When Can I Buy Again After a Foreclosure?

Once losing your home to foreclosure is far in the rear view mirror, it is only natural to wonder when you might be eligible to buy again.

There are 2 major factors to consider when recovering from a foreclosure. One is the waiting requirement that Fannie Mae imposes, and the other is your credit score.

The waiting requirement may vary depending upon the whims of Fannie Mae. Fannie Mae is the largest purchaser of loans in the U.S., so most lenders will want to fulfill the Fannie Mae requirements so that Fannie Mae can buy your loan. Currently (2010), the waiting requirement is 7 years from the date of foreclosure for a conventional (20% down) loan. FHA loans have a 3 year waiting requirement.

The second factor is your credit score. A credit score can drop 200 points after a foreclosure, but it can recover in far less than 5 years as long as you practice good credit management with your remaining credit. One of the dangers of a foreclosure is that credit card companies tend to drop you when your credit scores drop. Keep the credit cards that you can and use them, as long as you can pay them off every month. If you don’t have credit cards before you trash your credit in a foreclosure, it is unlikely that you will be able to get one, so consider getting a secured credit card. Faithfully pay any car loans or leases.

Lending practices change often, so no one knows what credit will be available in a few years. Some non-conventional mortgage sources may be available with lower requirements, or requirements may be tougher. If you’ve had a foreclosure, concentrate on improving not only your credit score, but your overall financial situation, which means less debt and more cash in the bank.