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How long do you have to wait to buy a house after a foreclosure?

Getting a residential mortgage to buy a house can be difficult for any prospective home buyer, but if you have a foreclosure on your credit report, the challenges are even greater 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 before you buy another house using a mortgage loan. How long you’ll need to wait depends on the type of loan you’re seeking.

For VA loans, the waiting period is 2 years.

For FHA loans and USDA loans, the waiting period is 3 years.  The three-year clock starts ticking from the time that the foreclosure case has ended, usually from the date that your prior home was sold in the foreclosure proceeding.

For Conventional loans sold to Fannie Mae or Freddie Mac, the waiting period is 7 years and with documented “extenuating circumstances” the waiting period may be reduced to 3 years with a 10% down payment.  Extenuating Circumstances means demonstrating to the lender that the foreclosure was caused by a one-time event that was beyond your control, such as a:  serious illness, death in family, divorce, job loss. 

For Conventional loans not backed by Fannie Mae or Freddie Mac, then it varies by lender. If a home buyer makes a larger down payment (sometimes 25% or more) and agrees to a higher interest rate this will shorten the post-foreclosure waiting period.

Don’t forget your FICO score decrease significantly too.  To re-establish good credit and boost your FICO score, you should:

    • pay your bills on time, consistently
    • keep your credit account balances low
    • monitor your credit report for errors and inaccuracies
    • maintain a small number of credit accounts

 

September 9, 2014 Posted by | Uncategorized | Leave a comment