To deter any kind of a new influx of new foreclosures, Fannie Mae announced a modification to the waiting period that a borrower must wait before being eligible for a new mortgage loan with Fannie Mae 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.
FHA guidelines are as follows:
Chapter 7 Bankruptcy:
- Allowed after 24 months since the discharge date and good credit has been reestablished.
- Bankruptcies less than 24 months (but not less than 12 months) may be allowed provided the reason for the bankruptcy was due to documented extenuating circumstances, the borrower has exhibited an ability to manage financial affairs, and the reason for the bankruptcy is not likely to recur.
Foreclosure:
- A borrower whose previous residence or other real property was foreclosed on or has given a deed-in-lieu of foreclosure within the previous three years (36 months) is generally not eligible.
- Foreclosures less than three years (36 months) may be allowed provided the reason for the bankruptcy was due to documented extenuating circumstances, the borrower has exhibited an ability to manage financial affairs.
Please contact a financial advisor with questions about how these guidelines might affect you. And to give credit where it's due: Thank you to Steve Valenta, Pinnacle Mortgage Sales Manager, for sharing this valuable information with us!
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