Can you use a conventional loan 3 years after foreclosure?  The quick answer is no, but let’s dig a little deeper since Freddie Mac has a program for just that...

Individuals who have lost their home due to a foreclosure may think that meeting the requirements necessary for a new loan may take several years. This is not necessarily true as there are many options for a family or individual to buy a home after a foreclosure has occurred. A few options may already be available with FHA financing, second chance financing or conventional financing.

Credit Report

A foreclosure will stay on an individual’s credit report for seven to ten years. This often means individuals are in a seven year waiting period before they can try again to apply for a mortgage. One interesting aspect is that circumstances, such as a divorce, medical bills, and long-term unemployment could shorten the wait.

Credit Score

Obtaining a loan to buy a home is extremely challenging with a low credit score. One way to help get a credit score back on track is to get a credit card and start building back a suitable credit history. However, there needs to be an awareness of the purchases that are made and making payments on time. This is generally the first step to take on the road to obtaining a conventional loan 3 years after foreclosure.

FHA Loans

A home loan from the Federal Housing Administration is available three years after a foreclosure. This option is now available to anyone who meets the qualifying criteria. A borrower must have been kept up on their current mortgage or have used an installment sale. Installment sales are when a home is sold with the proceeds used to pay the loan amount in full.

The benefit of an FHA loan is borrowers only need to have a 3.5 percent down payment and pay a monthly mortgage insurance premium. Current interest rates are at historic lows and the payments per month should be reasonable.

Conventional Loans

The only way to obtain a conventional loan 3 years after foreclosure is to have re-established credit along with at least 10% down payment.  One thing that is necessary is to view the current loan standards set by Freddie Mac. A mortgage advisor may also be able to help with the task of documentation.

Second Chance Home Loan Program

Individuals who have a credit score of at least 620 and 20% down can apply for this program at least one day after the foreclosure process or a short sale.  Check with us about the requirements to see if you may qualify for this Loan Program.