Tag Archives: Conventional Loan After Foreclosure

Conventional Loan 3 Years After Foreclosure?

Credit ReportCan you use a conventional loan 3 years after foreclosure?  The quick answer is no, but let’s dig a little deeper.

 

Individuals who have lost their home due to a foreclosure may think that meeting the requirements necessary for a new loan may take years. This is not true as there are many options for a family or individual to buy a home after a foreclosure has occurred. A few options may already be available. This will include obtaining a conventional loan up to 7 years after foreclosure.

 

Credit Report

A foreclosure will stay on an individual’s credit report for seven to ten years. This often means individuals are in a seven year waiting period before they can try again to apply for a mortgage. One interesting aspect is that circumstances, such as a divorce, medical bills, and long-term unemployment could shorten the wait.

 

Credit Score

Obtaining a loan to buy a home is extremely challenging with a low credit score. One way to help get a credit score back on track is to get a credit card and start building back a suitable credit history. However, there needs to be an awareness of the purchases that are made and making payments on time. This is generally the first step to take on the road to obtaining a conventional loan 3 years after foreclosure.

 

FHA Loans

A home loan from the Federal Housing Administration is available three years after a foreclosure. This option is now available to anyone who meets the qualifying criteria. A borrower must have been kept up on their current mortgage or have used an installment sale. Installment sales are when a home is sold with the proceeds used to pay the loan amount in full.

The benefit of an FHA loan is borrowers only need to have a 3.5 percent down payment and pay a monthly mortgage insurance premium. Current interest rates are at historic lows and the payments per month should be reasonable.

 

Conventional Loans

The only way to obtain a conventional loan 3 years after foreclosure is to document each special circumstance. One thing that is necessary is to view the current loan standards set by Freddie Mac and Fannie Mae. A financial advisor may also be able to help with the task of documentation.

 

Flexible Home Loan Program

Individuals who have a credit score of at least 600 can apply for this program at least one day after the foreclosure process or a short sale. Review the requirements to see if you may qualify for the Flexible Home Loan Program.

After foreclosure short sale bankruptcy

 

Getting a Mortgage After Foreclosure in California

Morgage after ForeclosureA foreclosure does not have to be a permanent bar that keeps you from taking out another mortgage. There are several things to remember to get a mortgage after foreclosure in California. The process it not easy, but it is possible.

 
A major factor in regaining mortgage eligibility is the loan program you use to purchase your new loan. It is important to remember that the date of foreclosure specified here is when the lender fully reacquired the property. There are instances where the foreclosure process does not complete even up to a year after the foreclosure was announced.

 
Each of the major programs have different guidelines on how they approach post-foreclosure loans.

 
FHA Loan After Foreclosure: You must wait three years from the foreclosure date. This time period drops to two years if you can prove, through documentation, that your foreclosure was due to acceptable extenuating circumstance. The FHA considers the death or serious illness of a major income earner an acceptable circumstance. It does not consider divorce, unemployment or inability to sell the home acceptable.

VA Loan After Foreclosure: You must wait two years from the completion of the foreclosure. This time period drops to between 12 and 23 months with acceptable extenuating circumstance. VA is somewhat more lenient about circumstance. In addition to death or illness, they may consider unemployment, an especially prolonged strike or major medical bills that are not covered by insurance as acceptable.

Conventional Loan After Foreclosure: You must wait seven years from the completion of the foreclosure. This lowers to three years if you accept a 10 percent down payment and can prove extenuating circumstance. Extenuating circumstances are similar to with a VA loan, but everything is considered on a case-by-case basis. This is often at the discretion of the individual lender.

Mortgage after foreclosure

 

Rebuilding Credit for a Mortgage After Foreclosure in California:

The above guidelines only mean that you qualify under law for a new loan, and the waiting is probably the simplest part of the process. The next major factor is your credit score. A foreclosure will almost assuredly demolish your credit score, and it will need to be entirely rebuilt. You will still need the same credit score as any average borrower for your loan and rate determination. The lender will be looking far more closely at your history regardless of your score. You will need to have perfect credit history after the foreclosure event. This means no missed or late payments. You will still probably get a higher rate and require a larger down payment at the lender’s discretion.

 
The important thing to keep in mind when getting a mortgage after foreclosure in California is to prove your responsibility and not lose hope. The road is long and steep, but it is climbable.

 

Tips for a Conventional Loan After Foreclosure

 

Conventional Loan after ForeclosureTrying to get a conventional loan after a foreclosure can be a tricky feat. The effects of a foreclosure can remain on your credit history for several years although the amount of time varies in different states. After a foreclosure, your credit score will decrease by many points. In some cases, credit scores have decreased by as many as 250 points. While it can be difficult to obtain a conventional loan after a foreclosure, it is not impossible. Read on for 5 tips that will help increase your likelihood of obtaining a conventional loan after a foreclosure.

Repair Your Credit Score
The first thing you will want to do after a foreclosure is to start repairing your credit. Create a budget that is within your means and has a little left over each month. Use this extra money to pay off any consumer debts you owe. Stop using credit cards once you pay off the balance of any credit accounts that you currently have. Make sure to pay all of your bills on time and do not open any new credit accounts. All purchases you make will need to be paid in cash.

Get a Higher Paying Job or a Second Job
If you have a lot of debt to pay off, you may want to try finding a job that pays more than the one you currently have or taking on a second job. The more money you have coming in, the sooner you can eliminate your debt and increase your credit score.

Save Up for a Down Payment
Once you have paid off all or most of your consumer debt, open a savings account. Put all of the money you once set aside for debts into this account every month. Saving up a sizable down payment for your next home will make you look more favorable in the eyes of conventional mortgage lenders. People with previous foreclosures in their credit history are also often required to pay higher down payments.

Mortgage AfterFind Alternatives to a Conventional Loan
Conventional lenders can require you to wait up to 7 years after a foreclosure to apply for a conventional loan.Utilizing a loan program like the Flexible Credit Loan Program may be an option. This program allows buyers to purchase a home one day after a foreclosure and is a great option to consider in place of a conventional loan after foreclosure.

Be Patient
I can take many years before you are able to apply for a conventional loan after a foreclosure. Take this time to save up, learn to manage your money better and improve your credit. If you do everything correctly, it will be much easier for you to obtain a conventional mortgage in the future.

For more options on Conventional Loans after Foreclosure.