Mar 10, 2011

Time Period for Re-establishing Credit after Foreclosure

With so many foreclosures over the past year (and still to come), you have to wonder how it will affect those former homeowners. How soon with the folks who are being affected, be back in the market to buy a home? The rules can often change, but as of March 2011, here is a rundown:

Foreclosure - 5 year time period from completion date of the foreclosure (can apply up to 7 years)
  • To purchase another residence requires minimum 10% down payment with a minimum credit score.
  • No purchase of a second home or investment property permitted.
  • Limited refinancing is permitted depending on eligibility requirements at the time.
  • No refinancing permitted that allows cash-out.
Deed-in-Lieu of Foreclosure (voluntarily giving the keys back) - 4 year time period from date of deed-in-lieu executed (can apply up to 7 years).
  • May purchase another property with minimum 10% down payment or greater sometimes.
  • Limited refinancing permitted depending on eligibility requirements at the time.
Preforeclosure Sale (short sale, ...) - 2 year time period from completion.
  • Requirements vary from lender to lender.
Keep in mind that there can be other credit issues outside of foreclosure or short sale that can affect someones ability to qualify for a loan. And each lender makes their own call on their lending policies and to whom they want to extend a mortgage.

Bankruptcy - 4 year time period from discharge date or dismissal date of bankruptcy action

Chapter 13 Bankruptcy - 2 years from discharge date or 4 years from dismissal date

Multiple Bankruptcy Filings - 5 year time period from most recent discharge or dismissal date.

As always, the interest rate for a mortgage you may be seeking is a reflection of your credit scores and financial statements. Typically, the better your financial health, the better your interest rate.  [where: 75230]

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