Get a mortgage after foreclosure, short sale and or bankruptcy
Buying a home in today’s economy can be challenging for even the most creditworthy borrower. Prospective buyers who have gone through a short sale, bankruptcy and or foreclosure, think that it is nearly impossible to obtain financing after they have gone through hard times and think they have to wait several years before they can buy again.
But this is far from the truth because there are lenders that may offer you a new mortgage as little as one day after short sale, bankruptcy and or foreclosure. Lenders are now more willing than ever to overlook the blemish on your credit report and new programs have come out that may allow financing almost immediately after a foreclosure or short sale.
As a direct lender offering portfolio niche programs we need to first ensure that you do not qualify via FHA, Conventional or even under extenuating circumstances. Once we have determined that you do not qualify for these programs we are able to offer you programs that start as little as 10% down after an economic event.
Time Table for Seasoning Requirements and Down Payment Below:
· Short Sale – No waiting period, min down payment 10% with a FICO of 680, 15% down 660-680 and 20% down below 660.
· Foreclosure – No Waiting Period, 20% down for Financing Immediately after Foreclosure, 10% down once 2 years have passed from the event. Credit requirements also apply.
· Bankruptcy/Pre-Foreclosure Sale, Foreclosure & Deed-In-Lieu – No waiting period, 20% down for immediate financing, 10% down after 2 years.
As you can see, you may have some home loan options that can help you buy another property. Below I will go over these different loans in more detail.
Buy Home Immediately After Foreclosure
Some lenders are willing to lend to borrowers immediately after a foreclosure. These mortgages are provided by portfolio lenders like us who keep their loans in-house and do not sell on the secondary mortgage market. Therefore, they are not subject to the same waiting periods or guidelines set forth by Fannie Mae.
This is not an FHA loan or a conventional mortgage backed by Fannie Mae or Freddie Mac, this is a “portfolio loan” program that is not sold on the secondary mortgage market – therefore, is not required to abide by government regulations. The lender will keep the loan on their books, and because of this the requirements can be more stringent than a traditional mortgage.
Since these loans are considered a higher-risk due to the recent foreclosure, we will require a larger down payment of 10-20%, and will likely only have limited adjustable-rate (ARM) programs available. There are specific requirements for purchasing a home immediately after foreclosure, keep in mind that each applicant is carefully reviewed on a case-by-case basis so these loans will not be available to everyone.
Eligibility requirements for buying a home just one day after foreclosure or short sale:
* Minimum down payment of 10% (if short sale) 20% (if foreclosure), 30% down payment
* Loan amount up to $1,000,000, 35% down payment required for loans over $500,000
* Minimum loan amount of $100,000
* Minimum credit score of 600, rates will be higher for scores below 650
* Only FHA-approved condos are eligible
* Three months cash reserves and 2% origination charge added to losing costs
Buy a Home With Only 10% One Day After Short Sale or 2 Years After Foreclosure
This new product is an evolution of our current product called Homeowners Access that now only requires 10% down once you’re ONE day out of short sale, 2 years past foreclosure or other economic event. We’re excited to announce that this is a portfolio product of ours only available through our channel.
What do you need to know about how to qualify for this loan?
* 680 FICO required for 10% down & 9 months of reserves also required
* 660 FICO required for 15% down & 6 months of reserves required
* 620 FICO required for 20% down and 3 months of reserves required
* Max Debt-to-Income Ratio > 80% Loan to Value is 43%
* LTV < 80% Max DTI is 50%
* Maximum Loan Amount is 2,000,000.00, Minimum 100,000.00
* 100% Gift funds allowed
* Flexible pay history requirements (must be current on mortgages in the past 90 days)
* Bankruptcy, Deed-in-lieu, pre-foreclosure sale, foreclosure must be complete
This is a great addition to our suite of mortgage products that we have available today.
FHA Loan – “Back to Work” Program in 2013-2016
The Federal Housing Administration (FHA) recognizes that any of the catastrophic events listed above will greatly impact a borrowers’ credit rating and will limit future access to financing. Although a borrower may have faced an extreme hardship that forced them into foreclosure, this doesn’t mean the borrower is not financially stable or able to repay a mortgage much sooner than with other lenders. Eligible borrowers may now qualify for an FHA loan in as little as 12 months, opposed to the previous 24-36 month required waiting period.
This new program is referred to as the “Back to Work” initiative and is designed for borrowers who lost 20% or more in household income that ultimately resulted in a foreclosure, short sale, bankruptcy or deed in lieu. As with most FHA loans, this program only requires a 3.5% down payment and is applicable for all purchase loans other than the Home Equity Conversion Mortgage (HECM).
This program is specifically designed for borrowers who could no longer afford their mortgage payments due to an “extenuating circumstance,” such as a job loss or a 20% (or more) loss in income for a period of at least 6 months prior to the foreclosure, short sale or bankruptcy. Even borrowers who went through both a bankruptcy and foreclosure may qualify as long as they’ve fully recovered from the “economic event.”
FHA is allowing for the consideration of borrowers who have experienced an “Economic Event” and can document that certain credit impairments were the result of a Loss of Employment or a significant loss of Household Income beyond the borrower’s control. To document the 20 percent loss of income, you must provide two years tax returns and W-2’s prior to the foreclosure or short sale, or a Verification of Employment (VOE) showing proof of your previous earnings.
You can read more about FHA’s Back to Work Mortgage Program at this link.
VA Loan After Foreclosure
VA loans are a popular option for anyone who is a current or past Service member and is eligible under VA guidelines. This special loan program offers 100% financing (no down payment required) and is available just 2-years after a foreclosure or short sale. VA stands for ‘Veterans Affairs’, as VA loans are specifically intended for Veterans and Service Members who possess a valid Certificate of Eligibility (COE).
VA loans typically refer to home loans given to qualified veterans through the Department of Veteran Affairs who is guarantor of these types of loans. They are usually considered easier to obtain than traditional mortgages, although there still remain specific qualifications to be eligible. VA loans can only be used to finance the purchase of a primary home.
This loan type is not eligible for use when purchasing investment properties, or even vacation homes. Many members of the military may qualify, however, this is by no means a guarantee. You will still need to meet specific loan, credit and income requirements to confirm your eligibility.
You can read more about VA loans and requirements at this link.
Conventional Loan after Foreclosure
For most conventional loan programs, the waiting period to purchase a home after foreclosure is seven years. This is the standard waiting period required by Fannie Mae, a government-sponsored enterprise (GSE) that purchases a significant amount of residential mortgages in the U.S. However, for borrowers who have experienced a hardship that was out their control (extenuating circumstances), the waiting period may be as little as 3-years.
Extenuating circumstances may include an extreme illness or accident resulting in severe injury, or death of borrower (or contributing spouse). Unfortunately, lenders no longer consider a divorce an extenuating hardship when looking to get approved for a new mortgage. Interest rate increases due to ARMs and temporary job losses are also not considered an extenuating circumstance.
If the foreclosure was out of your control and you did experience one of the hardships listed above, you’ll need to supply specific documentation supporting your claim in order to avoid the 7-year waiting period. Such documents may include medical bill/records or a death certificate showing that the borrower or spouse is indeed deceased. Even then, you are only eligible to obtain a new mortgage if you have successfully re-established your credit score and maintained other debts on time.
Any lender will need to ensure that you are not a “high-risk” applicant before approving the loan. There are many ways to increase your credit score after foreclosure – some easy solutions may include taking out a secured credit card, where you make a deposit and your credit limit is based off that amount. Paying off all purchases on the account will show your ability and willingness to repay other debt you have acquired.
After the foreclosure, immediately begin setting aside funds to save for a down payment. If you have to find a rental until you are eligible for a new purchase, find a place that’s well within your means so you can stash away your extra earnings. A borrower’s employment history will always be closely examined when applying for a mortgage. Most lenders will require that you show a stable employment history for the last two years to qualify for a mortgage.
After losing a home to foreclosure, short sale or claiming bankruptcy, the first thing you will need to do is focus on rebuilding your credit score and establishing a solid payment history. Witnessing thousands of homeowners go through the foreclosure process over the last 9 years here in our forums, we’ve found that the average hit to a borrower’s score ranges from 80-150 points. Families need to focus on securing suitable housing and saving money for a possible down payment in order to purchase a new home.
Senior Loan Officer
Hi, my name is Erik Sandstrom. I’m a proud sponsor and mortgage expert on LoanSafe.org. I’m also a sale’s manager and loan officer with Caliber Home Loans. If you are looking for a great mortgage with the best rates or for a great company to work for, please call me direct at 619-379-8999 or email me at Erik.Sandstrom@PrimeLending.com.