BluefoxToday blog : After Foreclosure - Can You Buy Another Home?

After Foreclosure - Can You Buy Another Home?

It's Been A Roller Coaster RideIf you are one of the millions of families that lost their home in the last couple of years to Foreclosure… you might think…

Been There – Done That

You might not want to own a home again! 

But if you’re one of those folks who truly does want to purchase again, here’s some potentially good news.

USDA says that they will allow you to purchase a new home to owner occupy, after foreclosure if you’ve done the following things:

  • Wait 3 years from the date of the Foreclosure.
  • Re-establish Credit
  • Have Credit Scores that meet the guidelines (as of the date I am writing this, that means you need a 620 score.)

Here’s the other part… you need to DOCUMENT what happened, and why you ended up in a Foreclosure. 

“FHA insured mortgages are generally not available to borrowers whose property was foreclosed on or given a deed-in-lieu of foreclosure within the previous three years. However, if the foreclosure of the borrower’s main residence was the result of extenuating circumstances, an exception may be granted if they have since established good credit…

This does not include the inability to sell a home when transferring from one area to another.”  So you MIGHT be able to buy after two years. 

My “real life” answer to this question is… in today’s credit environment, it’s going to be HARD to get a Bank to loan you money for a home if you had your home foreclosed upon less than 3 years ago.  I know what the guidelines say, but Bank’s do not have to follow guidelines set by FHA. 

FHA does not say you have to have a 620 credit score, but there are VERY few lenders who will allow you to purchase a home without at least a 620 score!  There are some Banks that will not allow you to purchase with FHA if you have ANY lates on ANY accounts in the last 12 months!  That’s not an FHA guideline, that’s a BANK rule, so again – I’d say - you might still be forced to wait 3 years, and have all of your documentation in order!

These guidelines are different from the Fannie Mae / Freddie Mac Conventional Guidelines… And these foreclosure guidelines are changing OFTEN… so I would not rely soly on information you get from an online site. 

Call a loan officer.

If you are considering a mortgage loan in NC, call Steve and Eleanor Thorne, First Financial Services, 919-649-5058 we'd love to help answer your questions!

Comment balloon 60 commentsEleanor Thorne • January 28 2011 12:55PM

Comments

Eleanor, great information. Thank you so much. I've been told that it's 5-7 years after Foreclosure ana 2-3 years after Short Sale. It's good to know that it can be less.

Posted by Irina Riley, GRI, SFR, CNE, e-PRO, SRES (American Dream Colorado) over 7 years ago

It is all about the "what happened"  sort of the old school underwriting. I remember telling my clients (pre FICO scores) if you can make an underwriter cry you will probably be approved!

If you just walked away because you could.. your wait will be longer.... and I am glad you mentioned investor overlays!  NO one is underwriting to plain FHA guide lines... 620 is the magic number and I have even seen a few 640s and 660s flirting around!

Posted by Robert Rauf (HomeBridge Financial Services (NJ)) over 7 years ago

I've been told a foreclosure will keep you from buying a home for at least 7 years.  I suppose it depends on the seller's and the type of loan they are trying to use.

Posted by Kay Van Kampen, Realtor®, Springfield Mo Real Estate (RE/MAX Broker, RE/MAX Solutions) over 7 years ago

Eleanor,

USDA is much more lenient right now than FHA!  3 years vs. 7?

Mike in Tucson

Posted by Mike Jones, Mike Jones NMLS 223495 (SUNSTREET MORTGAGE, LLC (BK-0907366, NMLS 145171) ) over 7 years ago

i heard more like a solid 7 years

Posted by Alex Elmassih (Boston Real Estate 360) over 7 years ago

Thank you for the info.  I had one lead who thought it might work despite what I had explained to him.

Posted by Melinda Pearson (Prudential Serls Prime Properties) over 7 years ago

Although these are not an opportunities for most...

 

you can buy a new home the day after foreclosure for cash...

 

or by owner-will-carry if the owner is willing...

 

or with hard money if the lender is willing.

 

The cash and hard money alternatives fit people like Donald Trump who may allow one property to foreclose while proceeding with other asset allocations.

