A mortgage lender often seizes property through foreclosure proceedings if the borrower fails to repay the debt in a timely manner. The legal process typically takes several months but may last years. Foreclosure requires at least three delinquent payments, at which point the borrower is considered in default and pre-foreclosure begins. Mortgage pre-approval is a preliminary underwriting process. The lender commits to offering the loan based on an initial review of borrower creditworthiness.
The lender must review a potential borrower's credit before issuing loan pre-approval. The lender relies on the borrower's credit report and FICO scores to determine the borrower's likelihood of repaying the new mortgage debt. Foreclosure damages credit severely in two ways: through the missed payments preceding the foreclosure and from the lender reporting the account as "not paid as agreed" for seven years following foreclosure.
Conventional mortgages often require a minimum FICO score that's higher than what a borrower could have during the foreclosure process. According to myFICO, borrowers with good credit between 680 and 780 will have their score drop as low as 600 to 650 after 90 days of missed mortgage payments. Underwriting guidelines also prohibit excessive late payments within the past two years. Additionally, conventional lenders require borrowers with a past foreclosure to wait seven years before acquiring a new Fannie Mae- or Freddie Mac-insured loan. Such requirements, known as seasoning requirements, impede a borrower headed toward foreclosure from getting financed.
Borrowers may acquire a mortgage pre-approval prior to fulfilling seasoning requirements if they have good credit and can demonstrate that extenuating circumstances led to the foreclosure, such as serious illness or death of a wage earner. Other, non-traditional forms of mortgage financing may be available to borrowers in foreclosure. Such lenders include private money lenders or investors and hard money lenders. These loans require large down payments and have high interest rates.
source : http://homeguides.sfgate.com/can-preapproved-mortgage-im-foreclosure-39651.html