Unlike the waiting periods for FHA, VA and even Fannie Mae after a bankruptcy – the waiting period after a foreclosure is tougher. The waiting period is bendable, but there’s a very narrow window of what can be approved in less than 36 months. The standard USDA Home Loan guidelines require at least a full 3 years from the time that the transfer goes through.
This can be a problem because the property doesn’t always change hands at the court-house records on the date that you give the keys back. Sometimes it takes months for all of the legal stuff to change hands and get recorded properly.
Let’s be clear here – you CAN BUY A HOUSE after you’ve had a foreclosure – it’s just a matter of how long you will have to wait. USDA Loans recently changed their guidelines – which is great news, because they were generally considered to have the LONGEST waiting period.
If the loan that you had to give up had a USDA loan on it – it is unlikely you will be eligible for another USDA Loan. We recently saw a situation where the person had a USDA Guaranteed loan that got behind, and was a short sale situation.
Even though the borrower eventually paid all of the past due money back to USDA, she was flagged in the system and was ineligible for a new USDA Loan for 3 years.
Many of the Homeowner’s we’ve talked to had a long, difficult short sale process. Unfortunately, the laws for Foreclosures and Short Sales and Evictions vary greatly from one state to another. Because of this, Banks do not have a “standard” guideline for reporting Short Sales on your credit report.
It’s important to understand when we say that a USDA Underwriter has the ability to approve something – that we are talking about that one in a 1,000 case. The step in the approval process, is getting through the Automated Underwriting System called GUS.
Depending on how the Bank showed the sale – this might be pretty easy. The USDA Loan actually goes to our Bank Underwriter, and then goes directly to the USDA Rural Development Office for an Underwriter there to physically look over.
As of December 2014, if your Foreclosed Property was included in a Bankruptcy Discharge – we are allowed to begin the waiting period (meaning the time until you can buy a new house) from the day of the discharge. This is a fairly big change. Because as I keep saying, it can take banks 6 to 9 months to ACTUALLY foreclose and transfer the paperwork.
So if the mortgage debt is included in the foreclosure, we are NOT going off the foreclosure transfer date IF the home was included in a Bankruptcy. The waiting period in this situation is 3 years from the date of the BK discharge.
Conventional lending through Fannie Mae has much shorter waiting periods now, and the waiting period after a foreclosure could be as little as two years. That is really the same time period that you will find for FHA or VA too.
The FHA Back to Work Program was just recently announced, and that the waiting period after a Job loss of at least six months is now only 12 months. This FHA Loan program is a little different from other FHA loans – and it relies on VERY strong documentation from the Borrower. If you qualify for this program, you will also be required to speak with a Housing Counselor at least 30 days prior to making loan application.
If you have questions about Buying A Home After Foreclosure with a USDA Home Loan, or specific concerns about buying a house in NC – please call Steve and Eleanor Thorne 919 649 5058 We offer the best rates, and we would love to help you buy a home in NC!
We had mortgage debt that was included and discharged in our chapter 13 which ended on January of 2013. I heard that the new guidelines for USDA as of Dec , 2014 was any mortgage debt included in bankruptcy waiting period would go by the end date of the discharged bankruptcy and not the subsequent foreclosure date. I wanted to see if this is still correct. If this is true, then we would be eligible to apply after January 2016. I will look forward to hearing from you.
Melissa – this is true. USDA Home Loan Guidelines did change Dec of 2014, and we ARE allowed now to go from the date of a BK Discharge, even if there was a property included in the discharge. Our Underwriters ARE following this new guideline. THE OTHER GOOD NEWS FOR YOU… because you haven’t owned a home for 3 years – you might qualify for the Mortgage tax credit! We would love to help you by your dream house!
Hello. I have a question. I was the co borrower of my father’s home.He passed away 11/2013. Before his death apparently he had a stroke and became severally behind in payments without me knowing because of his late payments debt i was under to keep the house. The house was placed into foreclosure and sold 9/2014. It was a FHA loan. My credit score is 610. I want to buy my own house. I can not afford the double and triple rent that my city is being faced with. Can i buy a home now? THANKS!!!!!!!
Renee, unfortunately you will have to wait for the full 36 months from the date of the foreclosure. In the meantime, we would suggest that you follow these basic rules to raise your credit scores.
My son had a foreclosure on his home in 2008 or 2009 never lived a day in his house spent $80,000 on payments for 5 years he won the legal case against them I got no money and I purchased a new home for him I would like him to start making his own payments can he get a loan the interest rate I pay now is 2.8%
He can probably get a loan, but mortgage rates are higher than the rate you noted.