How soon can you qualify for a USDA loan after foreclosure?
A waiting period determines how quickly you can qualify for a mortgage after foreclosure. However, that period depends on the mortgage type you are applying for. Today, we will focus on how quickly you can qualify for a USDA loan after foreclosure?
Updated USDA guidelines state the following regarding foreclosure:
“A foreclosure is the legal process by which a lender takes control of a property, evicts the homeowner (if necessary), and sells the home to attempt to satisfy the mortgage debt. The current homeowner(s) is no longer able or willing to make agreed upon mortgage payments as stipulated in the mortgage contract.”
“A foreclosure discharged, or a repossession reported 36 months prior to the date of loan application is not adverse credit.”
Can you qualify for a USDA loan if the foreclosure less than 3 years ago?
As discussed above, if a foreclosure occurs three years (36 months) prior to the application date, it will be deemed to have met the USDA foreclosure waiting period.
However, one exception to the three year waiting period is when you obtain an ACCEPT response through the USDA Guaranteed Underwriting System (GUS). When you are able to obtain this automated acceptance, no credit exception is required for waiting periods less than 3 years (36 months).
Additionally, if your file receives a GUS response of Refer, Refer with Caution, or for those manually underwritten loan files, a credit exception is required when the applicant has a foreclosure reporting within the three years prior to application.
As a reminder, GUS is USDA’s automated underwriting system and is available to assist lenders in the USDA loan approval process.
As a USDA approved lender, we utilize and have access to the GUS underwriting system which allows us the ability to review the findings upfront and help determine your eligibility.
Can you qualify for a USDA loan after a foreclosure that was due to a divorce or legal separation?
Thankfully, USDA guidelines address these type of foreclosure situations with the following guidance:
“An applicant that has a foreclosure discharged or a repossession reported post-divorce/filed legal separation agreement and the home was awarded to the ex-spouse/remaining party may document the loan was paid as agreed prior to date of divorce decree/legal separation agreement. The payment history on the credit report or other documentation from the loan servicer/lender may be retained to confirm eligibility.”
Do USDA guidelines consider timeshare losses as foreclosures?
“USDA considers the loss of a timeshare adverse credit of a long-term obligation and not a foreclosure. This loss will be reflected in the credit score. Lenders must review the applicant’s credit history to determine if they are an acceptable credit risk. No credit exception is required for the loss of a timeshare.”
Thus, while the short answer is no, remember that any negative credit which results from a timeshare loss will be considered during the underwriting review.
USDA Foreclosure Guidelines
Remember, You can view all waiting periods by downloading our FREE Loan Comparison Chart.
If you have recently been denied for a mortgage because of a previous foreclosure, please take advantage of our expertise by using our free Second Opinion Service (SOS).
It’s great for both new pre-qualifications and existing transactions!