If You’ve Had A Foreclosure, You Are Still Eligible To Buy A Home, Or Refinance Your Existing Residence.
Underwriting guidelines differ for home loan applicants who’ve undergone significant credit events. The good news is that you can still obtain financing with attractive rates and terms. Here’s how it works.
Sometimes circumstances in our lives cause us to experience major credit events such as bankruptcy, foreclosure, deed-in-lieu of foreclosure, a pre-foreclosure home sale, or short sale. Lenders understand that Life Happens, and underwriting guidelines invariably provide for the treatment of applicants who’ve gone through a rough patch. Below are the rules for clients who’ve experienced a prior foreclosure.
The general rules regarding loan approval after a foreclosure are set forth below:
- The borrower had good credit before the foreclosure.
- You’ve had good credit after the foreclosure.
- The foreclosure was caused by a one time event (or one time confluence of events)
- You’re now recovered and the circumstances that led to the foreclosure (huge medical expenses, job loss, excessive debt, divorce, unexpected expenses, reduction of income, etc.) no longer exist.
- Lifestyle adjustments have been made so that circumstances that led to the foreclosure will not recur.
Waiting Periods
Third date? Third week? Third month?
Well, none of the above. For foreclosures it’s more like the third year, or longer. Here’s the scoop:
Conventional Loans: Seven (7) years, measured from the completion date of the foreclosure action (e.g., the date the home’s title is transferred back to the lender, or transferred to the buyer at trustee’s sale, or date of court order if a judicial foreclosure). In the presence of extenuating documentable circumstances, the waiting period is three (3) years from the completion date of the foreclosure action, with a 10% down payment.
FHA Loans: Three (3) years, having established good credit since the foreclosure, measured from the completion date of the foreclosure action (e.g., the date the home’s title is transferred back to the lender, or transferred to the buyer at trustee’s sale, or date of court order if a judicial foreclosure). In the presence of extenuating documentable circumstances, the waiting period is one (1) year from the completion date of the foreclosure action.
VA Loans: Two (2) years, measured from the completion date of the foreclosure action (e.g., the date the home’s title is transferred back to the lender, or transferred to the buyer at trustee’s sale, or date of court order if a judicial foreclosure).
USDA Loans: Three (3) years, measured from the completion date of the foreclosure action (e.g., the date the home’s title is transferred back to the lender, or transferred to the buyer at trustee’s sale, or date of court order if a judicial foreclosure). In the presence of a temporary situation beyond the applicant’s control, that’s been resolved for at least a year, the wait period may be shorter. A shorter wait period may also be allowed if the new mortgage will cut your housing expenses significantly (i.e., 50% or more).
Specialty Loan Products featured by SLG: No foreclosure waiting period.
To find out more about foreclosure wait periods, please contact us today.
Call 855.SLG.FUND (855.754.3863) or inquire below.
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