Buying A Home After Foreclosure - Updated for 2018

Erik Sandstrom

Mortgage Expert - Call 1-619-379-8999
Staff member
Loan Safe Mortgage
Jan 14, 2011
2,058
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San Diego, California
www.loansreduced.com
There are many different programs and your specific scenario will determine which product will suit your needs the best. You do not need to reach out to a hard money lender, many direct lenders and federally chartered banks (FDIC) can help as well. I’m going to go through the process in which we would analyze program options as well as the questions I would ask.

Quick Synopsis of Program Availability:
  • Portfolio – 1 day out of foreclosure, short sale or bankruptcy
  • Conventional – 7 years out of foreclosure, unless home was included in bankruptcy
  • FHA – 3 years seasoning required
  • VA – 2 years seasoning required
With knowing the seasoning requirements above, let’s dive a little bit into the requirements to qualify for each program.

Portfolio:
  • 1 day out of foreclosure: 15% down 640 FICO required 6months reserves, 20% down 620 credit score 3 months reserves. 30% down only required a 580 credit score with 3 months of reserves.
  • 2 years out of foreclosure: 10% down 660 FICO and 9 months reserves, 15% down 620 FICO and 6 months reserves, 20% down 610 FICO 3 months reserves.

Conventional:
In some cases you may qualify for the 3% down program called Fannie Mae HomeReady, in all other cases 5% is usually the minimum. 620 FICO score required, no specific reserve requirements however automated underwriting will need to receive positive feedback.

FHA:
3 years in 99% of cases, 3.5% down minimum 580 FICO required and no specific reserve requirement. There is the extenuating circumstance program however it can be extremely difficult to qualify for. If you happen to qualify for extenuating circumstances you may be able to purchase a new home one year after foreclosure.

VA:
2 years, 100% financing available with 580 FICO required and also no specific reserve requirement. This is going to be the most flexible program post foreclosure but is only available to certain active duty or retired military.

There are many different options when it comes to finding financing post foreclosure. These touch the surface of what is out there and what I have found to be the best programs in the market today. First you must ensure that Conventional, FHA, USDA, VA are not eligible products before opening the door to portfolio. If portfolio is somehow not an option due to income qualifying or other factors at that point you would want to consider Hard Money financing. Do whatever you can to avoid Hard Money as the terms are not very favorable, in some cases require balloon payments and have pre-payment penalties.

If you have any questions, even if it’s just knowing where to start feel free to reach out to us here at LoanSafe 800-779-4547 or Eri[email protected]