 

Yes, I work with investors.

Posted by Jim Gilbert, The Gold Homes Team (Keller Williams Fairfax Gateway) over 7 years ago

here's the dilemma as i see it. if todays guideline(s) say you need to wait 2 yrs, 3, 4, whatever, will those guidelines still be in place in 2, 3, 4 yrs; whatever: who knows?

Posted by Jay Beckingham, "I love first time homebuyers" (Fairway Independent Mortgage Company) over 7 years ago

This is really good information.  yes, things may change, as mentioned above, but for today, great info.  Thanks.  Cindy

Posted by Cindy Edwards, CRS, GRI, PMN - Northeast Tennessee - 423-677-6677 (RE/MAX Checkmate) over 7 years ago

Eleanor, looks like some people with hardship cases might be able to purchase again. However, its up to the banks to approve the loans. It will be interesting to see if the banks do approve any of these loans.

Posted by Michael Setunsky, Your Commercial Real Estate Link to Northern VA over 7 years ago

Eleanor - Yes, people are asking this question.  Great information, and especially the ending, where you suggest people not rely on online info (which could be accurate at the time it's written but wrong when it's read).  They need to call a loan officer, like you.

Posted by Margaret Woda, Maryland Real Estate & Military Relocation (Long & Foster Real Estate, Inc.) over 7 years ago

I really don't think this is too long to wait after losing a house. Good things are worth waiting for.

Posted by Mike Frazier, Northwest Tennessee Realtor (Carousel Realty of Dyer County) over 7 years ago

Eleanor, thanks for the information.  The guidelines seem reasonable and give hope to people who have been through unfortunate circumstances beyond their control.

Posted by Brian Schulman, Lancaster County PA RealEstate Expert 717-951-5552 (Coldwell Banker Residential Brokerage, Lancaster PA) over 7 years ago

Thanks guys!  We had a case where the spouse DIED, the mortgage holder knew they could not make the payments - did not go LATE - just gave the house back deed in lieu.  2 years later, they remarried... and we were able to loan them money for a new home, and count their income!  So it CAN happen.  Yeah!  Every situation involving a foreclosure (that I've seen) has been different.  That's why I said call a loan officer!

Posted by Eleanor Thorne, Equity Resources 919-649-5058 (Equity Resources) over 7 years ago

Eleanor,

Thanks for the information, it's very useful to pass on to potential clients who may have been foreclosed on.

Posted by Monica Foster, Broker, CRS, ABR, SRS, CHMS, CNE, CNHS (RE/MAX Space Center - Clear Lake Area, League City, Friendswood, Pearland) over 7 years ago

Very valuable information Eleanor. While things can always change and there can always be amendments it is always best to go for the best people can go for especially in this industry.  

Posted by Kathy Goldman, Social Media & Marketing for Real Estate (REVA Online | SEO Boost For Real Estate, Social Media Marketing for Real Estate and Real Estate Blogging Expert) over 7 years ago

Eleanor - Good to know, thanks for the information. I had someone asking about homes after bankruptcy recently.

Posted by Julianne O'Reilly, Syracuse New York Real Estate (Syracuse Listings) over 7 years ago

Eleanor....this is great stuff.  It's a huge aspect of every loan program.  USDA is more forgiving than conforming loans!

Posted by Larry Bettag, Regional Vice-President (Larry Bettag - Cherry Creek Mortgage) over 7 years ago

Thanks for the information, I too thought is was more than 3 years. 

Diana

Posted by Diana Mehnert (Coldwell Banker Harris McHaney & Faucette) over 7 years ago

Eleanor great info.  As a Home Inspector in Maryland I speak to many  and sellers of  and short sale and foreclosure properties.  Many of them feel that it's over for them and they will never be able to purchase a home again.  I do try to tell them it is not and they should speak to a good qualified RE agent and they will see that there is hope for sure. 

