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Buying after foreclosure...

We foreclosed 3 years and 2 months ago.
We have been renting the same house since and want to buy it.
We have 30% down payment, credit score of 714 and stable work history of 10 years.
Due to the likelihood of interest rates going up in the next few years we only want a 30 year fixed rate option. We also do not want to pay FHA mortgage insurance, therefore FHA isn't an option either.  Do we have any options? We have a personal friend with wealth who has offered to co-sign if that would help.  Please advise.
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November 06 2013 - Goleta
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Yes, you do have another option. It is an exclusive portfolio loan available through my bank. Based on what you have said above you would qualify provided your debt to income ratio is below 43%.
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December 09 2013
@John Moran, thank you. I also have those same guidelines you are referencing.

I just checked an internal chart that my company provides, and effective October 16, 2013 it appears that they are going back to 7 years. My apologizes.

Freddie Mac really needs to provide clearer reference material on the topic. 
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November 07 2013
Dear Goleta Family,

Since its been over three years that the foreclosure took place, your best bet is to lean more towards FHA. You have to consider that interest rates are climbing and with that property values are too. So, maybe it  makes sense to get a lower interest rate now under FHA guidelines at the expense of having a mortgage insurance. Considering property values are climbing you and you can put 10% down and eventually get rid of the mortgage insurance organically when your  house appreciates in value and the 7 year cutoff time has passed. Depending on how much the 20% is, you can invest that money into a cheaper rental property that leaves you with a positive cash flow of enough the cover the mortgage insurance on your primary property. There are number ways you can utlize the 30% down payment and buy a house. You just need to create a solid strategy and stick to it.
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November 07 2013
To clear up a little of the confusion, each mortgage professional is quoting either their own company's guidelines or that of the lenders they broker loans to, so there are going to be differences.

I happen to work for a direct lender and we do not have any overlays, meaning we follow Fannie and Freddie guidelines to the letter and do not add any of our own. 

I have our guidelines open in front of me and the wait period after foreclosure for a conventional fixed rate mortgage is 7 years unless there are extenuating circumstances, in which case it is "Three (3) years from completion to the date of the credit report." Direct quote from our guidelines. This assumes the loan is 90% LTV or lower (this poster indicated 30% down) and the purchase of a new primary residence or limited cash out refinance (which also appears to be the original poster's motivation). 

If the original poster did not experience extenuating circumstances, then FHA or continuing to rent are probably the only options (I say probably because someone may do something with a portfolio product). If the original poster did experience extenuating circumstances, some lenders (like us) will be able to offer them a loan now, assuming they are otherwise qualified.
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November 07 2013
@Hamp Younce.  Thank you for comments but I politely disagree. 
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November 07 2013
Most waiting period after short sales, foreclosures, and bankruptcies are around 2 years but can be more depending on your current finances, financial record, your lender/loan type, and circumstance of the loan. It seems that you would be seeking a conventional loan and with you credit and down payment you should be able to get what you need. By what you are saying, you should have a good shot at the loan that you need. I recommend that you speak with a lender like myself that would be happy to speak with you. Us lenders would be happy to point you in the right direction to get you started on the road to your loan. Well I hope this helps, if you have any other questions or need a loan please contact me through the information on my profile page. I hope this helps and good luck!
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November 07 2013
I think Lynda McKenzie confused the Freddie Mac guidelines for a "short sale", or "deed in lieu", with the foreclosure waiting period guideline.
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November 06 2013

If you've decided that now really is the time for you to buy then an FHA loan is your number one and possibly only option.  While paying mortgage insurance is never anyone's favorite thing to do, it does allow you to buy the house you want and do it now.  FHA loans do not carry any prepayment penalties so you can always refinance as soon as you are able to receive a conventional loan approval thru Freddie Mac (4 year waiting period for foreclosures) and you'll be able to remove the MIP.  It can be viewed as a temporary situation that can be remedied in under 1 year.  You should also talk to your lender about the possibility of completing the refinance as a no closing cost loan.  Hope this helps and good luck!

