When Can I Get a Mortgage After Foreclosure?

Many people who've gone through a foreclosure wonder if they'll ever be able to buy a house again. Credit reporting agencies may report foreclosures in your credit reports for seven years after the first missed payment that led to the foreclosure, longer if you're seeking a loan for $150,000 or more.

But sometimes, it might take less than seven years to get a new mortgage after a foreclosure. The amount of time you have to wait before getting a new mortgage loan depends on the type of loan and your financial circumstances.

The chart below shows how long the waiting period is after a foreclosure for different kinds of loans, with more details below.

Also, a foreclosure will cause a significant decline in your credit scores, making it more difficult to get a new mortgage. How much your scores will fall depends on the strength of your credit before losing your home. If you had excellent credit before a foreclosure, which is rare, your scores will go down more than if you'd already had late or missed payments, charged-off accounts, and other negative items in your credit reports.

Whether you can get a loan, even after the waiting period expires, depends on how well you've rebuilt your credit following the foreclosure.

Waiting Period for Fannie Mae and Freddie Mac Loans After Foreclosure

Some mortgage loans adhere to guidelines that the Federal National Mortgage Association (Fannie Mae) and the Federal Home Loan Mortgage Corporation (Freddie Mac) set. These loans, called "conventional, conforming" loans, are eligible to be sold to Fannie Mae or Freddie Mac.

Before June 20, 2010, the waiting period for a new loan following a foreclosure was five years. Now, to qualify for a loan under Fannie Mae or Freddie Mac guidelines, you must usually wait at least seven years after a foreclosure.

Three-Year Waiting Period For Extenuating Circumstances

You might be able to shorten the waiting period to three years, measured from the completion date of the foreclosure action, for a Fannie Mae or Freddie Mac loan if extenuating circumstances (that is, a situation that was nonrecurring, beyond your control and resulted in a sudden, significant, and prolonged reduction in income or a catastrophic increase in financial obligations) caused the foreclosure.

Generally, you have to:

• prove that the foreclosure was the result of extenuating circumstances, like divorce, illness, sudden loss of household income, or job loss
• for Fannie Mae, have a maximum loan-to-value (LTV) ratio of the new mortgage of either 90% or the LTV ratio listed in Fannie Mae's eligibility matrix, whichever is greater
• for Freddie Mac, have a maximum loan-to-value (LTV)/total LTV (TLTV)/Home Equity Line of Credit TLTV (HTLTV) ratio of the lesser of 90% or the maximum LTV/TLTV/HTLTV ratio for the transaction, and
• use the new mortgage loan to purchase a principal residence. (You can't use the loan to buy a second home or investment property.)

Waiting Period for FHA-Insured Loans After Foreclosure

To qualify for a loan that the Federal Housing Administration (FHA) insures, you typically must wait at least three years after a foreclosure. The three-year clock starts ticking when the foreclosure case has ended, usually from the date that the home's title transferred as a result of the foreclosure.

If the foreclosure also involved an FHA-insured loan, the three-year waiting period starts when FHA paid the prior lender on its claim. (If you lose your home to a foreclosure but the foreclosure sale price doesn't fully repay an FHA-insured loan, the lender makes a claim to the FHA, and the FHA compensates the lender for the loss.)

A lender may grant an exception to the three-year requirement if the foreclosure was the result of documented extenuating circumstances that were beyond the borrower's control, such as a serious illness or death of a wage earner, and the borrower has re-established good credit since the foreclosure. Divorce is not considered an extenuating circumstance. An exception may, however, be granted where a borrower's mortgage was current at the time of the divorce, the ex-spouse received the property, and the mortgage was later foreclosed.

Also, the inability to sell the property due to a job transfer or relocation to another area doesn't qualify as an extenuating circumstance.

Waiting Period for VA-Guaranteed Loans After Foreclosure

After a foreclosure, you'll normally need to wait two years to get a VA-guaranteed mortgage, maybe shorter if the event was beyond your control. Though in some cases, you might have to wait for three. For example, if you lose your FHA-insured home to foreclosure, you might have to wait three years before getting a VA-guaranteed home loan.

Waiting Period for Other Kinds of Loans After Foreclosure

For most other types of loans, like subprime loans, waiting periods can vary. Many aren't as lenient as for FHA-insured and VA-guaranteed loans. The waiting period can range from two to eight years or longer.

Some lenders might shorten the post-foreclosure waiting period, provided that you make a larger down payment—for example, 25% or more—and agree to pay a higher interest rate.

How Your Credit Score Affects Your Chances of Getting a New Mortgage Loan

Notwithstanding the waiting periods, you have to establish good credit following a foreclosure before you can get another mortgage; your credit score must meet the lender's minimal requirements. And even if you're able to get a new mortgage with a relatively low credit score, you might have to make a larger down payment or pay a higher interest rate.

Which Credit Score Is Used for Mortgages?

FICO scores are often used in the mortgage-lending business. Scores generally range from 300 to 850. FICO has many different scoring models, like FICO, FICO 8, and FICO 9. A person's score usually varies depending on the model used to produce it and which credit reporting agency provided the underlying credit report.

For around 20 years, Fannie Mae and Freddie Mac required lenders to use the "Classic FICO" credit score to evaluate borrowers' credit. On October 24, 2022, the Federal Housing Finance Agency (FHFA) announced that it would eventually require lenders to deliver both FICO 10T and VantageScore 4.0 credit scores with each loan sold to Fannie Mae and Freddie Mac. (The FHFA is the government agency that oversees Fannie Mae and Freddie Mac.)

FICO 10T and VantageScore 4.0 consider different types of payment histories for borrowers than Classic FICO. For instance, when available, they include rent, utilities, and telecom payments in calculating scores.

Required Credit Scores for New Mortgages

As of 2022, Fannie Mae generally requires borrowers to have a credit score of 620 or 640, depending on the situation. Depending on the circumstances, Freddie Mac requires a score of 620 or 660 for a single-family primary residence. Of course, lenders may have requirements that are stricter.

An FHA-insured loan with a low down payment (3.5%) requires a score of 580. You could still qualify for an FHA-insured loan with a FICO score of 500 to 579, but instead of making a 3.5% down payment, your down payment would be higher, at least 10%. But because a foreclosure might cause your FICO score to drop by a hundred points or more, perhaps below 500, you might not qualify for a mortgage loan, even after the waiting period expires.

The VA doesn't set a minimum credit score requirement. But it requires lenders to review the entire loan profile. Often, lenders require a FICO credit score over 620. Some lenders permit lower scores, but borrowers must undergo additional scrutiny and meet other requirements to get a loan.

How to Re-Establish Good Credit After a Foreclosure

To re-establish good credit and boost your credit scores, you should:

• pay your bills on time, consistently
• keep your credit account balances low
• monitor your credit reports for errors and inaccuracies, and
• maintain a small number of credit accounts.

Talk to an Attorney

If you have questions about mortgages or buying a home, consider talking to a real estate attorney. If you have questions about foreclosure, consult with a foreclosure lawyer.