Yes, it is possible to buy a home after a foreclosure, but only after a certain amount of time has passed. Most lenders these days underwrite their loans to either Fannie Mae or FHA guidelines, and both have a required waiting period before you will be able to qualify for a purchase home loan.
Waiting Period for Fannie Mae Financing
Fannie Mae requires a standard waiting period of seven years after a foreclosure. In other words, once the foreclosure is complete, you’ll need to wait at least seven years before you can get a Fannie Mae conventional loan.
It is possible to get the waiting period reduced, but it’s not easy to do. The Fannie Mae guidelines do allow for a reduction of the waiting period if you can document that circumstances well beyond your control led directly to the foreclosure. This isn’t always easy to pull off because different underwriters may have a very different opinion about what “extenuating circumstances” means.
Banks these days fear the dreaded loan “buy back”, so they often won’t mess with loans that fall into gray areas in the guidelines. The last thing they want is to have to buy back the loan from their investor over a difference in opinion of what constitutes “extenuating circumstances”.
However, if circumstances well beyond your control did indeed lead to the foreclosure, it might be worth seeing if you can get your loan approved. It will not be an easy process, but you may be able to make it work.
FHA Waiting Period for Foreclosures
FHA guidelines are less strict than Fannie Mae guidelines, so the foreclosure waiting period is just three years. FHA also allows for a reduction in the waiting period for extenuating circumstances, but again, many banks may choose just to stick with the standard three-year waiting period.
If you had a foreclosure in the past and you’re still in the waiting periods, it might not be a bad idea to take some steps to clean up and reestablish your credit. Be sure to pay all your bills on time, pay down debt, and clear up any derogatory items in your credit file. The idea is to get your credit situated so that when the waiting period is over, you’ll be in a great position to get a great mortgage deal.
Note that what is presented here is just a very general overview. Lending guidelines can change at any time and other guidelines may apply to your particular situation.
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