This guide covers home loan after foreclosure waiting period guidelines to qualify for a mortgage. Millions of homeowners have had foreclosures in recent years. There are waiting period requirements to qualify for a home loan after foreclosure with government and conventional loans. Non-QM loans do not have any waiting period requirements after foreclosure.
Foreclosure rates have reached historic highs since the 2008 real estate meltdown. Millions homeowners who thought they had thousands in equity in their homes soon realized all of the equity in their homes had evaporated.
Most homeowners were left hanging with mortgages higher than their homes’ value. Many turned in their keys to their lenders and walked away. Others did a deed-in-lieu of foreclosure or a short sale and walked away with nothing but a dream that someday they could own another home. This article will cover and discuss home loan after foreclosure waiting period guidelines.
Real Estate Meltdown of 2008
Yet, other homeowners still have homes with mortgages higher than the value of their homes. Those who own a home whose mortgage loans are higher than the value of their homes are stuck in their homes until their value substantially increases. They would need to pay down their mortgage loans to sell their homes.
Homes With Underwater Mortgages
For homeowners with mortgage balances that are higher than the value of their homes, it is often said that their homes are underwater. The government created and implemented the HARP program for homeowners with underwater mortgages. HARP stands for Home Affordable Refinance Program. HARP was created for homeowners with mortgage balances that were higher than the value of their homes. No appraisal is needed, but Fannie Mae or Freddie Mac must own the home loan before June 1, 2009.
The Launch of HARP 2.0 For Homeowners With Underwater Mortgages
For homeowners with loans not sold to Fannie Mae or Freddie Mac before June 1, 2009, the government created HARP 2.0: Homeowners can refinance their mortgages with no appraisal or income verification with HARP. It is a conventional loan equivalent to FHA Streamline Refinance. Rumors of HARP 3.0, scheduled to be implemented this year, remain to be seen. HARP 3.0 is supposed to be created for those homeowners who cannot take advantage of the HARP 2.0 program. As of July 2017, HARP 3,0 has not been launched.
Deed-in-Lieu of Foreclosure
A deed in lieu of foreclosure is when a homeowner voluntarily surrenders the keys of their home to the mortgage lender. In return, the mortgage lender agrees not to pursue legal proceedings for foreclosure on the property. When a homeowner enters a deed-in-lieu of foreclosure agreement with their lender, the lender does not come after the deficit of the mortgage loan after the foreclosed property has been sold. Both the homeowner and lender agree on the deed in lieu of foreclosure.
Qualifying For Conventional Home Loan After Foreclosure & Deed-in-Lieu of Foreclosure or Short Sale
A person who has undergone a deed-in-lieu of foreclosure is eligible for a conventional mortgage loan four years from the date of the deed-in-lieu of foreclosure with a 5% down payment. FHA loan programs treat the deed-in-lieu of foreclosures like any regular foreclosure. The wait time for the borrower is the normal three years for foreclosure and deed-in-lieu of foreclosure on FHA loans. After foreclosures and short sales, there is a two-year waiting period to qualify for VA loans.
Home Loan After Short Sale Guidelines
A short sale is when homeowners sell their home below the mortgage balance amount with the mortgage lender’s blessing. When the real estate meltdown in 2008 hit the United States, real estate values plunged nationwide. Almost every neighborhood in the country was affected by this crisis. Short sales, a term almost nonexistent before 2008, was a household name.
Qualifying For Home Loan After Short Sale
A homeowner with a short sale on his record can purchase a home via a conventional mortgage loan four years after the short sale date. The wait time is three years for those seeking a FHA mortgage loan. FHA treats short sales like any other regular foreclosure and deed in lieu of foreclosure regarding wait times. After short sales, there is a three-year waiting period to qualify for USDA loans. After short sales, there is a two-year waiting period to qualify for VA loans.
Qualifying For Home Loan After Foreclosure
Homeowners can qualify for home loan after foreclosure with FHA in 3 years after the recorded foreclosure date. The three-year waiting period starts from the date of the sheriff’s sale of the property or the date the homeowner’s name was transferred out of their name.
The waiting period start date is when the deed was transferred into the mortgage lender’s name to qualify for FHA and USDA loans or the date of the sheriff’s sale.
It is not the date the keys were turned in or the day of the eviction. The waiting period start date is the date recorded on public records or the date of the sheriff’s sale. Borrowers need to check with public records as of the date the deed changed over to the lender or new owner to find the exact waiting period start date.
Update on Conventional Loan After Deed-in-Lieu and Short Sale
New Fannie Mae and Freddie Mac Guidelines to qualify for a conventional loan after a deed in lieu of foreclosure and short sale were implemented in August 2014.
There is a four-year waiting period to qualify for a conventional loan after a deed-in-lieu of foreclosure, short sale, and bankruptcy with a 5% down payment.
The two-year waiting period after a deed in lieu of foreclosure or short sale with a 20% down payment is no longer available. The good news is that the 20% down payment is no longer required. Borrowers can qualify for a conventional loan after a deed in lieu of foreclosure or short sale with a 5% down payment after four years.
