From the final recorded file date of foreclosure:
CONVENTIONAL LOANS: Currently, the waiting period that must elapse after a borrower experiences a foreclosure is seven years. However, Fannie Mae allows a shorter time period – five years – if certain additional requirements are met (e.g., minimum down payment and credit score, and occupancy requirements). These requirements are being modified to remove the five year option. Unless the foreclosure was the result of documented extenuating circumstances, which only requires a three-year waiting period (with additional requirements), all borrowers will now be required to meet a seven-year waiting period after a prior foreclosure to be eligible for a new mortgage loan eligible for sale to Fannie Mae. The additional requirements that apply to borrowers with documented extenuating circumstances are also being updated to reflect a maximum LTV ratio of the lesser of 90% or the LTV ratio per the Eligibility Matrix for all transactions.
FHA LOANS: 3 YEARS
USDA LOANS: 3 YEARS
VA LOANS: The fact that a home loan foreclosure (or deed-in-lieu of foreclosure) exists in an applicant’s (or spouses) credit history does not in itself disqualify the loan.
Develop complete information on the facts and circumstances of the foreclosure. Apply the guidelines provided for bankruptcies (**Please See Below) filed under the straight liquidation and discharge provisions of the bankruptcy law.
If the foreclosure was on a VA loan, the applicant may not have full entitlement available for the new loan. Ensure that the applicants Certificate of Eligibility reflects sufficient entitlement to meet any secondary marketing requirements of the lender.
**You may disregard a bankruptcy discharged more than two years ago. However, if the bankruptcy was discharged within the last one to two years, it is probably not possible to determine that the applicant or spouse is a satisfactory credit risk unless both of the following requirements are met:
- The applicant or spouse has obtained consumer items on credit subsequent to the bankruptcy and has satisfactorily made the payments over a continued period, and
- The bankruptcy was caused by circumstances beyond the control of the applicant or spouse such as unemployment, prolonged strikes, medical bills not covered by insurance, and so on, and the circumstances are verified.
- Divorce is not generally viewed as beyond the control of the borrower and/or spouse.