Getting a mortgage after foreclosure
There are some additional hurdles for homeowners who have gone through a foreclosure, short sale or bankruptcy, but a little patience and some financial hard work will go a long way.
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Buying a home is a challenging goal for most hopeful homeowners. But for those who have experienced a bankruptcy, foreclosure or short sale, the hurdles are even higher.
Still, it's not impossible to buy a home after financial difficulties, says Dan Keller, a mortgage banker with Hometown Lending in Everett, Wash. In fact, Keller says, people who have cleaned up their credit and are otherwise qualified to get a mortgage can buy a home as soon as they have outlasted a prescribed waiting period after the bankruptcy, foreclosure or short sale.
Wait a while
The waiting period can last one to seven years, says Kirk Chivas, chief operating officer at First Commerce Financial in Wixom, Mich. The one-year requirement applies to buyers who complete a Chapter 13 bankruptcy, have a spotless subsequent credit history and want to get a new loan insured by the Federal Housing Administration or guaranteed by the U.S. Department of Veterans Affairs. The seven-year requirement applies to buyers who experienced a foreclosure and want to get a new conventional loan that can be sold to Fannie Mae or Freddie Mac.
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In between are a number of two-, three- and four-year timelines based on similar criteria and other factors such as whether the buyer's previous mortgage was current at the time of a short sale or the size of the buyer's new down payment as a percentage of the home's purchase price.
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Generally speaking, the waiting periods after a bankruptcy tend to be more black and white while the waits after a foreclosure or short sale have more gray areas, Keller says. And in some cases, a waiting period can be waived or shortened if the buyer's bankruptcy, foreclosure or short sale was due to extenuating circumstances or a hardship beyond his control.
Technically, it is possible for a buyer whose prior loan wasn't in default at the time of a short sale to get a new FHA-insured loan with no waiting period, Chivas says. But he adds that he's never encountered anyone in that situation.
Buyers must have very clean or perfect credit histories before they can buy homes after bankruptcy, foreclosure or short sale. A slip-up as small as one late credit card payment could disqualify a post-bankruptcy buyer from some loan programs, even if the waiting period has been completed, Keller says.
"Bankruptcy is a serious word," he says. "If you do it, it's a get-out-jail-free card. But once you get out of bankruptcy, you need to be flawless in your credit. Don't even drop a gum wrapper."
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Credit dings can be difficult to sort out for buyers who experienced a loan modification or short sale, in part because, as Chivas says, there's "no consistency" in how lenders report those events to the credit bureaus. Buyers should review their credit reports and correct any errors or clarify the circumstances of adverse items.
Stable employment can be a plus, too, Keller says, noting that some loan programs are more lenient than others. "If there was a gap," he says, "it needs to be explained."
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Consult a loan pro
Given these complexities, buyers are advised to consult a loan officer or mortgage broker early on for advice that applies to their situation.
"They may think they're fine, but if they're not talking to a professional, their hopes can get dashed or crushed," Chivas says. "That's why you want to speak to someone as soon as you start dreaming it up in your head" that you want to buy a home after a bankruptcy, foreclosure or short sale.
It can be depressing to consumers and to the communities who have lost their homes to a Short Sale or Foreclosure. These families are now Renters or uncomfortably living with family or friends to have a roof over their head.
We have made a difference in the lives of thousands of consumers who now are able to purchase or refinance a primary residence home with No waiting period at all. Our 2nd Chance Loan year to date has Funded 750,700,000+ for these consumers which now have again the pride of homeownership. The 2nd Chance Loan requires a 660 FICO score and we will review as low as a 620 FICO, with 20% down payment minimum and this will go up to a maximum of 1 million Loan amount.
If you know someone that would benefit from this, please feel free to contact me so we can get started on the right path to your goals..
Sr. Loan Officer
Banc Home Loans
Obama could have fixed this mess but instead is giving the wall street terrorists 85 BILLION PER MONTH.
Tar and feathers.
All of you people out there that do not own your property out right are chumps. You would be better off borrowing money from the mafia than dealing with any bank or "Freddie".
The government is corrupt and in the business of screwing ANYONE that has to do business with them.
Keep on making those mortgage payments, chumps.
You chumps that are stuck with mortgages should be wondering why no one went to jail for the credit default swaps that screwed most Americans but obviously, you are too stupid if you are paying on a mortgage.
Put your pennies in a jar and live within your means.
Es importante no volver a caer en el juego de la Especulacion de los bienes raices,por que los Bancos se pueden dar el lujo de retomar una casa y si quieren regalarla,dejando altamente perjudicados a todos los vecinos de esa propiedad con caracteristicas similares,con el beneplacito del estado y los jueces de este pais ,sin ninguna sancion ni amonestacion,preparense para pagar altos impuestos y en cualquier momento otra crisis,ese el mundo del sueno Americano.
A relative and his wife had wonderful credit until the "bubble burst" about 6 years ago. Gas was almost $5.00 a gallon and
he was commuting to a 35 hour per week (part time job in healthcare paying $8.00/hr.) 7 days a week and after taxes and
other daily expenitures, with no reimbursement for mileage (128 miles per day round trip), he figured he was paying the
company to work for them, but he kept working because he could not get unemployment if he quit. They had two mortgages
which were always oaid on time and during the downward trend of the economy, they had to rely on credit cards to buy food
and gas and pay doctor bills as his wife was disabled and on social security and medicare only. They had tied what little
cash they had up in their home and were counting on it. They were lucky to sell the home in a depessed time just in time
to leave the state they were in and move back to Florida where they had lived 8 years earlier. Work slowly came available
and he grabbed what he could to stay afloat. After 4 years, they applied for a home loan and were refused. Even though
they had never been in arrears on their home, had paid on time and had made every car payment on time, they were
refused a loan because they had to forfeit some credit card lines to stay afloat on their car and pay off their home they
sold. They have been told they will not be financed by anyone because they cannot pay off the old abandoned credit cards
due to lack of funds to do so.
Common story for many and the banks do not care that they have able-to-pay clients sitting in front of them. The credit
card companies win again.
We had to file bankruptcy because my husband had his pay cut in half because of pay reduction. The company even worked under his license for three years without compensation to him. We held on for as long as we could, but finally just couldn't do it anymore. We tried three times to get a loan modification because the house had problems that needed to be fixed. They denied us each time, so we included it in the bankruptcy. The house has been vacant for over three years and has been really vandalized (bank's fault) for letting it stand so long. Our son was even willing to take over the house, but the bank wouldn't work with us to get the payments down. I guess it is too easy with the administrations involvement to let things go and not try to work them out--more profitable for them in the long run. That is really a shame. Right now we are renting and missing the tax deduction for the mortgage interest each year. They get you one way or the other.