Lost a Home To Foreclosure? Here’s How Long It Will Take To Buy Again

Photo (cc) by JefferyTurner

There’s a long list of ramifications for having your home go into foreclosure.

But at the top of that list is the blow to your credit rating, and the inevitable question: “Will I ever be able to buy a house again?”

The good news is that, yes, you can qualify for a mortgage to buy a new home after a foreclosure. The bad news is that it’s going to take a while. That’s because most home purchases depend on the quality of your credit score.

Typically, after a foreclosure, your credit score drops by 100 to 200 points from the foreclosure alone, according to FICO, the company behind most credit scores. (Here’s a story we did showing how various credit issues affect scores.) While banks and lenders will still do business with borrowers with a credit rating in the 600s, that kind of a drop, especially when compounded by late payments and other potential credit issues, will put most foreclosure victims out of the home mortgage market.

But all is far from lost. You can bring your credit score back up 200 points over the course of a few years – if you’re diligent about paying every bill and keeping a lid on your credit card use. Creditors recognize that a foreclosure is a single event – albeit a big one – and consequently they take a wider look at your credit history before making a lending decision.

Let’s take a look at the “wait-time” for an FHA-insured loan in two of the toughest financial situations: bankruptcy and foreclosure.

  • Chapter 13 Bankruptcy (The court establishes a plan for you to repay at least some of your debts). There must be 12 consecutive months of on-time payments on all accounts (including utilities, cell phones, etc.) from the filing of the Chapter 13 bankruptcy.
  • Chapter 7 Bankruptcy (The court wipes out your debts). There must be 24 months of perfect credit from the date of a Chapter 7 bankruptcy discharge.
  • Foreclosure There must be three years of perfect credit from the date of the foreclosure.

That’s for FHA-backed loans, which will probably be both easiest to get and offer the best rates and terms. For conventional loans (non-FHA-insured) the waiting period is less certain, but tends to be around four years.

Why is a person who files bankruptcy able to get an FHA-backed mortgage before one who has been through a foreclosure? Well, keep in mind that a Chapter 7 bankruptcy wipes out all debts, while a foreclosure doesn’t. In addition, you can only file for personal bankruptcy every seven years. There’s no such limit with foreclosure. So, while a bankruptcy filer may seem at first blush to be less attractive to a lender, the opposite is actually true.

Bottom line? If you’ve suffered a foreclosure, don’t lose hope. You’ll need to pick yourself up, dust yourself off, and begin the slow process of rebuilding your credit the same way you did when you first started out (here’s a recent story we did on that), paying your bills in full and on time.

If you can manage that, you might be back in your own home sooner than you think.

Disclosure: The information you read here is always objective. However, we sometimes receive compensation when you click links within our stories.

Read Next
Brace to Pay More for These 26 Prescriptions in 2020
Brace to Pay More for These 26 Prescriptions in 2020

More than 600 drugs — including these commonly prescribed meds — have seen price hikes so far this year.

5 Reasons You Should Claim Social Security ASAP
5 Reasons You Should Claim Social Security ASAP

Experts often recommend postponing claiming your Social Security retirement benefits. But there are situations in which you should start taking the money sooner.

7 Tricks to Cleaning Your Bathroom in Minutes
7 Tricks to Cleaning Your Bathroom in Minutes

These tips can get your bathroom sparkling with little time and no elbow grease.

15 Painless Ways You Can Cut Costs in 2020
15 Painless Ways You Can Cut Costs in 2020

Follow these tips to save — so you’ll have money for things that really matter.

60% of People With This Disease Don’t Know They Have It
60% of People With This Disease Don’t Know They Have It

Millions of people overlook this potentially potent condition that tends to strike women and older adults.

View this page without ads

Help us produce more money-saving articles and videos by subscribing to a membership.

Get Started

Most Popular
11 Things Retirees Should Always Buy at Costco
11 Things Retirees Should Always Buy at Costco

This leader in bulk shopping is a great place to find discounts in the fixed-income years.

Over 50? The CDC Says You Need These 4 Vaccines
Over 50? The CDC Says You Need These 4 Vaccines

Fall is the time to schedule vaccines that can keep you healthy — and even save your life.

11 Senior Discounts for Anyone Age 55 or Older
11 Senior Discounts for Anyone Age 55 or Older

There is no need to wait until you’re 65 to take advantage of so-called “senior” discounts.

9 Things You’ll Never See at Costco Again
9 Things You’ll Never See at Costco Again

The warehouse store offers an enormous selection, but these products aren’t coming back.

8 Things You Can Get for Free at Pharmacies
8 Things You Can Get for Free at Pharmacies

In this age of higher-priced drugs and complex health care systems, a trip to the pharmacy can spark worry. Freebies sure do help.

These Are the 4 Best Medicare Advantage Plans for 2020
These Are the 4 Best Medicare Advantage Plans for 2020

Medicare Advantage customers themselves rate these plans highest.

The 10 Most Commonly Stolen Vehicles in America
The 10 Most Commonly Stolen Vehicles in America

A new model parks atop the list of vehicles that thieves love to pilfer.

9 Deep Discounts Available on Amazon This Friday
9 Deep Discounts Available on Amazon This Friday

These items are all steeply discounted — but the deals won’t last long.

7 Ways to Boost Your Credit Score Fast
7 Ways to Boost Your Credit Score Fast

Your financial security might soon depend upon the strength of your credit score.

19 High-Paying Jobs You Can Get With a 2-Year Degree
19 High-Paying Jobs You Can Get With a 2-Year Degree

These jobs pay more than the typical job in the U.S. — and no bachelor’s degree is required.

10 Reasons Why You Should Actually Retire at 62
10 Reasons Why You Should Actually Retire at 62

If you can, here are several good reasons to retire earlier than we’re told to.

5 Ways to Get Amazon Prime for Free
5 Ways to Get Amazon Prime for Free

Hesitant to drop $119 a year on an Amazon Prime membership? Here’s how to get it for free.

Do This in the Car If You Want to Avoid COVID-19
Do This in the Car If You Want to Avoid COVID-19

It takes just seconds to take this simple preventive measure.

3 Ways to Get Microsoft Office for Free
3 Ways to Get Microsoft Office for Free

With a little ingenuity, you can cut Office costs to zero.

15 Products You Need — Even If You Didn’t Know It
15 Products You Need — Even If You Didn’t Know It

Discover some must-have products on Amazon that you didn’t even know you were missing.

5 Keys to Making Your Car Last for 200,000 Miles
5 Keys to Making Your Car Last for 200,000 Miles

Pushing your car to 200,000 miles — and beyond — can save you piles of cash. Here’s how to get there.

26 States That Do Not Tax Social Security Income
26 States That Do Not Tax Social Security Income

These states won’t tax any of your Social Security income — and in some cases, other types of retirement income.

14 Things That Are ‘Free’ With Medicare
14 Things That Are ‘Free’ With Medicare

These services could save you money and help prevent costly health problems.

5 Things That Make Life More Meaningful for Retirees
5 Things That Make Life More Meaningful for Retirees

Retirees agree: These are the things that give them purpose and fulfillment in their golden years.

View More Articles

View this page without ads

Help us produce more money-saving articles and videos by subscribing to a membership.

Get Started

Add a Comment

Our Policy: We welcome relevant and respectful comments in order to foster healthy and informative discussions. All other comments may be removed. Comments with links are automatically held for moderation.