Financing in 48236>Question Details

Marie, Home Owner in Michigan

When can I apply for a new mortgage?

Asked by Marie, Michigan Tue Sep 18, 2012

Filled for Chap 7 which we put the 1st and 2nd mortgage in. The BK was discharged in May 2010, did a pay and stay on the home. Ended up losing the home to foreclosure due to illness, sheriff sale was last Dec. We have been renting a home for almost 7 months now and at some point would like to make an offer to the owner while the market is down but we want to be pre approved ahead of time so we know what we can actually offer. When will we be able to be approved for a new loan? Thanks!

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All good answers. What I will add to that is that "re-establishing credit" usually means having a minimum of 3 lines of credit open for at least 12 months - preferrably 1 of those with at least a 24 month history AND ALSO record of some sort of housing payment. And there can be no late payments or collections in the last 12 months.

Lenders are looking to see that your credit problems are in the past and that you've been on the straight and narrow since then. i.e. it was a one time circumstance and not a recurring issue going forward that jeopardizes their chances of getting paid.

Sounds like the best course of action is just to put some time between you and the foreclosure and prepare for the future. If May of 2013 the earliest you can get approved, then start talking to a lender now. We can look at your credit now, identify any areas of concern, and make sure to put you in the best position come spring time to get that loan.

Best of luck
0 votes Thank Flag Link Tue Sep 18, 2012
Marie, Nicole is correct in that it takes some time after the sheriff's sale/foreclosure before you would be eligible to obtain financing again. If you or your husband are an eligible veteran, then VA financing only requires 2 years from the foreclosure (0% down payment). FHA financing requires 3 years from the foreclosure (3.5%) down payment). Fannie Mae/Freddie Mac (which is commonly referred to as "conventional financing") require 7 years (as little as 3% down payment). In addition to the required waiting time after the foreclosure, you should also have at least 12 months of re-established credit preferably with 3 forms of credit (i.e. 3 credit cards, or 2 credit cards and a car loan, or any combination). It can be from new credit you obtained afterwards, or trade lines that survived the bankruptcy & foreclosure.

If the bankruptcy & foreclosure was due to extenuating circumstances, then shorter waiting periods would apply before you would be eligible for financing - 1 year for VA, 1 year for FHA, and 3 years for conventional financing (with a 10% down payment). However from what I've found, the majority of lenders are usually unwilling to make exceptions for a foreclosure due to extenuating circumstances, they are more lenient for bankruptcies with extenuating circumstances.

Shane Milne | Lending in all 50 states | NMLS #81195
0 votes Thank Flag Link Tue Sep 18, 2012
Marie, you don't want to speculate on any of these questions. Usually it takes three years time to be able to become financed again after a foreclosure. After a bankruptcy a lender will want to see that you have established a new form of credit and are paying as scheduled. Perhaps you could speak with a lender that I work with. Robyn Popsy @ John Adams Mortgage (734-953-7348) I am sure that she would be glad to answer your concerns and you can tell her that Nicole Murphy referred you.
0 votes Thank Flag Link Tue Sep 18, 2012
Speak to some lenders, I think you will have a hard time for some years.
0 votes Thank Flag Link Tue Sep 18, 2012
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