Foreclosures are rarely ideal under most circumstances, but some people might think that the consequences of a foreclosure end with your eviction. Unfortunately, that’s not always the case. Foreclosures have long-lasting implications for a number of issues throughout your life. One of the major results of a foreclosure is that your credit score will take a noticeable and harsh hit. A foreclosure will stay on your credit record for 7 years, making it difficult or almost impossible to purchase a new home. But, is it possible to buy a home within 7 years after incurring a foreclosure?
7-year penalty
Under most conventional circumstances, it’s not possible to get a home loan for a new home after you’ve been foreclosed on. You will generally have to wait out the entire 7-year penalty before you can get your credit up and earn lender confidence again. Government programs like Fannie Mae and Freddie Mac require that 7-year grace period for standard foreclosures. Most conventional loans from lenders like banks also require 7 years before you can apply for a home loan again. But, there are a few situations where you could potentially get out of those stringent restrictions.
Apply for a mortgage within the 7-year period
1 – If you can prove that you had extenuating circumstances that led to your foreclosure, then you may be able to receive a loan as early as three years after the foreclosure ended. According to the Federal Housing Administration (FHA), foreclosures that are out of the hands of the borrower are considered to be foreclosures with extenuating circumstances. The most common extenuating circumstance is the death or serious illness of a prominent wage earner in the home. Fannie Mae, Freddie Mac, the FHA, and even conventional lenders would be willing to offer a home loan to someone who repaired their credit after a foreclosure and had experienced extenuating circumstances beforehand.
2 – Fannie Mae, Freddie Mac, and the FHA would likely not provide a home loan for someone who had just incurred a foreclosure. But, there is a possibility that a conventional lender might be willing to offer a home loan relatively soon after a foreclosure. In these cases, you don’t even have to prove extenuating circumstances to be approved for the loan. All you really have to do is prove that you’ve saved up enough money for a substantial down payment and be willing to accept high interest rates on your mortgage. Most banks still won’t provide you with the loan even if you can provide a huge home down payment, but there are some banks that will. It really depends on the policies of the individual lender and whether they’re willing to put enough confidence in you.
3 – It might be in your best interest to go to a smaller, regional bank where you can earn some leeway with managers and owners. Bigger banks are unwilling to work with recently foreclosed on individuals on a home loan. In any event, it’s probably wise to wait at least a few years to get back into the housing market again. You always want to make sure that you have the funds and the wherewithal to have a successful homeownership.
Author Bio:
Milton Thompson is a real estate agent in San Francisco. Through his career, he has since many people use foreclosure as a viable option of getting out from underneath a home valued at less than their current mortgage.
