Loans 1 Day After Foreclosure
Loans 1 day After Foreclosure
Loans 1 day after foreclosure is primarily facilitated by the highly flexible guidelines of Non-Qualified Mortgage (Non-QM) loans. These products are specifically designed for borrowers who cannot meet the strict credit history and waiting period requirements mandated by conventional (Fannie Mae/Freddie Mac) or government lending channels.
Eligibility and the "No Waiting Period" Standard
A foreclosure is uniformly classified across lending guidelines as a Housing Event (or Significant Derogatory Credit Event). These events typically trigger multi-year exclusion periods in traditional lending.
For borrowers seeking financing immediately after the event is complete, certain Non-QM programs eliminate the mandatory waiting period entirely:
- No Seasoning Required: Some Non-QM loans are offered with no waiting period after the housing event. Specifically, our Prime Non-QM Series requires no seasoning period for a single Housing Event (Foreclosure, Short Sale, Deed in Lieu, Loan Modification, Notice of Default, or 120+ Days Delinquent).
- Conditions for Immediate Eligibility: For this no-waiting-period option to apply, the Housing Event must be settled prior to close and cannot be a bailout for the subject property.
- Re-entry Strategy: The primary benefit of this expedited financing is that borrowers can qualify for a home loan now rather than later. Once their credit is re-established, they have the option to refinance the Non-QM loan into a traditional government and/or conforming loan to potentially secure a lower interest rate.
Credit Requirements and Seasoning Tiers
While some specialized programs allow for zero seasoning, most Non-QM options require at least some minimum time period, or seasoning, to elapse since the event’s completion date.
If a borrower has a recent foreclosure, program eligibility is determined by the length of time passed, affecting the maximum Loan-to-Value (LTV) ratio available:
| Program/Program Tier | Minimum Seasoning Required for Foreclosure | Max LTV/Conditions |
| Prime Non-QM | No seasoning (for single event) | Event must be settled prior to close |
| Edge Standard | 1 year (with additional Loan-Level Price Adjustment) | 2 years standard seasoning |
| Advantage Standard/Expanded | 2 years | Max 80% LTV (Requires 4 years seasoning if LTV is greater than 80%) |
| Horizon Standard/Expanded | 2 years (for Max 70% LTV) | Up to 4 years seasoning is required for higher LTVs (Max 90%) |
| Sharp Standard | 2 years (>=24 months clean history) | N/A |
| DSCR Programs | 3 years | DSCR (Investment property only) requires 3 years since completion date |
| Connect Asset Qualifier | 5 years | Asset Qualifier eligibility requires 5 years seasoning |
| Stricter Non-QM Programs | 4 years | Our Connect generally deems borrowers ineligible if the foreclosure was completed within the four years preceding the application date |
Multiple Housing Events: If a borrower has multiple unrelated derogatory credit events (e.g., foreclosure on a primary residence and an investment property) within a three-year period, the minimum seasoning requirement often increases to three (3) years from the date of the last event. Furthermore, some guidelines specify that borrowers with unrelated multiple significant credit events are ineligible.
Financial and Documentation Requirements
Obtaining a Non-QM loan after foreclosure requires adherence to key underwriting standards:
- Ability to Repay (ATR): The lender must carefully evaluate the borrower’s ability to repay the mortgage debt, reviewing factors like employment history, capacity, and credit profile.
- Down Payment: A 10% to 20% down payment is typically required, depending on the borrower’s credit score and the time elapsed since the foreclosure event.
- Written Explanation (LOE): A written explanation is required for significant derogatory information, including housing events like foreclosure. This letter helps the originator determine whether the credit problem was due to extenuating circumstances (factors beyond control, such as a major illness or death in the family) or financial mismanagement.
- Cost: It is important to note that Non-QM Mortgage Rates are normally higher than the rates offered for traditional government and conventional loans, as they account for the added risk associated with the borrower’s credit history.
FAQ's
If the borrower uses our Advantage program, what is the minimum seasoning required for a foreclosure to achieve 80% LTV?
Under our Advantage program, 24 months (2 years) seasoning is required for foreclosure to achieve a maximum 80% LTV.
Our Prime Non-QM Series requires no seasoning period for a single Housing Event (which includes foreclosure), provided the event is settled prior to close.
Under our Advantage program, 24 months (2 years) seasoning is required for foreclosure to achieve a maximum 80% LTV.
Homeowners with Non-QM loans can consider refinancing their loan to FHA or Conventional loans later to potentially obtain a lower interest rate.
The lender must comply with the Ability-to-Repay (ATR) rule by documenting the borrower’s capacity to repay the mortgage debt.
Borrowers with prior significant derogatory credit events must have reestablished acceptable credit verified after the credit event.
Non-QM Mortgage Rates are normally higher than government and conventional loan rates because these specialized loans pose a greater risk to lenders.
Foreclosure is defined as a Housing Event or a Significant Derogatory Credit Event.
Non-QM loans offer flexibility because they typically have no mandatory waiting period after a housing event, such as foreclosure, for qualified individuals.
Non-Qualified Mortgage (Non-QM) loans are the option that can allow a borrower to get a home loan as soon as a day after the foreclosure event is completed.
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For informational purposes only. No guarantee of accuracy is expressed or implied. Programs shown may not include all options or pricing structures. Rates, terms, programs and underwriting policies subject to change without notice. This is not an offer to extend credit or a commitment to lend. All loans subject to underwriting approval. Some products may not be available in all states and restrictions may apply. Equal Housing Opportunity.
Interactive calculators are self-help tools. Results received from this calculator are designed for comparative and illustrative purposes only, and accuracy is not guaranteed. Shining Star Funding is not responsible for any errors, omissions, or misrepresentations. This calculator does not have the ability to pre-qualify you for any loan program or promotion. Qualification for loan programs may require additional information such as credit scores and cash reserves which is not gathered in this calculator. Information such as interest rates and pricing are subject to change at any time and without notice. Additional fees such as HOA dues are not included in calculations. All information such as interest rates, taxes, insurance, PMI payments, etc. are estimates and should be used for comparison only. Shining Star Funding does not guarantee any of the information obtained by this calculator.
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