After Foreclosure, Wait Time Varies for New Loan

Life after foreclosure still goes on.  And if you are trying to prepare yourself to purchase another home, it may take a little more time than you thought.  The waiting periods for various types of loans are different.  Read the article below to know what to expect:

Getting life after foreclosurea mortgage can be difficult for any prospective homeowner, but if you have a foreclosure on your record, the challenges are even greater – though not impossible – to overcome.

Many lenders are willing to look past a foreclosure, but you’ll have to reestablish your credit rating and wait a certain length of time. How long you’ll need to wait depends on the type of loan you’re seeking.

Conventional Loans

Every mortgage loan type requires a waiting period before you can apply after a foreclosure. Conventional loans backed by Fannie Mae or Freddie Mac require the longest waiting period: “Seven years from completion,” according to Nick Wilson, a production partner at RPM Mortgage Inc. in Bellevue, WA. Conventional loans may also come with stricter credit and debt-to-income requirements.

VA Loans

The Department of Veterans Affairs-backed loans have a two-year waiting period, according to Wilson. However, not everyone qualifies for a VA loan. To apply, either you or your spouse must be a veteran or currently serving in the United States military.

FHA Loans

Recent changes in Federal Housing Authority rules have made it possible to get an FHA-backed loan as soon as a year after completing foreclosure, if you can prove an economic event outside of your control caused the foreclosure. According to the U.S. Department of Housing and Urban Development, you must have documented proof that a catastrophic event such as a job loss or medical emergency reduced your income by 20 percent for over six months. If you can’t provide proof of such an economic event, the standard waiting period for an FHA loan is three years, Wilson said.

Meeting Requirements

On top of losing your home, going through a foreclosure will be a big blow to your credit score. “A foreclosure can lower someone’s credit score by 100 or more points,” Wilson said. To qualify for a new mortgage loan, you’ll have to re-establish your credit and finances.

While Wilson says ‘there is not a ‘one size fits all’ plan to prepare someone for buying again,” basic steps like -committing to positive credit actions” and ‘saving money to purchase a home in the future? are vital if you want to apply again after passing the wait period.

To re-establish your credit, pay all of your bills on time, be careful not to max out any credit cards, and don’t take on a lot of new debt after your foreclosure. If you rent after your foreclosure, look for a landlord who participates in Experian’s RentBureau program. Timely rental payments are reported and can also help boost your score.

Finally, make saving money a goal early on.

Individual banks may require a larger down payment,” Wilson said. “Some require 10 percent down after foreclosure.? Be prepared to have a down payment and additional liquid assets when you apply for a loan.

By: Jan 2, 2014


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