Posted by Jim Keilson, Specializing in Mold and Radon Gas Testing. (Maryland Home Inspection Services, Inc.) over 7 years ago
Great blog and very timely - I will re-blog for sure. I have clients asking these questions all the time.
Posted by Kathy Schowe, La Quinta, California 760-333-8886 (California Lifestyle Realty) over 7 years ago

Great information, thank for the post.  Here in California there are hundreds of thousands of prospective buyers who are locked out of the market for the very reasons you've listed above.  The fed is gradually allowing these folks back in the game.  The next sub prime bubble is already expanding.

Posted by Will Handley, Certified Master Inspection Services (Progressive Inspection Service) over 7 years ago

Great to know!  Thanks for sharing!  I'm inserting a beautiful Sunset picture of my area to share.  This one taken in Panama City Beach, FL - Enjoy!  by me: Debbie Webb, Broker Associate with ResortQuest Real Estate of Florida, LLCSharing Beautiful Panama City Beach, FL Sunset

Posted by Debbie J. Webb, Broker Associate (Newman-Dailey Resort Properties, Inc.) over 7 years ago

This is good information, some more options we can discuss with our clients. Thanks

Posted by Laura Reilly, Home Sales Realtor - Short Sale Team Member - Redd (Real Living Real Estate Professionals) over 7 years ago

Thank you for the sharing your experience about the died and remarried situation. I have client who is in similar situation.

Posted by Ritu Desai, Virginia Realtor-Fairfax/Loudoun/PW-703-625-4949 (Samson Properties) over 7 years ago

Timely blog. I too had someone asking me about the same situation.  Thanks.

Posted by Bob Zorechak - ABR, GRI, e-PRO, Sells Homes in Morris/Somerset/Hunterdon Cos., NJ (Keller Williams Realty Metropolitan) over 7 years ago

Great information.  I would like to see the guidelines require a bigger down payment rather than the 3 years.  I feel the 100% financing that was offered 4 years ago was the culprit.

Posted by Ellie Penaranda, Naples Florida Real Estate - Waterfront & Beach Co (239.776.5077 Downing-Frye Realty ) over 7 years ago

Eleanor - The circumstances/hardship explanation is probably huge when it comes to making these parameters a reality. 

Posted by Jason Sardi, Your Agent for Life (Auto & Home & Life Insurance throughout North Carolina) over 7 years ago

I think what will eventually happend is that when the nation needs a boost to the housing market "they" will just dumb down all of the requirements and then people can buy again. If the majority of people in the US have credit scores of 600, then that will be the norm for lending, and then they will come out with a 80/10/10 product again, then there will be like an "amnesty" period for those that had foreclosures etc. etc.

banks need to lend, builders need to build and workers need to work. And the only way to urge that on will be to dumb down the requirements.

Posted by Andrew Martin (REMAX Accord) over 7 years ago

Eleanor - Great outline for buyers considering re-entering the real estate market after they have experienced a "trigger event" outside their control. With forecasts of double digit rent rate increases due to the increased demand from the high voume of foreclosures in many markets, this is another ray of sunshine for people to focus on.

Posted by Karen Cooper, Helping Homeowners w/Home Loans in 27 US States (Karen Cooper | Sr Retail Loan Originator ! NMLS # 223305 | 360 Mortgage Group LLC Austin Texas) over 7 years ago

Real good simple explanation of this. I tell people 3 years with the credit improving.  It takes work but its possible.

Posted by Chuck Carstensen, Minnesota Real Estate Expert (RE/MAX Results) over 7 years ago

Great information to pass on to clients. Thanks.

Posted by Dustin McClure (Mossy Oak Properties Outdoor Realty) over 7 years ago

I get this question all the time too. I tell people 3 years minimum, but it is definitely situational. Thanks for sharing!

Posted by Julie Baldino, Opening Doors to New Chapters... (Front Door Realty) over 7 years ago

Wow.  Very useful information.  I don't know that I'll have an opportunity to work with someone in such a scenario any time soon but this is eye opening.  I'm sure qualifications and criteria will change between now and 3 years from now but at the very least this news allows for some optimism.  Thank you for sharing.

