With everything that has happened over the last eight or nine years, an unfortunately common question is whether or not you can buy a house if you had a foreclosure in the not-too-distant past. There is a common misconception that any foreclosures mean you can’t buy a new house for seven years. And while it does take seven years (and sometimes as much as ten years) for the foreclosure to come off of your credit history, it does not mean that you can’t buy a new house before then, provided you do a few things to make yourself credit worthy.

First, you need to reestablish your credit in a good way. This means either making on time payments to any credit cards, car loans, personal loans, or other outstanding loans, or taking out new loans and credit cards. You want to have at least 2 good trade lines. A trade line is any loan or line of credit (such as a credit card), but I would recommend at least 1 loan, 1 credit card, and 1 more loan or line of credit. Most commonly, it is 2 credit cards and an auto loan. This will allow you to build a credit history of recent, on-time payments.

Next, you need to clear up any collections, liens, levies, or judgments. Collections of less than $500 and medical collections can often be ignored for the purposes of getting a mortgage, but they will impact your credit score, and will still need to be explained on a mortgage application. And with a recent foreclosure, we don’t want to need to explain any additional issues.

Finally, you wait. Depending upon the circumstances surrounding the foreclosure, the window is either 12 months or 3 years to qualify for an FHA mortgage. Basically, if you qualify for a financial hardship, you can buy a new house after 12 months. If not, it is 3 years. But once this window has elapsed and you have rebuilt your credit score, you are eligible to buy a new house. A few weeks ago, for instance, I helped a client buy a house in Brighton who foreclosed on a house only 15 months ago. So if you have recently foreclosed, it is important to start taking the steps to make yourself eligible again.

If you have any questions about buying a house after a foreclosure or about getting a preapproval letter, please contact me. If you have anything to add about buying a house after a foreclosure, please leave a comment.