Using USDA To Purchase A Home After Foreclosure

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

Been 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 Requirements for purchasing after 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, but we see VERY few exceptions made on this time frame.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.  Here are some FHA and VA Home Loan guidelines regarding waiting periods.

FHA does not say you have to have a 640 credit score, but there are VERY few lenders who will allow you to purchase a home without at least a 640 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. 

If you are considering a mortgage loan in NC, call Steve and Eleanor Thorne, Mortgage Banker in Cary , 919-649-5058 we’d love to help answer your questions!

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