Buying a Home After a Foreclosure
No one applies for a home loan with the intention of defaulting on the note and being foreclosed upon nor does a lender issue a loan with the intention of doing the same. Lenders and borrowers alike go into a transaction with a “win-win” mindset. The buyers get financing and the lender receives interest on the loan. Yet things can go wrong in life as the unexpected happens and a foreclosure is the only way out for some borrowers. However, it’s not the end of the world. A prevailing myth is that a foreclosure keeps you from buying a house for 10 years but that’s simply not the case. Depending upon the type of loan you select and what program you’re qualified for, you can get a brand new home loan sooner than you think.
Government Loans. There are three primary government-backed home loan programs. They are the VA, FHA and USDA mortgage loans and each have provisions to provide financing after a foreclosure. If you’re VA eligible, the waiting period is two years since the foreclosure was officially recorded. FHA loans ask that you wait for up to three years but can be less based upon your situation. If you can document the foreclosure was the direct result of an “economic event” you might be able to get financing in as little as one year. Finally, the USDA program, designed for those in rural and semi-rural areas, the wait time is three years.
Conventional Loans. These are mortgage loans that do not carry a government guarantee with the most common conventional loans being those underwritten to Fannie Mae and Freddie Mac guidelines with the lender taking on 100 percent of the risk. Conventional loans will require there be a seven year waiting period. However, in the event of “extenuating circumstances” that forced the foreclosure, the wait time can be as little as three years.
One final, important note- even though the waiting periods are established guidelines it’s just as important to reestablish credit. This means opening up new lines of credit or an installment loan and making timely payments. If a credit report shows a late payment made more than 30 days past the due date after a foreclosure has occurred, getting a home loan will then be more difficult.
For more information or questions about mortgage loans,
Please visit Majestic Home Loan
Or Call (855) 757-8748