I have a lot of people ask me similar questions about buying a house after a foreclosure or short sale.
However, it’s important to note that just because the waiting period is over doesn’t necessarily mean you will automatically be approved. Credit scores, history, debt to income ratio and other factors will always play a part in your eligibility for a home loan.
One of the best ways to ensure that you will be eligible after suffering a short sale or foreclosure is to continue improving your credit. You’ll want to manage and maintain existing credit, pay all of your bills on time so that there are no late payments or collections on your credit history and you maintain a job with a steady income for at least 6 to 12 months. Related: How Long Does it Take to Increase a Credit Score?
Below are the waiting periods for traditional lending, but Right Choice Mortgage also has portfolio product that can help you buy a home 1 day out of Foreclosure, Short Sale or Bankruptcy. Everyone has a different situation, so call me to talk about yours.
There are different waiting periods depending on the type of loan you want to apply for. For VA, the waiting period is two years from the date of foreclosure or 12 to 23 months if certain credit has been reestablished and the foreclosure was caused by extenuating circumstances.
Time limits and waiting periods do change but currently for the state of California there is an FHA loan waiting period of three years from the date of foreclosure in general but, it is less than two years but not less than 12 months from the date the foreclosure was completed if the foreclosure was a result of acceptable extenuating circumstances.
For USDA loans there is a three-year waiting period or less than three years if credit is reestablished, any outstanding balance is paid and again, acceptable extenuating circumstances. There is no minimum when it comes to USDA but it does depend on your credit history and score.
For conventional, which is the lowest interest rates and one of the trickiest loans to be approved for, has a seven year waiting period from the date the foreclosure was completed and the property was transferred back to the bank. There is a four-year waiting period if you included your mortgage in a Chapter 7 bankruptcy and a three-year period if you have a 10% down payment and there were extenuating circumstances.
What are Extenuating Circumstances?
So what do extenuating circumstances really mean when we’re talking about a foreclosure? These are allowable circumstances from the lender for either an FHA, USDA, VA or conventional loan that will allow you to buy much sooner after a foreclosure. This circumstance is a non-reoccurring event that was beyond the homeowners control. This could be a sudden or significant reduction in income, a death, serious illness, possibly the loss of a job or government benefits. However, divorce or a change in familial status does not count as an extenuating circumstance for any of these loans. If you do not have these types of circumstances you will have to wait the appropriate time depending on the type of loan you had.
It is also important to mention that the waiting period does not start when you first failed to make a mortgage payment. The date begins when it was transferred back to the lender, which actually could take anywhere from three months to two years.
These are general regulations and restrictions. Short sale status may offer even the less waiting periods depending on the circumstances surrounding the short sale. The best way to find out how soon you can purchase a home again is to contact a lender like myself at any time. We can run the numbers, do a little bit of research and I show you all options, portfolio, as well as well the traditional loans above. You can buy a house again.
Call me with your scenario. 949-600-0944