 

 

Posted by Dave Leiderman, ABR, SFR - Realtor - DE & MD Beaches (Coldwell Banker Residential Brokerage) over 7 years ago

Eleanor,

Thanks for the information.  I hear conflicting data.  I've also heard that it could be 5 years.

Posted by Eugene Adan, Carlsbad Real Estate (Adan Properties, Carlsbad, CA (760) 720-9710) over 7 years ago

3 years is good news but don't bank on it. I do think though that when this foreclosure wave is completed, the time to be able to buy again will need to be reduced because the millions of homeowners who are foreclosed on represent a large percentage of the buyer pool in this country. My .02

Posted by Ronnie Margolis, Kauai Realtor - CDPE, ABR, RA - On Top of the Aloh (KW Kauai) over 7 years ago

Interesting! Like many posting here, I'd heard 7 years. It's good to know that for some it could be sooner. Many of the folks who've lost their homes were good, conscientious people who were simply in a bad circumstance. Often it was health problems, loss of job or divorce. I believe that if they can show they've turned their financial lives around, they should be able to get financed. Of course, it's likely to be a 2 strikes and you're out situation so if they were to default again they probably wouldn't ever be able to get another home loan.

Posted by Bob Krus, What About Bob? For All Your Real Estate Needs! (Keller Williams Foothills Realty) over 7 years ago

Yes, you can buy after foreclosure and short sale hoping the investors and banks don't add additional overlays to the current guidelines.

Posted by Patricia Regan (The Regan Team Home Loan Group) over 7 years ago

Good information for agents and borrowers. As a rule of thumb I tell clients with previous foreclosure to not even consider purchasing another home for at least three years.

Posted by Markita Woods NMLS#196099, Queen of Mortgages - FHA, VA, Conventional, USDA (Fairway Independent Mortgage) over 7 years ago

Eleanor - this is really good information for some buyers to have so they do not give up the possiblility of future homeownership. Many certainly got into a situation beyonod their control and should not be denied owning a home again provided they qualify.

Sounds like those who strategically decide to walk away might have a harder time convincing the powers that be that they should own a home again. Who knows.

Jeff

Posted by Jeff Dowler, CRS, The Southern California Relocation Dude - Carlsbad (Solutions Real Estate ) over 7 years ago

Eleanor - Terrific details and information for those who have undergone foreclosure in the past.  Great job!

Posted by Jason Crouch, Broker - Austin Texas Real Estate (512-796-7653) (Austin Texas Homes, LLC) over 7 years ago

There is life after foreclosure.

Buyers need the right Realtor and mortgage broker on their side to help navigate the real estate market.

The right mortgage broker will guide the buyer through the credit repair process while keeping track of the changing loan approval guidelines.

Posted by Dave Halpern, Louisville Short Sale Expert (Keller Williams Realty Louisville East (502) 664-7827) over 7 years ago

Great information. Sometimes circumstances are not what they seem on paper. People need to understand what is the back story on these things. 

Posted by Erica Ramus, MRE, Schuylkill County PA Real Estate (Erica Ramus - Ramus Realty Group - Pottsville, PA ) over 7 years ago

Great information. Sometimes circumstances are not what they seem on paper. People need to understand what is the back story on these things. 

Posted by Erica Ramus, MRE, Schuylkill County PA Real Estate (Erica Ramus - Ramus Realty Group - Pottsville, PA ) over 7 years ago

This is really important information.  I think it's important to know the requirements for short sales as well, and yet they keep changing.

Posted by Christine Donovan, Broker/Attorney 714-319-9751 DRE01267479 - Costa M (Donovan Blatt Realty) over 7 years ago

Really well laid on process, generally we tell people 3-5 years in our market.

Posted by "Jayne" Focused on Finding the "Right" Home For You (Georgia Residential Realty, LLC) over 7 years ago

Great info Eleanor. Thanks for sharing it. These calls from clients with stories like this are getting to be the norm. Hopefully lessons are learned and it will be better the next time around.

