Buying a home after you have gone through a foreclosure, short sale, or bankruptcy and or foreclosure can be tough but not impossible.
The facts are that there are lenders who may offer you a new mortgage almost immediately as long as you qualify. I know because I’m a loan officer who has successfully assisted dozens of borrowers across the U.S. with these loans.
In this quicky 5 minute article, I would like to show you how you can qualify and the various mortgage programs available in 2018-2019 with as little as 10% downpayment.
Portfolio Loan Requirements to Qualify:
· 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.
· Short Sale – No waiting period, min down payment 10% with a FICO of 680, 15% down 660-680 and 20% down below 660.
· 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 definitely have some options. Now, I would like to go over some more of the details and other loan programs that are available so you understand how these loans work.
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 these 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 closing 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.
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 the 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.
Conventional Loan after Foreclosure
For most conventional loan programs, the waiting period to purchase a home after a 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.
More Loan and Credit Tips
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.
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.
You will also 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 decade here in the LoanSafe forums, we’ve found that the average hit to a borrower’s score ranges from 80-150 points.
Do you need some expert help?
If you have any questions about these programs or would like a free analysis of your credit situation, please give me, Erik Sandstrom a call at 619-379-8999.