How does foreclosure work? | Buying a home | Waiting period for FHA-insured loans after foreclosure | Extenuating circumstances | Summary | FAQs
If you foreclose on a mortgage from the Federal Housing Administration (FHA), the foreclosure waiting period is three years.
You can apply for a new loan, but you'll need to meet some basic FHA requirements to get approved. These include:
| Waiting period | 3 years after foreclosure |
| Credit score | 580+ |
| Debt collections | Removed from credit report |
| Bankruptcy | 0 within past 12 months |
| Down payment | 3.5%+ |
| Debt-to-income ratio | <43% |
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What is a foreclosure?
A foreclosure is a legal process that transfers property from a homeowner to another party, usually a mortgage lender or the government. They happen because the owners have stopped paying their mortgage or property taxes.
Most common causes of foreclosure
How foreclosures happen
How a foreclosure affects your finances
Can you buy a home after a foreclosure?
Yes, but you'll need to do these things first:
🗓 Wait. Every loan has a foreclosure waiting period. For FHA loans, it’s three years.
🚧 Rebuild your credit. While you’re waiting, focus on repairing your credit score. Get a secured credit card (a card with an initial deposit), pay your bills on time, and show lenders you’re responsible with debt.
💰 Save for a down payment. The larger your down payment, the less risky you’ll seem to lenders.
» LEARN: How to improve your credit report before applying for a mortgage
Waiting period for FHA-insured loans after foreclosure
The waiting period for FHA loans is three years after your lender receives the mortgage insurance payout for your foreclosure. You can check your claim status on the CAIVRS database.
Requirements for a new home loan after foreclosure
| Loan type | Waiting period | With extenuating circumstances | Credit score |
|---|---|---|---|
| FHA | 3 years (36 months) | 1 year (12 months) | 580 |
| Conventional | 7 years (84 months) | 3 years (36 months) | 620 |
| USDA | 3 years (36 months) | 1 year (12 months) | 640 |
| VA | 2 years (24 months) | 1 year (12 months) | N/A |
Extenuating circumstances
An extenuating circumstance is an unpredictable event that prevents you from paying your mortgage. If this event led to a foreclosure, the FHA may shorten or waive the waiting period.
Divorce
The FHA generally doesn’t consider divorce an extenuating circumstance. However, if you paid your mortgage payments up until your divorce, and your partner acquired the property and later foreclosed on it, the FHA may waive the waiting period.
Short sale vs. foreclosure
A short sale occurs when you sell your home for less than the amount owed on your mortgage. Like foreclosures, you typically have to wait three years after the short sale before you can apply for an FHA loan again.
But there are exceptions. If an uncontrollable event caused you to lose your job or a source of income, then you might be able to waive the waiting period.
You'll have to show that your credit history has fully recovered (no late payment within the past 12 months) and that you had made at least 12 months of mortgage payments before the event knocked you off-track.
What credit score do you need for a new FHA loan after foreclosure?
An FHA loan requires a 580 credit score. But some lenders may want a higher score following a foreclosure.
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Summary
- The foreclosure waiting period on FHA loans is 3 years after the day your lender is paid their mortgage insurance claim.
- You may get an exception if you lost income due to the death of a partner, a severe illness or disability, or a layoff.
- Before you reapply for an FHA loan, you must have a 580 credit score, a DTI ratio that’s below 43%, and a down payment of at least 3.5%.
FAQs about FHA loan foreclosure
What happens when an FHA loan is foreclosed?
The FHA will repay the lender, and the U.S. Department of Housing and Urban Development (HUD) takes possession of the house. Your credit report will take a hit, and you'll wait up to three years for a new loan. Learn more.
What is an FHA waiting period?
Borrowers have to wait three years before they can apply for an FHA loan after a foreclosure. With extenuating circumstances, the waiting period could be shortened to one year or waived altogether. Learn more.
How long does it take to foreclose on a FHA loan?
It takes the FHA around three to six months after the first missed payment to complete a foreclosure. Learn more.
Can you get another FHA loan after foreclosure?
Yes, you can apply for another FHA loan after foreclosure. You must wait three years, maintain a good credit score (at least 580), and have no bankruptcies within the past year. Learn more.