What is Fannie Mae?

The entity that holds great power in the conventional mortgage market is Fannie Mae. Fannie Mae is America’s largest mortgage buyer, a private corporation, which buys mortgage loans in the secondary mortgage market. Because Fannie Mae would end up with the properties back if borrowers default, Fannie Mae has a strong interest in setting forth stringent guidelines to lessen the chance a borrower will go into foreclosure.

Fannie Mae revised its guidelines on buying a house after foreclosure. and now addresses separate waiting periods depending on the type of foreclosure.

Moreover, if you have documented extenuating circumstances, this will have a direct bearing on the number of years you will have to wait to get a conventional loan.

What is Documented Extenuating Circumstances?

Fannie Mae allows for extenuating circumstances such as:

• Death (not yours, of course)
• Illness
• Job Transfer
• Accident Resulting in Severe Injury

Generally, extenuating circumstances are things that happen beyond your control, which dramatically affect your ability to continue making payments on your mortgage.

With documented extenuating circumstances, the waiting period is less than without. I’m sorry to say that being unable to afford an increase in payment due to an interest rate increase on your adjustable-rate mortgage is not considered a circumstance beyond your control.

Waiting Period to Buy After Foreclosure

• Buying A House After  Foreclosure

  The waiting period is 5 years up to 7 years.

• Buying After a Foreclosure With Extenuating Circumstances

  The waiting period is 3 years up to 7 years.

• Buying After After a Deed in Lieu of Foreclosure

  The waiting period is 4 years up to 7 years.

• Buying After a Deed in Lieu of Foreclosure With Extenuating Circumstances

  The waiting period is 2 years up to 7 years.

• Buying After a Short Sale

  The waiting period is 2 years. However, if a seller does not have a 60-day late pay, that seller may immediately buy another home. It’s a reason to stay current on your payments while the home is on the market as a short sale.

However, to answer your particular question, if you have no extenuating circumstances, you will need to wait four years from the date of completion, meaning the date your deed-in-lieu of foreclosure was recorded.

In addition to the waiting period, some loans require 10% down and a minimum FICO score. The home you purchase must be your principal place of residence, not a rental nor a vacation home.

Fannie Mae constantly issues new guidelines. The above policies are in effect for loan applications submitted after August 1, 2008.

Note that Fannie Mae guidelines allow a seller to immediately apply for a new loan to buy another home if that seller kept the payments current, had no delinquencies exceeding 30 days and did not agree to repay the debt relief. Moreover, it’s the late payments that dramatically affect your credit report, not the short sale.

In short buying a house after foreclosure, is not a simple decision to be made especially if you need mortgage after foreclosure.