topic Re: Prior preforeclosure in Mortgage Loans

Prior preforeclosure

Fig8wife — Thu, 01 Aug 2024 17:32:29 GMT

I am trying to get a mortgage had a prior preforeclosure. We sold the house before it went into foreclosure. How long should I wait to apply?

Re: Prior preforeclosure

pizzadude — Thu, 01 Aug 2024 17:46:50 GMT

@Fig8wife wrote:
I am trying to get a mortgage had a prior preforeclosure. We sold the house before it went into foreclosure. How long should I wait to apply?

What notations are showing on your reports in terms of late payments ? Is there any mention of any CO or foreclosure ? Also how long ago was this?

Re: Prior preforeclosure

Fig8wife — Thu, 01 Aug 2024 17:52:38 GMT

This happened last year, wasn't reported to credit bureaus because mortgage co said it wasn't required. They saw the large deposit in my bank account from the sale. We were months behind but we were still making payments to try and catch up. Just applied for mortgage and was denied even though I have many current accounts in good standing and have $50,000 in savings.

Re: Prior preforeclosure

pizzadude — Thu, 01 Aug 2024 18:15:29 GMT

Ok but what late payments are showing on your credit reports ?

Re: Prior preforeclosure

Fig8wife — Thu, 01 Aug 2024 18:18:47 GMT

None but they asked for past mortgage statements which showed we were behind 6 months. I also told them about the hardship that caused it, I had open heart surgery and was in and out of hospital for months my husband missed a lot of work.

Re: Prior preforeclosure

VAMortgageGuy — Thu, 01 Aug 2024 19:06:42 GMT

@Fig8wife wrote:
I am trying to get a mortgage had a prior preforeclosure. We sold the house before it went into foreclosure. How long should I wait to apply?

Your scenario would qualify under extenuating circumstances for an FHA loan. You'll need a good lender to help you with a letter of explanation.

Your file will be a manual underwrite, so I would, as a lender, run your file through underwriting upfront to make sure there's no issues once you find a house and go under contract.

Re: Prior preforeclosure

ShanetheMortgageMan — Thu, 01 Aug 2024 19:11:42 GMT

In mortgage lending, a "preforeclosure" usually refers to a short sale - where you owe more than what you can sell your home for and your mortgage lender agrees to accept a lower payoff amount than what is actually owed. Was that your situation? Or were you just behind on the mortgage payments severe enough for your mortgage lender to start preforeclosure proceedings, but you were eventually able to sell it prior to foreclosure and were able to pay your mortgage lender in full?

It sounds like the latter, so in that situation you just have mortgage late payments, and will need to wait until they are long enough ago before you can qualify.

With Fannie Mae loan programs, loans with excessive prior mortgage delinquencies are not eligible. Excessive prior mortgage delinquency is defined as any mortgage tradeline that has one or more 60-, 90-, 120-, or 150-day delinquency within the 12 months prior to the credit report date.

Freddie Mac loan programs look at payment history differently though, and states direct verification of Mortgage debt, rental payments and other debts not shown on the credit reports are typically not required if you have received an "Accept" response through their automated underwriting system. So that might be your best route to get approved at this point.

FHA financing requires your loan to be manually underwritten if there is any mortgage delinquency within 12 months of the case number assignment date or more than two 30 day late mortgage payments within 24 months of the case number assignment date and it's not reported to your credit report. The case number assignment date happens once you have an accepted offer. When an FHA loan is manually underwritten, you need to have all housing and installment debt payments on time for the previous 12 months and no more than two 30-dDay late mortgage payments or installment payments in the previous 24 months.

When did you sell the property?

There are non-traditional mortgage programs, usually referred to as "Non-QM" mortgages, that can approve people with mortgage late payments in the past 12 months, but will require larger down payments and have higher interest rates.

Re: Prior preforeclosure

Fig8wife — Thu, 01 Aug 2024 19:35:01 GMT

Yes the latter, sold house in January.

Re: Prior preforeclosure

ShanetheMortgageMan — Thu, 01 Aug 2024 19:49:49 GMT

If your payment history was perfect prior to the medical situation that required open heart surgery then FHA could be an option like @VAMortgageGuy mentioned. You don't need to provide any documentation about your medical situation, just mentioning that there was a medical situation and putting together a timeline should be enough for an underwriter to potentially approve your loan.

The other options would be Freddie Mac or Non-QM financing.

What are your and your husband's mortgage credit scores like now?

Re: Prior preforeclosure

Fig8wife — Thu, 01 Aug 2024 19:58:39 GMT

Husband has no credit zero. Mine is 670 with excellent payments. But not a long history.

Re: Prior preforeclosure

ShanetheMortgageMan — Thu, 01 Aug 2024 20:10:46 GMT

With Freddie Mac financing, since your husband doesn't have a credit score then there can't be any housing late payments in the past 12 months.

Non-QM financing would also very likely have similar guidelines. Not all Non-QM loan programs are the same though and there are 101 different flavors of them, still, it's usually the option of last resort.

FHA could still work though and with a 670 score might be the best option in terms of interest rate/payments.

You might be able to help your husband obtain a credit score by adding him as an authorized user to any of your credit cards.

Re: Prior preforeclosure

Fig8wife — Thu, 01 Aug 2024 20:28:24 GMT

Any idea how long I would have to wait to get a conventional loan? I just don't understand with $50,000 in the bank they would still deny me.

Re: Prior preforeclosure

ShanetheMortgageMan — Thu, 01 Aug 2024 20:35:08 GMT

Freddie Mac and Non-QM loans are both types of conventional loans.

A conventional loan is any mortgage that isn't FHA, VA or USDA financing.

Then conventional financing is broken into two categories: Conforming & Non-conforming. Conforming means the loan characteristics conforms to Fannie Mae or Freddie Mac's guidelines. Non-conforming means it does not - a Non-QM loan program is a type of convenitonal financing that is non-conforming.

There are people with more money in the bank than $50k who cannot get approved for a mortgage. You'll need to understand mortgage guidelines and have a little bit of luck finding a mortgage lender that abides by them.

Re: Prior preforeclosure

Fig8wife — Thu, 01 Aug 2024 21:36:55 GMT

So would waiting a year be a good idea?

Re: Prior preforeclosure

ShanetheMortgageMan — Thu, 01 Aug 2024 23:44:37 GMT

Waiting a full year from the sale of your home would eliminate the need for Freddie Mac financing to be concerned with the previous mortgage payment history if your husband still has no credit scores.

But it wouldn't change the guidelines you'd need to meet if it was an FHA loan, however, since the late payments would then be over a year old you might find underwriters to be more lenient than they are right now.

My recommendation would be to find a mortgage broker or mortgage lender who knows Freddie Mac and FHA guidelines and apply for a mortgage pre-approval. You should ask if they are familiar with Freddie Mac & FHA guidelines about mortgage payment history and make them tell you the exact guidelines. Then you'll know you are working with a loan officer who can appropriately argue your case rather than one who is just BS'ing you.

Re: Prior preforeclosure

Fig8wife — Fri, 02 Aug 2024 16:11:15 GMT

Thank you so much for your help. ❤️