Many people who have gone through the foreclosure process wonder if they will ever able to buy a house again. While a foreclosure can be a big blow to your credit score, you may eventually be able to get another mortgage, but you’ll have to wait. The amount of time you must wait before applying for a new mortgage depends on your financial circumstances and your lender.
You Must Get Your Credit Score Up
While your credit will be hurt after foreclosure, you may be able to get another mortgage after some time passes. Some foreclosures can stay on your credit history for up to seven years and are factored into your FICO scores for all of that time period. The seven-year period can also apply to short sales, settlements with credit-card companies, and other negative events.
Even after the seven year timeframe, you must still have a qualifying credit score in order to obtain a home loan. So before you’re ready to buy a home again, you should begin looking at your credit at least 6 months ahead of time.
Lenders Have Their Own Wait Time
Most lenders may have some of their own guidelines for foreclosures. Depending on the type of home loan you are trying to obtain, your lender, and your financial situation, the timeframe for each program will differ:
- FHA: You may apply for a FHA loan 3 years after the sale/deed transfer date. Exceptions to the 3 year waiting period include serious illness or death in the family, divorce, or job loss.
- VA: You may apply for a VA guaranteed loan 2 years after a foreclosure.
- USDA: You may apply for a USDA rural loan 3 years after a foreclosure.
- Conventional (Fannie Mae): You can apply for a conventional Fannie Mae loan 7 years after the sale date of your foreclosure.
- Jumbo: You may apply for a jumbo mortgage 7 years after the sale date of your foreclosure. Additional qualifying requirements may apply.
For conventional loans, you may be able to shorten the waiting period by proving that your foreclosure was the result of an uncontrollable circumstance like serious illness or death. Alternatively, you can show that the maximum loan-to-value (LTV) ratio of the new mortgage is either 90% or the LTV ratio listed in Fannie Mae’s eligibility matrix. Then, you can use the new mortgage towards the purchase of your personal residence or a limited cash-out refinance.