Experiencing bankruptcy and foreclosure will not necessarily rule out purchasing a future property. There are particular criteria that you must know about. Below, we provide a basic understanding of how soon you can qualify for a home loan after foreclosure and bankruptcy.
Buying a Property After Foreclosure
A foreclosure stems from defaulting on a home loan. Thus, it logically follows that you would not be in a position to directly purchase another piece of real estate. Another lender will not have much faith that you will make payments on a new home loan. For conventional home loans, there is a waiting period of 7 years (from the foreclosure date) before you may be approved for a new home loan. FHA home loans allow a shorter 2-3 year time frame. There is also a special FHA Back to Work Program requiring just a 1 year waiting period.
Keep in mind that the time frame is merely one of many mortgage approval criteria. During the waiting period, it is important that you are really good when it comes to your credit. Examples are making prompt payments, not carrying large balances on your credit cards, avoiding collections, etc. Most mortgages require certain credit scores for loan approval and the foreclosure likely brought down your score dramatically. Good credit behaviour will both substantiate your deserving of new credit and raise your score.
Qualify For A Home Loan After Foreclosure and Bankruptcy
If you went through foreclosure AND you have a discharged bankruptcy, there are 2 separate waiting periods. Normally, the longer of the two applies. However, if the foreclosure was included in the bankruptcy (and the mortgage company is able to confirm that), then you may take advantage of a shorter waiting period. For conventional home loans, that would be four years (compared to 7 years).
Finding Out How Soon You Can Qualify For A Home Loan After Foreclosure And Bankruptcy
All of this can be a bit confusing. Speak to a loan officer to determine which category you fall into. If you are beyond the waiting period, the loan officer can also provide information on what you might qualify for. If you do not qualify at this time, your loan officer can provide tips on repairing your credit.
What you should know is that it is feasible to qualify for a home loan despite going through a foreclosure and bankruptcy. Wait periods do apply and will vary depending on the type of loan you are applying for. Additionally, there are special programs that may shorten that timeframe. Criteria and offerings will change over the years, so your loan officer is usually your best resource for current information.