If your homeowners' association (HOA) forecloses on your home, whether it is a single-family home, condo, or townhome, you will be able to get a new mortgage after the foreclosure, but you will have to wait a while and it will likely will cost you more than if you hadn’t previously gone through a foreclosure.
Foreclosure Lowers Your Credit Score
Any foreclosure, whether it is a foreclosure by your mortgage lender or HOA, will lower your FICO credit score significantly. (FICO stands for “Fair Isaac Corporation,” which is the creator of the FICO score.) Generally, a foreclosure will drop your FICO score at least 100 points (scores range from 300-850), often more. (Learn more in Nolo’s article Foreclosure and Your Credit Score.)
Your Low Credit Score Will Affect Your Ability to Obtain a Mortgage
When you apply for a mortgage, one of the first things a potential lender takes into consideration when deciding whether or not to lend to you is your credit score. Lenders prefer to make loans to borrowers who are most likely to repay them, such as those people with the highest scores.
This means that if you have a high score, it’s relatively easy to get a mortgage with favorable terms. (Mortgage lenders tend to offer the best interest rates to those with a FICO score of at least 760 since they are considered low-risk borrowers.) However, if you have a low score as a result of a foreclosure, you may be able to get a mortgage loan eventually, but the interest rate will probably be higher or you may have to put more money down.
Foreclosure’s Impact on Your Score Will Lessen Over Time
To get a new post-foreclosure mortgage, your FICO score will have to meet the lender's minimal requirements. While the foreclosure will remain on your credit report for seven years, its impact on your credit score and ability to get a mortgage will lessen over time. If you stay up-to-date on your other debts, your score can start to recover more quickly. In fact, if remain current on your other debt obligations, your FICO score can start to recover as quickly as two years after the foreclosure according to www.myfico.com. (Learn more about ways to rebuild credit.)
When You’ll Be Able to Get a New Mortgage
In addition to the fact that your FICO score will have to meet the lender's minimal requirements to qualify for a post-foreclosure mortgage, you’ll also have to endure a waiting period before you can get a new loan. (Learn more in Nolo’s article When Can I Get a Mortgage After Foreclosure?)
The waiting period can be up to seven years, though based on recent changes to FHA guidelines, you can get a new FHA-backed mortgage as little as one year after foreclosure if you meet certain criteria and maintain satisfactory credit during this time period. (Learn more in Nolo’s article Getting an FHA Loan After Foreclosure or Bankruptcy.)