There are several unknowns at work here, so let's work through some different possibilities.  Best case:  The foreclosed home was sold for enough money to pay off the debt and all collection expenses.  In this instance, the borrower could get another mortgage once enough time had gone by, generally 3 years and in some cases, 4 years.  Re-established credit with no late payments and a 2 year history of traditional credit accounts are also needed.  A good letter of explanation that details the circumstances surrounding the foreclosure will be required.  The underwriter should feel that it was not a situation that will recur.

Next best case:  The foreclosed home was sold and there was a deficiency and not everything was paid, but the lender forgives the balance and does not report a deficiency to the credit bureaus.  All of the above should be expected, but a longer period of re-establishment of positive accounts may be needed.

Not so good case:  The foreclosed home was sold at a loss and you are liable for the difference.  It is reported on the credit report.  You may need to clear up the balance due while also re-establishing credit and waiting the 3-4 years before applying.  Chances of approval are not as good, so the letter of explanation really needs to be detailed, and the underwriter needs to be satisfied.

IF the foreclosure was a VA loan, do not expect to get another VA loan.  IF the foreclosure was an FHA loan, do not expect to get another FHA loan.  IF the foreclosure was an RD loan, do not expect to get another RD loan.  Some agency loans [VA, FHA & RD] may not be approved even if the foreclosure was with another agency.

Bottom line:  Re-establish credit, get documentation on the foreclosure resolution, & write the letter while the details are still fresh in your mind.  And consult with a mortgage professional who can run the details by an underwriter BEFORE you contract to buy.

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