How soon can borrowers get non qualified mortgage loans after a foreclosure?

October 14, 2018

Many people who may have lost their homes during the time of recession are now able to get mortgages again. This is mainly owing to the fact that they waited seven years for the black mark to be lifted from their credit record. Records show that more than 5 million American families have lost their homes between 2007 and 2014. If a mortgage does not comply with the rules for a qualified mortgage, then it is a non-qualified mortgage.


What you need to take out a loan after a foreclosure


What makes a loan nonqualified?

The following are a list of guidelines that make a loan nonqualified:

  • There is a debt ratio of 43%
  • No risky loan features, such as balloon terms or interest only
  • Not more than 3% in points and fees that is charged by the lender


Nonqualified loans

For those borrowers who do not meet the standards for mortgages, non-qualified loans are a newer type of agency alternative loan. These are backed by hedge funds and private equity funds. The main concern of the lender is the borrower’s ability to repay the loan. Income documentation is necessary when applying for a non-qualified mortgage, as this will show one’s ability to pay back the loan.


What will it take to get approved for a loan?

If you have gone through a full foreclosure and have managed to restore your credit, you may be able to get an FHA loan. Federal Housing Administration (FHA) loan is one of the first options for borrowers who have previously been blacklisted. You only need a score of 500-580 to qualify and your debt to income ratio should be less than 43%. You will also be required to pay at least 3.5% deposit beforehand.


How much will a foreclosure affect your credit score?

This is totally dependent on the credit score that the individual started off with. Generally, the higher a person’s credit score, the greater the impact the foreclosure will have on the individual. The lower the score of the person, the less likely they are to have their loan approved but if they are approved, they can expect higher interest rates.


Should you wait to apply?

When you are ready for another home, you may want to enter the market quickly. However, you need to first decide if this is the right decision for you. You must be aware when the negative mark on your credit score will be lifted. You can do this by checking when your foreclosure was recorded. Timing is key when applying for a new mortgage. If you have a few months to wait before the foreclosure is lifted, it is in your best interest to wait. This will ensure that lenders do not see your foreclosure when they check your application.


Tips on getting approved

A few tips on being approved for a mortgage after a foreclosure include:

  • Paying all your credit card debt
  • Try not to apply for any other loans in the interim
  • Avoid any misdemeanors on your credit record.