A foreclosure is a serious situation that no homeowner wants to find themselves facing, but the reality is that many homeowners are only one unforeseen crisis away from the worst. If you’ve made it through a foreclosure, you will be able to recover. It will take some time and effort on your part during the waiting period, but it is possible to buy a house again in the future.

Will I Be Able to Get a Mortgage After a Foreclosure?

Foreclosure No Longer Carries the Same Stigma

Before the housing crisis in 2008 and 2009, most banks viewed foreclosures as a sign of irresponsibility and the risk was too great to offer another mortgage. However, after the housing crisis, it became apparent that even the most responsible people can face foreclosure. In a recession, skilled professionals can lose their jobs, be forced to downsize or relocate, and with property values decreasing, could not sell their homes, leaving foreclosure as the only option. When the economy and the former homeowners recover, they can be, in fact, better prepared to take on a new mortgage. They are more likely to understand the risks and prepare for any circumstances.

What is the Waiting Period for a Mortgage after Foreclosure?

Even under the best of circumstances, you are unlikely to qualify for a new mortgage for at least two years after a foreclosure. Your credit report will show a foreclosure for seven years and you will see a significant decline in your credit score after a foreclosure, perhaps even below 550. In fact, the stronger your credit was before the foreclosure, the greater the decline you will see. Until you are able to build your score back up to a minimum of at least 550 for an FHA loan, the lower score will make it more difficult to qualify for a mortgage. Depending on what type of mortgage you are seeking, you may need to wait between two and seven years. The waiting period typically starts when the foreclosure is complete.

  • Fannie Mae/Freddie Mac – usually 7 years, can be reduced to 3 years with extenuating services, which are generally one-time only situations beyond your control, such as divorce, illness, job loss, or sudden loss of income.
  • FHA-Insured – 3 years
  • VA-Guaranteed – 2-3 years
  • Conventional/Private – 2-8 years

What Do You Need to Do to Get a Mortgage after Foreclosure?

The first thing you’ll need to do when attempting to get a mortgage after foreclosure is to reestablish your credit. This will take some time, but with steady and consistent attention to your finances, this is something you can do. Make sure you pay all bills consistently on time, keep your credit balances low, monitor your credit report regularly, and maintain a small number of credit accounts. After a foreclosure, many lenders will require a larger down payment (sometimes 25% or more) and will offer a much higher interest rate. In addition to rebuilding your credit, it is important to rebuild your savings as well.

Find a Professional Who Will Work with You on Getting a Mortgage After Foreclosure

When looking to get a mortgage after foreclosure, the process will not be as easy as filling out an application online or contacting a bank. You will need to find professionals who understand your situation and are willing to work with you. Talking with a real estate attorney, a financial advisor, or a mortgage broker can help you understand what you need to do to get back to home ownership. It is essential that you take care of all the financial paperwork before you begin looking at homes again.

The foreclosure is in the past, and all the professionals will be more focused on the steps you are taking now and the safeguards you’ve put in place for the future. With the right work on your part to get your financial picture back in order and the right professionals in your corner, a new mortgage is possible. If you have questions regarding home loans or what you can do to raise your credit score, let’s talk today. Contact Equibox Mortgage to learn more.

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