How To Get A Mortgage After Foreclosure
Apr 24, 2017 | Mortgage Tips
If you are trying to purchase a home after a foreclosure, you are not alone. In the past decade, millions of homeowners went through foreclosure, due to sky-high housing prices and dropping property values combined with a financial downturn. Now that the housing market is more stable, we are beginning to move past these difficult times. With more reasonable home values and low mortgage rates, it’s a great time for those with foreclosures in their pasts to apply for a new mortgage.
There’s a common misconception that if you have gone through a foreclosure, you have to wait seven years before trying to buy a home again. But this is not always the case! While a foreclosure does present some challenges in trying to qualify for another home loan, it is not something that will stay with you forever. Read our tips below on how to apply for a loan after a foreclosure.
Buying a Home after Foreclosure
Re-establish Your Credit Score to Qualify for a Mortgage After Foreclosure
Two major focuses after a foreclosure should be saving money and re-establishing your credit. To do this, be sure to pay your bills on time. Even if you make the minimum payment, a missed or late payment will look worse. In addition, be sure to not max out your credit cards, as high amounts of unsecured debt is a red flag to lenders.
Not all debt is bad, though! Lenders want to see that you can repay debt responsibly, so a car loan and/or a secured credit card with a small balance is a great way to demonstrate your responsible repayment abilities. In addition, be sure to check your credit score for any inaccuracies.
Know the Type of Loan for Which You Should Apply
Typically, FHA loans are the most forgiving to people who have foreclosures in their past. There is a 3-year waiting period after your foreclosure case has ended before you can apply for an FHA loan; unless you can demonstrate that the foreclosure was caused by a onetime event that was out of your control (such as a serious illness, divorce or job loss).
Conventional loans backed by Fannie Mae or Freddie Mac have the longest waiting period, which is 7 years. The waiting period can be shortened, however, if you have a big enough down payment. If you can put down more than 20%, you can shorten the waiting period to just 2 years.
Find Out if You Qualify for a Home Loan
Here at Home Point Financial, our experts are happy to assist you after a foreclosure so you can own a home again! For more information, please contact us today.