Typically speaking, anyone who has a foreclosure on his or her credit history will have to wait seven years before than can apply for a new loan. This is an industry standard for mortgage lenders. There are situations where a borrower can reduce the length of time they must wait before they are eligible to take out a mortgage or other loans of considerable size.
Hurry Up And Wait
Because Fannie Mae has a vested interested in issuing new home loans, the standard waiting period for a loan after a foreclosure is reduced. This reflects an industry beguiled by debt, strapped for new cash and with an oversupply of homes.
Fannie, a gigantic mortgage lender, is often seen as the benchmark for other lending institutions, so their guidelines for lending after foreclosure are a good indicator of what to expect from other lenders in such a situation. Here’s how long you may wait before being issued new credit from Fannie after a foreclosure:
1.) Standard Foreclosure
Expect to wait 5 to 7 years before you can buy/borrow again
2.) Deed-in-lieu Foreclosure
Expect to wait 4 to 7 years before you can buy/borrow again
3.) Foreclosure ameliorated by extenuating circumstances
Expect to wait 3 to 7 years before you can buy/borrow again
4.) Deed-in-lieu Foreclosure ameliorated by extenuating circumstances
Expect to wait 2 to 7 years before you can buy/borrow again
Notably, Fannie and other lenders are generally lenient to borrowers who foreclose because of extenuating circumstances like sudden illness, death of a spouse, and misfortune where the borrower is no longer able to pay his or her bills.