August 7, 2023
Here is a variation on a common reader question. “I had a foreclosure on my house. What is the waiting period before I qualify for an FHA mortgage?”
The first thing to do is call the FHA at their toll-free number, 1-800 CALL FHA, and ask for a referral to an FHA/HUD-approved housing counselor in your local area.
A housing counselor can assist in areas like this with advice on how to proceed toward becoming a homeowner once again after a foreclosure, bankruptcy, job loss, or other issues.
The answer to the reader’s question varies greatly depending on circumstance, lender standards, and whether or not the home foreclosed upon was purchased with an FHA mortgage.
While the FHA loan program does include options for borrowers who have experienced a qualifying “economic event” that led to default and foreclosure, these programs typically require the participation of an FHA lender.
Generally, a borrower who had a previous FHA mortgage foreclosed upon may be required to wait a minimum of three years before applying for another FHA loan.
The waiting time may be shorter in some circumstances, but borrowers should know that three years is fairly standard in cases of foreclosure on a prior FHA mortgage
The borrower’s credit activity since the foreclosure is an extremely important factor in getting a new mortgage loan approved.
If a borrower with a foreclosure on their credit history has missed any payments in the 12 months leading up to the new loan applications, chances are not good for loan approval.
To the lender, this may appear as though the applicant is returning to less-than-ideal credit utilization.
The best thing to do is to seek out housing counseling and find a participating FHA lender willing to work with you and your specific circumstances.