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Crofton Real Estate Q&A: Buy After a Foreclosure?

Q.  I’m probably going to lose my Crofton MD home to foreclosure in 2011.  Will I ever be able to buy another home?

A.  You’ll be happy to know the short answer to this is “YES.”  My friend from Cary, N.C., lender Eleanor Thorne, will tell you about the timing under different mortgage programs, and what you should do to qualify for a mortgage in the future – information you need to know, as you negotiate a lease and start making long-term plans.

If you are one of the millions of families that lost their home in the last couple of years to Foreclosure… you might think…

Roller Coaster Real Estate MarketBeen There – Done That

You might not want to own a home again! 

But if you’re one of those folks who truly does want to purchase again, here’s some potentially good news.

USDA says that they will allow you to purchase a new home to owner occupy, after foreclosure if you’ve done the following things:

  • Wait 3 years from the date of the Foreclosure.
  • Re-establish Credit
  • Have Credit Scores that meet the guidelines (as of the date I am writing this, that means you need a 620 score.)

Here’s the other part… you need to DOCUMENT what happened, and why you ended up in a Foreclosure. 

“FHA insured mortgages are generally not available to borrowers whose property was foreclosed on or given a deed-in-lieu of foreclosure within the previous three years. However, if the foreclosure of the borrower’s main residence was the result of extenuating circumstances, an exception may be granted if they have since established good credit…

This does not include the inability to sell a home when transferring from one area to another.”  So you MIGHT be able to buy after two years. 

My “real life” answer to this question is… in today’s credit environment, it’s going to be HARD to get a Bank to loan you money for a home if you had your home foreclosed upon less than 3 years ago.  I know what the guidelines say, but Bank’s do not have to follow guidelines set by FHA. 

FHA does not say you have to have a 620 credit score, but there are VERY few lenders who will allow you to purchase a home without at least a 620 score!  There are some Banks that will not allow you to purchase with FHA if you have ANY lates on ANY accounts in the last 12 months!  That’s not an FHA guideline, that’s a BANK rule, so again – I’d say – you might still be forced to wait 3 years, and have all of your documentation in order!

These guidelines are different from the Fannie Mae / Freddie Mac Conventional Guidelines… And these foreclosure guidelines are changing OFTEN… so I would not rely solely on information you get from an online site. 

Call a loan officer.

Re-published with permission of the author.

I echo Eleanor’s recommendation that you check with a lender as the time draws closer to find out if the rules change between now and then, rather than rely on information online which could be outdated.  Whether you’re in North Carolina or Maryland or Anywhere USA, you couldn’t go wrong checking with Eleanor Thorne.  She’ll update you on the answer to this question and refer you to a lender in your own neck of the woods.

You can reach her at First Financial Services, Inc (919-649-5057).

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