house-hunters often wonder, do you need good credit to buy a house? It is well known that credit scores can affect your ability to secure a home loan, especially if you have experienced a negative credit event such as bankruptcy, short sale, or foreclosure. But how long do these incidences affect your credit? When can you purchase a home again, and what can you do in the meantime to bring your credit score back up? We’ll cover all these questions – and more – below.

How long does negative credit remain on your report?

Unfortunately, something as small as missing a payment can stay on your credit report for months, making you feel like a bad student with a strike on your permanent record. Here are some common examples of how long each will show up on your report:

• Foreclosure – 7 years from the date of the first missed mortgage payment that led to your foreclosure
• Bankruptcy – 10 years from the filing date for Chapter 7 & 11, and 7 years from the filing date for Chapter 13
• Repossession – 7 years from the date of the first missed payment that led to the repossession
• Charge-off – 7 years from the date of the first missed payment that led to a charge-off
• Collection – 7 years plus 180 days from when the account became past due
• Late payment – 7 years
• Credit inquiry – 2 years from the inquiry date

When can I buy a home again?

While many believe that you need good credit to buy a house – or even perfect credit – you will be happy to learn that there are other options. The waiting period between buying a home and experiencing a credit issue is not as long as you may think. Below, we outline the different types of home loans you may qualify for – but keep in mind that these may vary based on individual cases.

FHA Loan:

• 3 years after a foreclosure
• 3 years after a short sale
• 2 years after Chapter 7 bankruptcy
• 1 year after Chapter 13 bankruptcy

VA Loan:

• 2 years after a foreclosure
• No waiting period after a short sale if it was voluntary
• 2 years after Chapter 7 bankruptcy
• 1 year after Chapter 13 bankruptcy

USDA Loan

• 3 years after a foreclosure
• 3 years after a short sale
• 3 years after Chapter 7 bankruptcy
• 1 year after Chapter 13 bankruptcy

Freddie Mac

• 7 years after a foreclosure
• After a short sale, you may be eligible to buy right away if your lender receives an automated approval through Freddie’s Loan Product Advisor underwriting system.
• No waiting period after Chapters 7, 11, and 13 Bankruptcy if your lender receives an automated approval through Freddie’s Loan Product Advisor underwriting system

Fannie Mae

• 7 years after a foreclosure
• 4 years after a short sale
• 4 years after Chapter 7 Bankruptcy
• 2 years after Chapter 13 Bankruptcy

How can I increase my score?

If you ran into some hard times, it does not mean that your credit history is doomed forever. There are steps you can take today to build it back up!

• Make all of your payments on time and pay down your credit card balances.
• Get a free copy of your credit report annually, and dispute inaccurate data.
• Only run your credit report when truly needed to minimize hard inquiries that could lower your score.
• Settle any remaining collections or pay-offs.

How do I dispute an error on my credit?

When your credit is pulled, it is important to carefully look it over and verify that there are no mistakes. After all, you don’t want to get docked for a missed payment or financial incident that never happened! If you find a mistake, reach out to the credit bureaus using their online forms. Be sure to include copies of the disputed documents and explain what is incorrect.

You can expect credit report companies to investigate your request and respond to you within 30 days. Once they complete the process, you should receive their decision in writing.

The Byron Mortgage Team is here to improve your credit!

If you are wondering if your credit is too low to apply for a home loan, The Byron Mortgage Team is here to help. We’ll meet with you to get an idea of your unique financial situation, help you determine whether you qualify for a mortgage, and find ways to improve your credit. Are you ready to start your homeownership journey? Reach out to me today to get started!