Past foreclosure means waiting years for new loan
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Past foreclosure means waiting years for new loan
Next to filing for bankruptcy protection, nothing wrecks a borrower’s chances of qualifying for a
home loan like a foreclosure. And, some lenders may not look favorably upon borrowers who
were able to successfully complete a short sale either.
Making sense of the story
. Although more than 4 million homes have been lost to foreclosure in the six years since
the housing market began its descent, it’s a reality that the former owners will have to
contend with the repercussions of foreclosures and/or short sales. However, the
passage of time makes all the difference.
. The mortgage-lending guidelines followed by the majority of banks prohibit lenders from
making loans to people with foreclosure or short sale in their credit history, often for
years.
. Still, some homeowners who were foreclosed upon when the market first started to skid
are now looking to buy another home and are getting approved for new loans.
.The likelihood of a borrower with a real-estate related blemish on their credit history
being approved for a new loan depends on several factors, but largely on whether the
borrower had a foreclosure or a short sale.
. Generally, borrowers who have a foreclosure in their credit history can expect to wait
between two to seven years before a lender will even accept their loan application. The
waiting periods stem from guidelines most banks must follow in order to sell their loans
to purchasers such as Fannie Mae and Freddie Mac.
.If a buyer with a past foreclosure is seeking a government-backed mortgage, the waiting
period can vary before they can qualify. The Federal Housing Administration, which
insures roughly 30 percent of new loans, requires former homeowners to wait three
years from the date of their foreclosure before they can qualify for a loan guaranteed by
the agency.
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