Can you get a loan after a foreclosure or short sale? There are a variety of foreclosure alternatives available to homeowners. And there are also a variety of ways that these alternatives impact your credit.
Fannie Mae rules
Fannie Mae has updated the waiting period before a homeowner is eligible for a new mortgage after a foreclosure, short sale or deed-in-lieu. The new Fannie Mae policies favor homeowners who work with their lenders to avoid foreclosure by allowing them to be eligible for a future Fannie Mae loan in a shorter period of time. Below is an idea of the latest requirements to get a new loan after a negative mortgage outcome:
Foreclosure
1. Foreclosure: must wait 7 years after a foreclosure to get a new mortgage loan, and must have re-established good credit.
However, under extenuating circumstances (loss of job, serious medical issue, etc.) this period may be reduced to 3 years to less than 7 years, if:
.You have at least 10% down, or more if the loan program calls for a larger minimum down payment.
.The new loan is for the purchase of a principal residence.
Bankruptcy
2. Bankruptcy – Chapter 7 or 11: for a Conventional loan you need to wait 4 years (2 years possible with extenuating circumstances) from the discharge date, and must have re-established good credit to get a new mortgage loan.
For an FHA loan its a 2 year waiting period after a bankruptcy discharge.
Multiple Bankruptcy Filings
3. Multiple Bankruptcy Filings: wait 5 years if more than one filing within the past 7 years (3 years possible with extenuating circumstances), and must have re-established good credit.
Deed-in-Lieu of Foreclosure
4. Deed-in-Lieu of Foreclosure, Pre-Foreclosure Sale or Short Sale: must wait 4 years, and must have re-established good credit. There is a possibility that you can buy after a Short Sale/Deed-in-Lieu of Foreclosure/Pre-Foreclosure Sale in less than 4 years, if there were extenuating circumstances out of your control (i.e. extreme health issue).
These latest rules are subject to change at any time, so always make sure you check with your mortgage professional for the latest details.
Brian Martucci is a loan officer for Capital Bank Home Loans, a division of Capital Bank, N.A. He has been in the mortgage industry since 1986 and has served in a number of roles, including loan processor, loan officer, mortgage broker, branch manager, and vice president. Brian Martucci – NMLS# 185421. His opinions do not necessarily reflect the opinions and beliefs of Capital Bank Home Loans or Capital Bank. Capital Bank, N.A.- NMLS# 401599. Click here for the Capital Bank, N.A. “Privacy Policy”.
