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Can You Purchase Another House After a Foreclosure?

Qualifying for a mortgage loan is an arduous process even with a decent credit score. If you have a foreclosure in your credit history, this process can be much more difficult. However, difficult is not impossible, and many homebuyers who faced foreclosure can still qualify for financing with some extra work.

Conventional mortgage loans require potential homebuyers to wait a certain number of years after a foreclosure before they can be approved for a new loan. For loans backed by Fannie Mae or Freddie Mac, this period is usually seven years. Other mortgage lenders have shorter time periods. For instance, loans backed by the Department of Veterans Affairs only require a two-year waiting period, while FHA loans require three years.

In some instances, potential homebuyers facing a long wait can reduce the time it takes to qualify for a mortgage loan if they can prove that their foreclosure resulted from financial circumstances which were beyond their control. To prove this, the U.S. Department of Housing and Urban Development requires that homebuyers have documented proof of a catastrophic event such as a job loss or medical emergency that reduced his or her income by at least 20% over six months.

In addition to waiting out these time periods, potential homebuyers may also have to wait until their credit score improves. A foreclosure can often decrease a credit score by 100 points or more, and will remain on a credit report for seven years. As a result, even if a homebuyer is past the waiting period, he or she may not have a high enough credit score to qualify for a loan.

While the prospects for purchasing a new home after a foreclosure may seem bleak, homebuyers should be aware that many people faced foreclosure during the housing crises which increases the odds of being approved for a loan. To improve their odds, homeowners should expect to pay at least 10% of the purchase price as a down payment.

Additionally, homebuyers can improve their chances of approval by repairing their credit and increasing their credit score prior to their application. By paying bills on time and removing inaccurate information, a homebuyer may be able to boost his or her score substantially.

If you need help with a foreclosure or with increasing your credit score, the attorneys at Loan Lawyers are here for you. We can review your financial situation and help you defend a foreclosure or fight inaccurate credit information which may be decreasing your credit score. For a free and confidential consultation about your rights and options, schedule a consultation at Loan Lawyers today by calling (888) FIGHT-13 (344-4813).

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  • Florida Trend's - Florida Legal Elite 2014
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  • National Association of Consumer Advocates
  • National Association of Consumer Bankruptcy Attorneys
  • NBC News
  • National Consumer Law Center
  • The New York Times
  • Avvo
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