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How Long until I can buy again after a Foreclosure?

I had some great questions come in from a reader on my website that I thought I would share with you all...

Q.  I happen to work a very unique schedule where I am on 6 days and then off for 8 days.  This would allow me to commute from my current home in California to a home in Las Vegas very easily.  How is residency determined in that scenario?  As I would technically be staying in the Las Vegas home more than my California home.

A.  You raise a very good point with your work schedule in that you have the freedom to stay in the home in Vegas more often which is not the usual case. However, the lender will most likely prevent you from being able to call the Vegas home as your primary residence. Lenders have and always viewed your primary residence as being the home that is nearest to your source of income. They also look at your driver’s license and what state you file your taxes in.  There are exceptions for people such as traveling salespeople or truck drivers.  I believe it would be extremely difficult to put that purchase in Las Vegas through calling it your primary. We can always attempt it and have you write a letter of explanation with your rationale and motiviation for buying the home.  But chances are they would require you to call it a 2nd home and the loan would have to be set up as a 2nd home purchase.  I would prefer you be prepared with assets in order to put the extra money down required for the 2nd home.

Q.  What are the down payment requirements in this case?

A.  The down payment requirements are higher for 2nd homes, but the rates are simliar as if it were your primary residence. The exact down payment requirement for a 2nd home will be determined by your credit score.  You also deduct the mortgage interest you paid for the 2nd home off your taxes in the similiar fashion as you do your primary residence in California (or whereever your home may be).  If you were able to call this home purchase your primary residence, then you have the chance to use FHA financing which has a 3.5% down payment requirement.  However a word of caution as lenders are being prudent as to how far they will go with allowing a person to call a home their primary residence.  The rule of thumb to follow is primarily where do you work?  Where will you keep your driver's license and what state will you file taxes in?

Q.  I have credit issues.  Had several foreclosures a several years back after a death in my household and my current scores are in the 600-640 range.  Is this even a possibility for me?

A.  Whether a 2nd home purchase or an investment, you would be required to use conventional financing as opposed to FHA. Therefore the current timeframe you must wait after a foreclosure is 7 years before you can purchase again using conventional financing.  The waiting period decreases for extenuating circumstances but they will require 20% down.  With an extenuating circumstance, the waiting period is reduced to 3 years.  The extenuating circumstance must have been out of your control such as medical or death in your household.  FYI - A divorce isn't a good reason for an extenutating circumstance.  The waiting period after a deed in lieu of foreclosure is only 4 years, but it must be your primary residence that you are purchasing.  If you are putting 20% down, then the waiting period is decreased to 2 years after a deed in lieu of foreclosure.

They also require you to re-establish & re-build your credit to prove your credit worthiness and that you can manage credit wisely. They will look to see that you have at minimum of 4 open and active lines of credit (auto loan, credit cards, installment loans, etc). And that they’ve been open for at least 24 months. All accounts must be paid current.  The longer the better of course as that improves your score. 

Now, let’s talk about score. The minimum credit score is 620 with 20% down using a conventional loan.  If you need some help with credit, our credit system will issue you recommendations that you can follow to improve the score on your own. Or if the system doesn’t find anything that you can improve upon by yourself, I can refer you to credit restoration specialist that can work at actually deleting derogatory credit from your history. That will drastically improve score which will benefit you in the long run. Conventional loans will base rates on score – the lower the score the higher risk you are therefore the higher the rate.   And in reverse the higher your score, the lower the rates.  So some up front work on credit could save you thousands in the long run on the rate of the loan.

If these Questions and Answers didn't quite touch upon your unique scenario then please call me and I can get answers to your specific scenario.  I also invite callers who are borderline at qualifying as we can put the loan application through as an attempt to see what the underwriter would say before you've actually put any offers on any homes.  We call this submitting a file as a "to be determined."



Have any unanswered questions?
Call me to go over your unique scenario
Casey Moseman


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