Since Fellowship Home Loans is a faith based lender, we take a different approach to the mortgage process. Whether you are refinancing, purchasing or just trying to educate yourself we are here to help in any way we can. Which brings me to the topic I would like to discuss with you. Many times, in my mortgage career I have noticed that when it comes to purchasing after a foreclosure there are many questions to be answered.
There is a lot of uncertainty when pursuing financing after going through something like a foreclosure. People always ask me how long will I have to wait? What will need to be done to purchase a home after I’ve been through a foreclosure? Can I even qualify for a home loan at all after this? The answer is yes you can, and there are certain things to be aware of when doing so.
Different products have certain requirements. FHA, VA, and Conventional loans all have specific time periods to wait before being able to pursue financing under one of these programs, and that waiting period varies from product to product.
Conventional Loans require a seven-year waiting period. Extenuating circumstances may apply due to events beyond the borrower’s control. These circumstances must be well documented to be considered for financing before the waiting period is up. In some cases, if a bankruptcy and a foreclosure are disclosed at the same time the lender may be able to apply bankruptcy waiting periods if the lender obtains the appropriate documentation to verify that the mortgage loan in question was discharged during the bankruptcy. Otherwise the 7-year waiting period will apply.
If you are a veteran of the Military (Thank you for your service) the VA requires a two-year waiting period from the time the title is transferred from your name. If a previous VA loan was involved the lender will need to assure that there is sufficient benefit left over to secure another VA mortgage, as well it needs to be verified there is no unresolved debt to the Government.
Qualifying for an FHA loan after a foreclosure is a little less stressful than the previous two programs, but there will still be hoops to jump through. When qualifying for an FHA loan after foreclosure, or deed in lieu of foreclosure, you will need to meet a three-year waiting period before being able to obtain financing. That three-year period starts on the date the deed transfer happens. Sometimes you may foreclose on your home with the bank, but your name stays on the deed until the bank sells the home to its next owner. It is very important to make sure you know the date your name was removed from the deed of the foreclosed property. There are exceptions with FHA loans if the foreclosure was the result of documented extenuating circumstances that were beyond your control, such as a serious illness. The death of a wage earner in the family. Good credit will need to be re-established from the time of the circumstance as well. This is something that will be determined by the underwriting process. Divorce is not an extenuating circumstance. An exception may be granted where a borrower’s mortgage was current at the time of the borrower’s divorce, the ex-spouse received the property, and the property was then foreclosed on.
A few points to better your opportunity of purchasing after a Foreclosure.
- Re-establish credit history.
- Stay current on all monthly obligations, even one late may cause issues.
- know when your name was released from title of the foreclosed home. (when the home has a new owner) keep tabs on the home make sure someone has moved in, because your name is not always released from title once you walk away.
- Limit your outstanding debt.
- Keep an eye on your credit scores (these are even more important after going through a foreclosure)
When considering financing, it is important to turn every stone, and evaluate all of your options. Honesty is what we are built on here at Fellowship. We know that this is one of the largest financial decisions you will make in your life, and having a lender with core values at your back will make it that much less stressful of a process. I hope after reading this article you have a little more confidence in the purchase process, especially after dealing with something as difficult as a foreclosure in your past.
Looking for mortgage financing options? We can help you find the one that is right for you. Try an Honest Home Loan Company. Whether you’re looking to purchase a new home or refinance an existing home, we can suggest several products to suit your needs. Just call 1-800-804-SAVE (7283) or visit us at www.fellowshiphomeloans.com
By: Max O’Grady – Loan Officer at Fellowship Home Loans