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November 06 2013
The shortest wait period on a conventional loan without PMI is 4 years for Freddie Mac with 20% down. If you really want to purchase right away, you may have to consider the FHA route as Step 1 and then refinance yourself out once you hit the 4 year mark. Just as an added note, if you go with a 15 year FHA, the MIP is much lower for your scenario. Upfront on a 15 year is only in place for 11 years and the monthly is .45  Just throwing that out as a comfort option in the event rates rise dramatically before your 4 year mark.
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November 06 2013
Depending on your reason for the foreclosure I am selling homes a year later. I work with a great Loan Officer. His name is Todd Collins with Summit Funding. Give Todd a call and see what he can do for you, Tell him I referred you. [Content removed by Zillow Moderator. Please see our Good Neighbor Policy]
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November 06 2013
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I don't think that purchasing using FHA financing would be a good option no matter what! Paying PI fees as high as the monthly property tax is ridiculous and it isn't deductible from your income taxes. Is seems as though an FHA loan would only be a good option for someone who is looking to use gifted funds for the down payment or if they have less than 5% to put down.  At this time, Freddie Mac guidelines state 7 years from foreclosure unless there is an extenuating circumstance and then it is 3 years.  Lynda Mckenze, I am not sure where you are coming up with your 4 year timeline. I cannot find anything that supports this. Please offer your reference.
 
I think people offering advice forget that the other option is not to buy and to keep renting another home. This isn't ideal but getting into another poor loan doesn't seem like it is a good option!

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November 06 2013
The only way you can do a non-occupying co-borrower is by putting a minimum of 20% down on the home. Unfortunately even then you would have to wait 7 years. VA is 2 years; FHA and USDA are both 3 year waits.

At this point it sounds like FHA is your best option while rates are low. Even with PMI it will make more sense than waiting for no MI on a conventional loan in another 4 years when who knows what mortgage rates will be.
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November 06 2013
You are in a tough spot with having 30% down.  I understand that FHA would not be an option for you but if that is the only option that you have for now it would be considered one of the best options you can take.  If you do decide that you would go for an FHA home loan it would be wise to gather the 1099 form they sent for your foreclosure date as the underwriter wants to know when the completion date took place.  If you do not have one get it from your servicer who foreclosed on your home. 
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November 06 2013

Here are a couple of options:

If you are a veteran, you could apply 2 years after the discharge date.
If you are purchasing in a rural area and use USDA financing, you could apply 3 years from completion date.
FHA financing allows 3 years from completion date.
If you can hang in there a bit longer, Freddie Mac will allow you to apply 4 years after the completion date with a 10% down payment.
Fannie Mae unfortunately is 7 years.

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November 06 2013
Hi!

You may or may not be able to get into a new conventional loan. With extenuating circumstances, it is possible to get a loan as soon as 3 years from the date of foreclosure. Extenuating circumstances are defined as "non-recurring events that are beyond the borrower's control that result in a sudden, significant, and prolonged reduction in income or a catastrophic increase in financial obligations."

It sounds like credit score, down payment and work history are non-issues, so adding someone else to co-sign on the loan wouldn't offer you any benefit. Adding a co-signer does not erase or replace the credit history of a loan applicant. They are typically used in situations when the borrowers do not qualify from a debt-to-income perspective. 

I hope that helps. Please feel free to contact me with any follow up questions and have a wonderful day!
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November 06 2013
Taking into account the information you have provided, FHA most likely would be your only option, which unfortunately does include PMI. There may be a way for you to buy out the FHA Insurance upfront. I am a Sr. Consultant with a National Lender, and would be happy to speak with you about this scenario. Please feel free to contact me through my profile at anytime. Thank you.
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November 06 2013
 
Related Questions
Buying after foreclosure...
Profile picture for Craig Bosse
Latest answer by Craig Bosse
December 09 2013 | 16 answers
  • Asked by Goletafamily
  • In Mortgage
  • November 06 2013
Mortgage Rates
 
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