Generally, buyers must wait at least three years after a foreclosure
or short sale to qualify for a government-backed Federal Housing
Administration mortgage. It can take seven years to get a conventional
loan backed by Fannie Mae or Freddie Mac.
“I think over three-fourths of these folks will take a stab at the
comeback trail,” says Paul Scheper, division manager for Greenlight
Financial in Irvine, Calif. “Even though some are coming off a bitter
experience, most will be looking to regain the American Dream.”
In the nation as a whole, more than 3.4 million households
potentially could qualify for an FHA loan because it’s been three years
since their short sale or foreclosure. But many people still do not have the money or sufficient credit to get a loan. Natalie Lohrenz, the Credit Counseling Service’s director of
development and counseling, says there are two types of foreclosed
homeowners: those who had a bad loan they couldn’t afford, and those
whose finances got nuked.
The first type couldn’t make their house payments, but still had enough income to stay on top of their other bills. The second — because they went through a divorce, illness, job loss
or business reversal — basically ended up with nothing, and trashed
their credit across the board.
Here’s a breakdown of waiting periods for boomerang buyers who lost their homes due to a foreclosure or a related event:
Foreclosure:
—Seven years for a government-backed Fannie Mae or Freddie Mac loan.
—Three years for a Federal Housing Administration (FHA) loan.
—One to two years for a FHA loan if there were extenuating circumstances (such as illness or death of a wage earner).
Short sale:
—Seven years for Fannie Mae or Freddie Mac with less than 10 percent down.
—Four years for Fannie Mae or Freddie Mac with 10 percent down.
—Two years for Fannie Mae or Freddie Mac with 20 percent down.
—Three years for an FHA loan.
Deed in lieu of foreclosure:
—Seven years for Fannie Mae or Freddie Mac with less than 10 percent down.
—Four years for Fannie Mae or Freddie Mac with 10 percent down.
—Two years for Fannie Mae or Freddie Mac with 20 percent down.
—Three years for FHA.
—One to two years for FHA loan with extenuating circumstances.
SOURCE: Fannie Mae, Department of Housing and Urban Development
