Losing your home to foreclosure can be a trying journey. However, it doesn’t imply that you’re permanently barred from owning a home ever again. Whether you’re lent money again to buy a home is really up to individual lenders, who have their own underwriting rules and requirements when it comes to foreclosed homeowners. It is possible to do a few things, however, to enhance your odds of getting another loan.
Timing
The longer you wait to attempt to purchase a home after foreclosure can work in your favor. Oftentimes, lenders place an emphasis on the previous 2 years of your credit history. Therefore, while the foreclosure doesn’t go away out of your own credit report for 7 years, it becomes less of a factor in your credit rating, one of the main determinants of whether you can finance a new home. A foreclosure can decrease your credit score by anywhere from 200 to 300 points for the initial 2 years later, according to Mortgage Home Loan.
Credit score
1 approach to improve your changes of purchasing a home after foreclosure is to improve your credit report. Liz Pulliam-Weston, a fiscal writer, writes that you need to begin fixing your credit shortly after your foreclosure with either an installment loan or revolving credit, including credit card. Whatever type of credit you get, you need to ensure that it accounts to all three credit bureaus on a monthly basis. By obtaining credit and creating on-time payments, it will raise your credit rating and make it more likely you can get financing. The rate of interest may nevertheless not be that good, because the foreclosure will still be on your report.
If Your Home Is Yours
If your home is in foreclosure, then make sure you look at your state’s foreclosure guidelines. Even after your home is sold at auction, several countries offer Right of Redemption, a time period in which you have the right to buy back the home, even though someone else has bought it. In California, right of salvation is a 90-day to 1-year time, determined by how much the creditor received . In either case, you must pay the whole loan, plus late payments, fees and costs, before the interval expires, or the voucher winner retains the property.
Form of Mortgage
It matters what type of mortgage you’re applying for after foreclosure. As an example, if you’re applying for a government-backed mortgage, such as a loan by Freddie Mac, Fannie Mae or a mortgage guaranteed by the Federal Housing Administration, then you cannot apply for a period of five years. The waiting period is 2 years if you surrendered your home through a deed in lieu of foreclosure or sold your home in a quick sale. If you’re applying for an unconventional mortgage, for example one with a variable rate of interest, it’s up to the individual creditor.
Down Payment
The amount of your down payment may determine whether you’ve got the capital to buy a home after foreclosure. The payment is up to your creditor. But, according to CNN Money, some lenders may seek up to a 30 percent down payment out of you if you went through foreclosure, especially if you did little to try and save the home, which lenders consider a walkaway foreclosure. Consequently, if you intend to buy afterward, be conscious of what you may want to save for a down payment.