Shorter Waiting Periods After Foreclosures

 In Common Questions

Did you know that you don’t always have to wait 7 years after a foreclosure to get a conventional loan?  Sometimes, you only have to wait 4 years.  Here’s how to take advantage of these shorter waiting periods after foreclosures.

Shorter Waiting Periods

If you had a foreclosure, the normal waiting period after the foreclosure for conventional loans is 7 years from the recording date of the Public Trustee’s Deed.  However, if you filed for bankruptcy, and the mortgage on your property was included in the bankruptcy, the waiting period is only 4 years from the discharge date of the bankruptcy.  It does not matter when the foreclosure was finalized, as long as the mortgage was included in the bankruptcy.

FHA or Conventional?

Why is this important to know?  

You can get a new FHA mortgage 3 years after a foreclosure, but sometimes an FHA loan is not going to be the best option for you.  FHA requires mortgage insurance on all of their loans, regardless of how much money you are putting down, and the mortgage insurance never goes away if you put less than 10% down.  That can add up to a lot of money over the life of the loan.

On the other hand, conventional mortgages do not require mortgage insurance if you put 20% or more down, and if you put less than 20% down, it goes away once you have 22% equity in the property.  So over the life of the loan, the conventional loan might be much less expensive for you than an FHA loan.

It’s difficult to figure out for yourself which would be better for you – FHA or conventional – so give us a call if you have had a foreclosure and a bankruptcy, and we can easily figure it out for you. We’ll let you know if you qualify for the shorter waiting period, and we’ll let you know if a conventional loan or an FHA loan is going to be cheaper for you.

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