One question that we get asked quite often is “Can I buy a home again”
The answer to this question does not have any clear cut and dry answer.
Each situation is unique, so there are quite a few variables involved when trying to figure out when someone will be able to get approved for a mortgage after a foreclosure, or a short sale.
Going through either a short sale or a foreclosure can seriously impact ones credit, negatively.
How credit and finances are handled afterward is a huge factor in determining if one can buy a home again.
This is one of the reasons why there is something called the waiting period.
Each mortgage program has a different requirements.
Government loans have more favorable timelines than the traditional conventional loan.
During the waiting period, buyers are encouraged to get their finances in order, work on getting credit to good standing and, also work on saving up some funds for savings for a future down payment.
A foreclosure / short sale will not ruin your credit forever
But it will have a significant impact on your ability to obtain another mortgage for quite some time.
It’s extremely crucial to NOT have any negative blemishes on credit after the foreclosure / short sale has been completed.
Having one late payment after the negative event could have a huge setback in obtaining a home loan.
Which is better a short sale or a foreclosure?
When analyzing the difference in regards to buying a home in the future it boils down to the waiting time which is more favorable in a short sale.
Short sale also has less of an impact on credit. Why?
Once the sale is completed, the bank will stop reporting late payments.
With a foreclosure the bank may not stop until the home has been sold to another individual. This could take months or years.
Sometimes banks will keep the property sitting in their portfolio for years before any action is taken.
Lenders typically have the authority to lend to whoever they want but will generally follow the guidelines set forth by Fannie, Freddie, HUD, and Ginnie.
Some lenders, of course, will take greater risks with some borrowers than others.
** As a side note a deed in lieu of foreclosure follows the same guidelines as FHA’s foreclosure policy, the same as Fannie Mae and Freddie Macs short sale policy.
Below are the general guidelines Coole Home follows when considering a loan after a foreclosure:
Government home loans have the shortest waiting periods. On average, you’ll wait two to three years after a foreclosure with the right circumstances:
- FHA loans – 3 year waiting period
- VA loans – 2 year waiting period
- USDA loans – 3 year waiting period
- Conventional Loans – 7 year watiting period (you can check from the source here)
- Non-QM Loans – 6 month waiting period
Are you ready to apply? Start the process by completing the form below.