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My Loan Modification Failed, How Soon Can I Buy A New Home After A Foreclosure

By Andrew

The sad truth is that most troubled homeowners do not qualify for a trial loan modification. Of these, only a small percentage will receive a permanent modification. Analysts estimate that over 5 million households have underwater mortgages and are struggling with their payments. This represents nearly 20% of all American households. Many of these homeowners are going to lose their houses. The question is how soon can borrowers that foreclose on their homes buy a new home. The answer depends on the type of foreclosure and the extenuating circumstances of your particular case.

Who decides how soon you can get a new home loan?

The answer is the lender and their insurer. Although there is not one central body that sets fixed rules on this issue, there are clear guidelines set by Fannie Mae. Fannie Mae is America?s largest mortgage buyer. You might not even know that Fannie owns your mortgage because ?she? does this on the secondary mortgage market. Because this corporation buys such a large percentage of mortgages, lenders will often follow in line with its guidelines.

What are the guidelines?

They can be found in Fannie Mae?s website and documentation. Below I detail the current guidelines, but these can change quite regularly so I encourage you to see them as a ballpark figure and then check for yourself.

How long you must wait after a foreclosure?

The quick answer is 5 to 7 years. However if there are extenuating circumstances the waiting period can be reduced from 3 to 7 years.

What about when you carry out a Deed-in-Lieu of Foreclosure?

It is actually worse; you should expect to wait between 4 to 7 years. However, if there are extenuating circumstances this might be a good option for troubled borrowers that want to buy a new home quickly, as the waiting time is reduced from 2 to 7 years.

What about short sales?

The current waiting period is two years. However, and this is an important point, if you are current on your monthly payments you can purchase a new home immediately. This is a powerful reason to stay up-to-date with your payments if you possibly can.

What are extenuating circumstances?

This refers to the reasons (or excuses) you provide to explain why you cannot pay your mortgage. There are many extenuating circumstances but your bank is only going to accept those you can prove, with documentation, are beyond your control and fall within their list of acceptable extenuating circumstances.

Fannie May will consider death (of a close relative, or partner), illness, job transfer, serious injuries from an accident, and other mitigating factors that dramatically affect your ability to pay your loan and are outside of your control. Unfortunately not being able to afford your payments because the interest rate on your variable interest loan has increased is not considered a mitigating circumstance.

These guidelines can help you make better decisions when trying to find the best choice when foreclosing on your home. Make sure you can prove the financial hardship you are going through and try to work with your lender with an option that will give the best chances of getting a clean start as soon as possible.

Related posts:

1. Deed In Lieu of Foreclosure, The Last Resort Loan Modification
2. Loan Modification, New Guidelines For California
3. Avoid Foreclosure With A Personalized Home Loan Modification

Related posts:

1. Deed In Lieu of Foreclosure, The Last Resort Loan Modification
2. Loan Modification, New Guidelines For California
3. Avoid Foreclosure With A Personalized Home Loan Modification

Full post as published by Blown Mortgage on March 09, 2010 (boomark / email).