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Can i get a cash out refinance if i had a forclosure 6 years ago my score is 650
Can i get a cash out refinance if i had a forclosure 6 years ago my score is 650?
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1 Reply
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Yes, even if you foreclosed on a property six years ago and your credit score is 650, you can refinance and get cash out. There are some points that you have to note:
Waiting period after foreclosure:
FHA Loans: HUD, the parent federal agency of FHA, requires three years of waiting time after foreclosure before applying for another mortgage. Examples include such as cash-out refinances. This means that, in this case, with a foreclosure that happened six years ago, we meet this requirement.
Conventional Loans: Conventional loans usually require seven years after foreclosure. However, if there are extenuating circumstances, the lender might reduce it to three years.
VA Loans: They would work for you if you qualify for a VA loan. To qualify and get approved for VA loans, you usually have a two-year waiting period after foreclosure.
Credit Score Considerations:
650 Credit Score: A credit score 650 is considered fair and may allow someone to qualify for a cash-out refinance. But not with terms as good as those available at higher scores. Expect higher interest rates or more rigorous qualification standards.
Loan-to-Value (LTV) Ratio:
LTV Requirement: Most lenders want 80% LTV on cash-out refinances. So, ensure you have at least 20% equity in your home. The better one’s equity position, the likelier it is that approval will be granted on favorable terms.
Debt-to-Income (DTI) Ratio:
DTI Consideration: The DTI ratio will be calculated to ensure new mortgage payment can be afforded, typically requiring 43% or less but sometimes higher with sufficient compensating factors allowed by certain underwriters
Lender Flexibility: Some lenders may have more lenient policies toward borrowers who have had foreclosures. This holds especially when reestablished credit is proven, along with other qualifying criteria being met. Hence, shopping around among different financial institutions becomes essential.
Final thoughts: Although having had a foreclosure might complicate matters. In your case, six years since then and a credit score of 650 do put you within reach of getting cash-out refinancing. As always with this type of loan, though, eligibility will be determined based on factors such as the LTV ratio, DTI ratio, and lender-specific requirements.
Let me know if there is anything else I can do for you!