We had two rental properties that were foreclosed two years ago. We now have a rental unit as well as a primary property. Our home is worth $1.2 million and we would like to refinance the current loan of about $600,000. Given that rates are at historic lows, can we refinance now?
There is a range of policies regarding new loans after a property has been foreclosed or sold short.
The first question would concern any extenuating circumstances. For instance, were the foreclosures the by-product of an injury, illness, job loss, major accident or the death of a spouse? Lenders might be willing to make new loans in as little as two years in such cases, assuming that good credit has been re-established.
Federal Housing Administration Commissioner Carol J. Galante said in December that generally, "Borrowers are able to access FHA-insured financing three years after they have experienced a foreclosure only if they have re-established good credit and qualify for an FHA loan in accordance with fully documented underwriting requirements for any FHA-insured mortgage origination."
Under Fannie Mae and Freddie Mac rules, a foreclosed borrower may have to wait as long as seven years to qualify for a new mortgage. Then again, there are situations where lenders can consider a borrower in as little as two years after a short sale.
Regardless of what you may hear, we now live in a new era when lenders are taking every step possible to document loans and avoid future liability. In your particular situation, you have two investment foreclosures, something that will absolutely catch the eye of mortgage underwriters and require close examination.
As well, you must consider when the time span for reconsideration started. Foreclosure can be a long process and lenders will want to know the date when title was actually transferred. Each foreclosure will have to be rigorously documented to show the correct timeframe.
For more information, speak with several local lenders and ask about their current post-foreclosure requirements.
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