Waiting Period After Foreclosure To Qualify For A Mortgage Loan
Foreclosure
If the borrower has had past delinquencies or has defaulted on an FHA insured loan, there is a three-year waiting period before the borrower can regain eligibility for another FHA-insured mortgage. The three-year waiting period begins when FHA pays the initial claim to the lender. This includes deed-in-lieu of foreclosure, as well as judicial and other forms of foreclosures.
Foreclosure or deed-in lieu of foreclosure on a non-FHA loan requires three years seasoning.
Exceptions To Waiting Period Requirements
Exceptions are possible if the foreclosure was the result of documented extenuating circumstances that were beyond the borrower’s control, such as a serious illness or death of a wage earner, and the borrower has re-established good credit since the foreclosure.
Divorce is not considered an extenuating circumstance; however an exception may be granted where a borrower’s loan was current at the time of the divorce, the ex-spouse received the property, and the loan was later foreclosed.
The inability to sell the property due to a job transfer or relocation to another area does not qualify as an extenuating circumstance.
Judgments
Judgments must be paid in full prior to loan approval , with the exception of a court ordered judgment with payment arrangements. If payment arrangements have been made with the creditor of a court ordered judgment and three months scheduled payments were made prior to loan approval, payment in full is not required. The following requirements must be met:
1. The verified payment must be included in the DTI.
2. The borrower must provide a copy of the payment agreement and evidence that the payments were made in accordance with the agreement.
Prepayment of the scheduled payments in order to meet the minimum three month requirement , are not allowed.
Note On Judgments
In a community property sate, non-purchasing spouse judgments must be paid in full, or meet the payment arrangement requirements detailed above.
Manually Underwritten Mortgage Loans
Judgments must be considered in underwriting the loan. The lender must document the reasons for approving a mortgage when the borrower has one or more judgments. The borrower must provide an explanation for all judgment reflected on the credit report.
Court-ordered judgments must be paid off if on title. Judgments not on title may remain unpaid if borrower has a repayment plan in place with a minimum of two payments made prior to the date of the contract.
Gustan Cho NMLS ID # 873293
