When it comes to getting a mortgage, your credit history has a lot to do with whether you will qualify and what type of interest rates you’ll get. If you’ve foreclosed on a house in the past, the challenges of getting a mortgage are increasingly difficult, although not impossible. Typically, to get a new home you’ll be required to wait somewhere between one and seven years.
Your lender will start the process by looking at your credit history, credit rating, and how long it’s been since your foreclosure. There is no official timeline for how long you have to wait; rather, the amount of time depends primarily on your financial state. The loan type you apply for will also make a difference. Some loans are more forgiving than others.
When applying for a loan you have three options to consider: a conventional loan (Fannie Mae or Freddie Mac), VA loan, or an FHA-backed loan. Conventional loans have the longest waiting period and FHA loans are typically the most forgiving. A few years ago, to qualify for an FHA loan you had to wait at least three years after foreclosure; however, this rule has recently been waived and some potential homeowners have been able to qualify in as little as one year. To qualify for a conventional loan, you need to wait about seven years, and for a VA loan, two years.
Although there are some restrictions in terms of the waiting period, remember that you should focus on your finances before applying for a mortgage. Start by checking your credit score. Most lenders will require that your score is at least above 500, but the higher your score, the more likely you’ll be to qualify for a loan. Additionally, take a look at your debt-to-income ratio. You’ll want to reduce your debt to no more than 45 percent of your income. Finally, save as much as possible for a down payment. Although a high down payment is no longer required, it can help you secure your loan.