Many people who have gone through 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, 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 applying for a new mortgage loan depends on the type of lender 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.
|Loan Type||Waiting Period After Foreclosure|
|Fannie Mae/Freddie Mac||
Generally: 7 years
Extenuating circumstances: 3 years
|Other Kinds of Loans||2-8 years|
Also, a foreclosure will cause a significant decline in your credit scores, making it more difficult to get a new mortgage. The amount of that decline depends on the strength of your credit before losing your home. If you previously had excellent credit, your score will go down more than if you'd already had late payments, charged-off accounts, or other negatives items in your credit reports.
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.
You might be able to shorten the waiting period to three years for a Fannie Mae or Freddie Mac loan if you had extenuating circumstances—that is, situations which are one-time only, beyond your control, and resulted in a sudden, significant, and prolonged reduction in income.
Generally, you have to:
To qualify for a loan that the Federal Housing Administration (FHA) insures, you must wait at least three years after a foreclosure. The three-year clock starts ticking from when the foreclosure case has ended, usually from the date that your prior home was sold in the foreclosure proceeding. If the foreclosure also involved an FHA-insured loan, the three-year waiting period starts from when FHA paid the prior lender on its claim.
After a foreclosure, you'll typically need to wait two years to get a VA-guaranteed mortgage, 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.
For most other types of loans, like subprime loans, the waiting periods can vary. Most aren't as lenient as FHA and VA lenders. The waiting period can range from two to eight years or longer. Other lenders might shorten the post-foreclosure waiting period, provided that you make a larger down payment—sometimes 25% or more—and agree to a higher interest rate.
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. Alternatively, while you might be able to get a new mortgage with a low credit score, you could have to make a larger down payment or pay a higher interest rate.
FICO is the most common score 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. Fannie Mae and Freddie Mac, for instance, generally require mortgage lenders to use the "Classic FICO" credit score to measure credit. The Classic FICO score is also called these names at the major credit reporting agencies:
As of October 2020, Fannie Mae generally requires borrowers to have a credit score of 620 or 640, depending on how the loan was underwritten. 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.
A foreclosure might cause your FICO score to drop by a hundred points or more, perhaps below 550. So, even after the three-year foreclosure period, you might not qualify for FHA's low down payment loan, which requires a score of 580. You could still qualify for an FHA loan with a 550 FICO, but instead of making a 3.5% down payment, your down payment would be higher, at least 10%.
To re-establish good credit and boost your credit scores, you should: