Having a foreclosure in your past not only damages your credit score, it puts you in a holding pattern before you can purchase another home. There’s no simple answer to how soon after a foreclosure you can purchase again, just as there is no single factor that led to foreclosure. All the lending programs available for mortgages carry “special circumstances” waivers that put the waiting period on a sliding scale. But wait you must, so use the down time to rebuild your credit, reduce debt and build a savings account that’ll cover a down payment and give you reserve holdings.
Conventional loans, those underwritten by commercial mortgage lenders and resold to federally chartered Fannie Mae or Freddie Mac, require a seven year waiting period between a foreclosure and a repurchase. The down payment requirements are stringent, usually between 10 percent and 20 percent. However, a product named the Conventional 97 allows a 97 percent mortgage if the borrower’s credit score is 680 or better and the down payment funds are not borrowed. Use the seven years -- or less, if there were special circumstances that led to the foreclosure -- to improve your credit score that'll enable you use the Conventional 97 program.
Federal Housing Administration
The FHA doesn’t write loans, it insures them, which is why anyone carrying an FHA loan must also add mortgage insurance to their monthly payments. Lenders writing these loans use the FHA guidelines that set three years as a waiting period before a new loan can be processed after a foreclosure. A credit score minimum of 680 is required.
Department of Veterans Affairs
A two-year recovery period is required by the VA before a member can apply for a new mortgage after suffering a foreclosure. If the original mortgage was backed by the VA, then the borrower may have to make restitution to the department, or suffer a reduced borrowing ability. Consistency in income and ability to repay the mortgage are scrutinized.
While waiting for time to pass before applying for a new mortgage, rebuild your credit. Start by getting a secured credit card from your bank and paying off the outstanding balance every month. Reduce your debt to a maximum of 38 percent of your gross monthly income. While different lenders have different parameters for this debt level, keeping it under 40 percent carries weight. Stay in one job or in the same field and show consistent income. Build your savings to show you have the funds for a down payment and additional savings for reserves.
- Bankrate.com: MSN Real Estate: Getting a Mortgage After Foreclosure
- The Mortgage Reports: Fannie Mae Conventional 97% Mortgage: Loan Guidelines Plus Mortgage Rates
- The Mortgage Reports: FHA May Waive its 3-Year Foreclosure Waiting Period
- Direct VA Loans: VA Loan Qualifications After Foreclosure
- Realtor.com: How Soon Can You Buy a Home After a Foreclosure?
Jann Seal is published in magazines throughout the country and is noted for her design and decor articles and celebrity *in-home* interviews. An English degree from the University of Maryland and extensive travels and relocations to other countries have added to her decorating insight.