 

Posted by Jay O'Brien, Kansas City : Social Media Guy (RE/MAX Revolution) over 7 years ago

Eleanor... not sure how I missed this one.. Excellent post with some great information supplied... and this is one that needs to be posted on Mortgage Myth Busters. ;o)  Again great post here.

jeff belonger

Posted by Jeff Belonger, The FHA Expert - FHA Loans - FHA mortgages - USDA loans - VA Loans ( Social Media - Infinity Home Mortgage Company, Inc) over 7 years ago
Eleanor~ This is a question I actually hear pretty often during Cash for Keys exchanges.
Posted by Liz Lockhart, GRI, Cape Girardeau Real Estate (Riverbend Realty, Cape Girardeau, MO) over 7 years ago

Just re-blogged this, Eleanor.  I didn't disable comments because I targeted the intro to a local community with lots of foreclosures and posted it to Localism for that community.  'Want the locals to see comments from Activerainers.  Hopefully they'll also stop over here.

Let me know if it would be okay to re-blog this on my outside RE Tomato blog, Focus On Crofton.com.  Friday is RE Q&A day.

Posted by Margaret Woda, Maryland Real Estate & Military Relocation (Long & Foster Real Estate, Inc.) over 7 years ago
Thanks Eleanor for some great info! And for passing along hope to those that fell into tough times. You and Steve do an excellent job helping people get back on the credit track!
Posted by Lee & Pamela St. Peter, Making Connections to Success in Real Estate (Berkshire Hathaway HomeServices YSU Realty: (919) 645-2522) over 7 years ago

Eleanor,  I just had this question come up and after speaking with a local Loan officer I was able to get the answers that I needed to provide to my client. Thanks for posting!

Posted by Malik Crichlow, Maplewood,SouthOrange,Union Real estate (GoodBuy Homes NJ Essex & Union County Real Estate specialist) over 7 years ago
Eleanor, me too- how did i miss your blog here...this is great information so clearly stated. Great stuff you are sharing...
Posted by Ginny Gorman, Homes for Sale in North Kingstown RI and beyond (RI Real Estate Services ~ 401-529-7849~ RI Waterfront Real Estate) over 7 years ago

Hi Eleanor -- this was one of the most informative posts that I have seen in a while.  I am an experienced LO but a relative newcomer to AR.  Thank you for allowing "After Foreclosure - Can I Buy Another Home?" to be re-posted.  This was a very professional piece.  Thanks again! 

Posted by Jack Tenold, Conventional and Reverse (Caliber Home Loans, Inc. NMLS 15622) over 7 years ago

Eleanor - These are all great points especially the one about if FHA allows it doesn't mean the lender will.  It is also true that most lenders require at least a 620 FICO on an FHA purchase.  I only have 1 lender that goes down to a 580 and they are very difficult to deal with.

Posted by Nevin Williams, Raleigh Mortgage Pro (Sierra Pacific Mortgage Raleigh) over 7 years ago

Eleanor,

As banks get on a more solid footing again they'll start easing up on qualifying guidelines that will also help those folks with foreclosure on their records.

 

Posted by Esko Kiuru over 7 years ago

I understood that if you foreclosed with Fannie Mae/FM, was homsteaded, paid into PMI, and were laid off due to the economical crisis that you were covered under the 2009-2012 act - that an individual could buy an affordable home within two years with no discrimination?? What happened to that??

 

fiffig40@yahoo.com

Posted by alison about 7 years ago

I had a client who wanted to buy a home in Arizona, but he had a foreclosure.  After researching the web I found a loan program at www.cfsflex.com, they allow a mortgage after a foreclosure.  There is no waiting period.  Good to see lending options coming back.

Posted by Terri Club about 5 years ago

I am curious Terri, is there any program that you know of in Florida similar to the www.cfsflex.com to purchase a home after a deed in lieu of foreclosure? 

Posted by Deidre about 5 years ago

Yes, you should probably find a reasonable place to live, and clear all your debt under your name. Remember that the foreclosure is an outcome of whatever underlying crisis is going on in your life that either impacted your income or caused expenses that made your mortgage unaffordable.

Thanks for this great information.

Posted by Sara Chris (Absolute Consultant Group) almost 4 years ago

Participate