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Hi all,
I'll be three years from the transfer of title out of my name on a foreclosure on March 9, 2023 and am planning to buy a house at that time. I've rebuilt my credit with no lates in the past three years, no collections or judgements. My current middle FICO mortgage score is 652 and I paid down my cc util from 37 percent to 5 percent and am waiting for that to post for a boost and will do AZEO for the next five months. Assuming I'm at 680 plus by then, will the foreclosure keep me from receiving an FHA AUS approval and force a downgrade to manual underwriting? I'm trying to determine if I'll be capped at the smaller DTI ratios due to manual underwriting or not. I've read conflicting answers to this on Google.
Thank you for any guidance you can provide. I've made a lot of progress but sometimes it feels like this foreclosure is going to haunt me forever.
@Ougaouga wrote:Hi all,
I'll be three years from the transfer of title out of my name on a foreclosure on March 9, 2023 and am planning to buy a house at that time. I've rebuilt my credit with no lates in the past three years, no collections or judgements. My current middle FICO mortgage score is 652 and I paid down my cc util from 37 percent to 5 percent and am waiting for that to post for a boost and will do AZEO for the next five months. Assuming I'm at 680 plus by then, will the foreclosure keep me from receiving an FHA AUS approval and force a downgrade to manual underwriting? I'm trying to determine if I'll be capped at the smaller DTI ratios due to manual underwriting or not. I've read conflicting answers to this on Google.
Thank you for any guidance you can provide. I've made a lot of progress but sometimes it feels like this foreclosure is going to haunt me forever.
I did a few quick searches as well, I thought that there was a 3 year waiting period to be elligible again for FHA and I'd be surprised if you'd be able to go through automated underwriting with a foreclosure.
FHA requires 3 years from a foreclosure, but will make an exception if foreclosure was the result of documented extenuating circumstances that were beyond your control, such as a serious illness or death of a wage earner, and you have reestablished good credit since the foreclosure (usually means no new derogs since the foreclosure + 3 tradelines with 12 months of reporting history).
To answer your other question, anytime there is a foreclosure within 3 years it's automatically downgraded to manual underwriting guidelines so those debt ratio & reserve requirements would apply.
Situations that automatically require a downgrade to manual underwriting on FHA loans are:
If you are concerned about not being able to meet manual underwriting DTI requirements then you are less than 6 months out from being eligible for automated underwriting findings up to 46.99%/56.99% maximums. A 680 score + clean credit since the foreclosure usually has a good chance of getting an automated underwriting approval.
Thank you Shane! So it sounds like as long as I wait until the three year seasoning date has passed I'll have a good chance of passing through AUS. I haven't had a late payment since 2019 and have five open tradelines with three + years of perfect payment history and nothing in collections. Now I'll just concentrate on saving more money and getting that middle score as high as I can. And hopefully the additional five months of waiting will work in my favor as house prices continue to come down
@Ougaouga wrote:Thank you Shane! So it sounds like as long as I wait until the three year seasoning date has passed I'll have a good chance of passing through AUS. I haven't had a late payment since 2019 and have five open tradelines with three + years of perfect payment history and nothing in collections. Now I'll just concentrate on saving more money and getting that middle score as high as I can. And hopefully the additional five months of waiting will work in my favor as house prices continue to come down
Having a previous foreclosure isn't ideal, but for someone who has had a foreclosure it sounds like your chances for approval are going to be as good as they can get.