Waiting Period Requirements To Qualify For Home Loan After Foreclosure

This BLOG On Waiting Period Requirements To Qualify For Home Loan After Foreclosure Was UPDATED On July 17, 2017

Millions of homeowners had a foreclosure in recent years. There are Waiting Period Requirements To Qualify For 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.  
  • Million of homeowners who thought they had thousands in equity in their homes soon realized all of the equity in their homes have evaporated. 
  • A substantial percentage of homeowners were left hanging with mortgages that were higher than the value of their homes. 
  • Many turned in their keys to their mortgage 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 can own another home.

Real Estate Meltdown Of 2008

Yet, there are other homeowners who still have their 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 in value. 
  • If they want to sell their homes, they would need to pay down their mortgage loans.

Homes With Underwater Mortgages

For those homeowners who have mortgage balances that are higher than the value of their homes,  it is often called that their homes are underwater.

  • The government created and implemented the HARP program for those homeowners with underwater mortgages. 
  • HARP, stands for Home Affordable Refinance Program, and was created for homeowners who had mortgage balances that were higher than the value of their homes. 
  • There is no appraisal needed but the home loan needs to be owned by Fannie Mae and/or Freddie Mac prior to June 1, 2009.

The Launch Of HARP 2.0 For Homeowners With Underwater Mortgages

Homeowners who have loans that have not been sold to Fannie Mae or Freddie Mac prior to June 1, 2009, the government created HARP 2.0 where they can refinance their mortgages with no appraisal or income verification similar to a FHA Streamline Refinance. Rumors of HARP 3.0 is scheduled to be implemented this year still remains to be seen.

  • HARP 3.0 is supposed to be created for those homeowners who could not 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 to foreclosure on the property.

  • When a homeowner enters a deed in lieu of foreclosure agreement with their mortgage lender, the mortgage 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 in 4 years from the date of the deed in lieu of foreclosure with 5% down payment.

  • FHA mortgage loan programs treat deed in lieu of foreclosures just like any other regular foreclosure. 
  • The wait time for a FHA mortgage loan borrower is the normal 3 years for foreclosure and deed in lieu of foreclosure.
  • There is a two year waiting period to qualify for VA Loans after foreclosures and short sales.

Short Sales

A short sale is when a homeowner sells their home below the amount of the mortgage balance with the mortgage lender’s blessing.

  • When the real estate meltdown of 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 that was almost non existent prior to 2008, was a household name.

Qualifying For Home Loan After Short Sale

A homeowner who had a short sale on his record is eligible to purchase a home via conventional mortgage loan after 4 years from the date of short sale.

  • For those who are seeking a FHA mortgage loan, the wait time is 3 years. 
  • FHA treats short sales like any other regular foreclosure and deed in lieu of foreclosure when it comes to wait times.
  • 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 after shorts sales.

Qualifying For Home Loan After Foreclosure

Homeowners can qualify for home loan after foreclosure with FHA in 3 years after recorded date of foreclosure. 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 into the mortgage lender’s name to qualify for a FHA Loan and USDA Loans.

  • It is not the date the turned keys were turned in or the day of the eviction
  • The waiting period start date is the date recorded on public records and/or date of sheriff’s sale.
  • Borrowers need to check with public records as of the date the deed changed over to the mortgage lender or new owner to find the exact waiting period start date.

2017 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 has been implement in August 2014.

  • There is now a four year waiting period to qualify for a conventional loan after deed in lieu of foreclosure, short sale, and bankruptcy with 5% down payment. 
  • The two year waiting period after deed in lieu of foreclosure or short sale with 20% down payment is no longer available. 
  • The good news is that the 20% down payment is no longer a requirement. 
  • Conventional loan mortgage borrowers can qualify for a conventional loan after a deed in lieu of foreclosure and/or short sale with a 5% down payment after 4 years.

Related> Late Payments After Bankruptcy And Foreclosure

Related> Conventional Loan After Deed In Lieu

The information contained on Gustan Cho Associates website is for informational purposes only and is not an advertisement for products offered by The Gustan Cho Team @ Gustan Cho Associates or its affiliates. The views and opinions expressed herein are those of the author and/or guest writers of Gustan Cho Associates Mortgage & Real Estate Information Resource Center website and do not reflect the policy of Gustan Cho Associates Lenders Network, its officers, subsidiaries, parent, or affiliates.

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