Since for many reasons there is a rising rate of foreclosures, how do these former homeowners recover to purchase their next home?

My understanding has always been that being late on your mortgage or having a foreclosure was the worst type of credit mistake one could make. Has that changed? Since foreclosures are so rampant will they be looked at with less horror?

How long will it take for them to become homeowners again especially since much of the freaky financing is going away?

Just wanting to hear opinions.

I think to some degree, that answer is still an unknown. The reason is that the first available source of financing for someone with a foreclosure in their history is sub-prime financing. That segment is changing rapidly and so it's uncertain what changes may come specific to guildelines for applicants with a prioer foreclosure.

Conventional guidelines still prefer to see a 4 year history since the foreclosure with re-instated credit. There are programs for 2 years from foreclosure but they are typically limited to people with other compensating factors such as really high income/assets, etc.

Loan guidelines are all about risk of default. If someone is making a down-payment of 5% or 10% then the lender is more likely to approve the loan then if they are making no down-payment. Obviously a prior foreclosure shows that a buyer didn't meet the terms of their borrowing agreement in the past. That's a "red flag" of risk to the lender. So how is that applicant going to offset that risk?

- more assets/down-payment?
- really stable income/employment?
- newer, recent credit paid as agreed?

So there are always ways to justify borrowing money. The question isn't how long does someone have to wait, but what did they do with that time while waiting.

Ken

Thanks Ken for your reply. As a RE Agent it is helpful to know some options since I am certain I will be running into several who have suffered through a foreclosure.

Most of my guidelines require a person to be out of foreclosure for 3 years and they must not have any new issues and they must have reestablished credit.

There are lenders that market saying they only require 1-2 years after a foreclosure but the rest of the guidelines are unrealistic (eg 680 credit) I fear they are just marketing to get the phones to ring...

Howaver waiting around 3 years means nothing. I have a program that will work with them while they are rebuilding their credit. The program includes credit repair, education, and building techniques as well as a review of common issues people have when qualifying (eg. I make sure that if they are renting they keep copied of checks as many lenders will require this no matter what the score winds up being.

For more info please call
Danny

Will a foreclosure always show up on someones credit report, or does it depend on the lender? I have heard some say that it wont show up.

It almost always shows up. Consider that most mortgage lenders report the mortgage tradeline to the credit bureaus and that most lenders will consider a 120 day late on a past mortgage to be EQUAL to a foreclosure. So even if the credit report doesn't show the final disposition, the underwriter will see the 120 day late and ask for verification that a foreclosure didn't happen.

I can still do 1x120 in the past 12 months and an NOD as long as it is not current.