Seizures result from the defaulting owner on mortgage payments or taxes imposed by the federal and state governments. The latter is known as a tax lien foreclosure. In the years 2005 and 2006, the real estate market was booming. Lenders, on the other hand, provided subprime loans to borrowers who managed to make payments as long as interest rates were low. Once interest rates began to rise, borrowers defaulted. This resulted in seizures.
VA Insured Loans: Real Estate Loans Guaranteed by the Department of Veterans Affairs (VA) are similar to FHA loans, except they are intended for veterans whose eligibility is based on the number of days of active service and other service requirements. For the purpose of obtaining a mortgage after foreclosure, a 2 year waiting period is mandatory. In extenuating circumstances, as determined by Veterans Affairs Canada, the waiting period may be reduced. For guaranteed VA loans, no down payment is required and no premiums must be paid for the insurance. However, 2 percent of the loan amount must be paid as financing fees.
On September 7, 2008, Fannie Mae (Federal National Mortgage Association) and Freddie Mac (Federal Home Loan Mortgage Corporation) were placed under trusteeship. This was done to ensure that lenders had sufficient funds to lend at affordable rates. However, lenders do not comply with strict loan requirements and this, in turn, have resulted in defaulting borrowers on the loans.
Find Here: best VA lenders
With most subprime lenders having gone bankrupt, people can no longer get mortgages without a good credit score. Since foreclosures stay on file for 7 to 10 years and negatively affect the credit score, getting a mortgage loan after foreclosure will be a daunting task. It is better that hard money lenders are avoided since the interest rate on hard money loans will be very high and may plunge the borrower into other debts. Therefore, Fannie, Freddie, FHA (Federal Housing Administration), and VA (Veterans Affairs) are the best bet.
How to get a mortgage loan after foreclosure
Conventional loans: conventional loans may be in compliance or non-compliant. Conforming loans are provided in accordance with the guidelines set by Fannie Mae and Freddie Mac. Non-compliant loan providers can not adhere to these guidelines. In accordance with the guidelines of Fannie Mae and Freddie Mac, the borrower must wait 5 years after the end of a foreclosure to qualify for a new mortgage, subject to establishing the desired credit rating. A minimum FICO score of 680 is required and the borrower must pay 25 percent of the purchase price of the house as a down payment, otherwise private mortgage insurance becomes necessary. In the case of short sales, the waiting period is 2 years. Right here, short sales refer to the sale of the house at a price that does not cover the balance due on a loan (for which the house is the collateral). In extenuating circumstances, the waiting period may be less than 5 years.
FHA Insured Loans: FHA insured loans are government insured mortgages. The government agrees to make payments, if the owner stops doing them. This insurance, which protects the lender against loss in case of default, is a substitute for PMI. PMI is a must if the down payment amount is less than 20 percent. In the case of insured FHA loans, the borrower must wait 3 years, after the end of a foreclosure sale, to obtain a new mortgage subject to establishing the desired credit rating. A minimum credit score of 580 is required to qualify for an FHA insured loan. In order to qualify for an insured FHA loan, income, the assets and debts of the borrower must be fully documented. The house must be physically inspected and must meet the desired standards.
Working on improving the credit rating, avoiding credit card debt, making a budget and spending accordingly will help people restore a good credit score and make them eligible for a mortgage in the time, despite a foreclosure on their credit report.