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Mortgage after foreclosure - 5 Tips to qualify for a new loan

Author: Jessica Bennet
Community Mentor
Ask Jessica
Posted on: 04th Oct, 2007 06:16pm
If you've been in foreclosure, your credit must have trashed down and this is what will stop you from buying a home or qualifying for a new mortgage after foreclosure. You'll have to organize your finances and get financially stronger prior to getting a home loan again.

You can try getting a loan 1 year after foreclosure but chances are you'll be charged with very high rates. The best thing is to wait for at least 2-4 years to get the better and lower rates on your new loan. Even if you'd like to get a mortgage after 2 years, you can try out with FHA loans but you need to have minimum score of 580-600 especially in times of mortgage and housing crisis.


5 Tips to qualify for Mortgage after Foreclosure

Here are 5 Do's to help you get a home loan after foreclosure.

  1. Rebuild your credit:
    Getting mortgage months after foreclosure may not be impossible but you should be prepared to accept higher rates of interest. For eg: you may be paying 8.20% rate with 2 points for 30 year fixed rate loan while anyone having good credit and not being in a recent foreclosure may get a 6.20% rate with 0 points. So, what you need doing is to rebuild your credit before you apply again.

    The best thing is to make on-time payments on bills, credit cards etc. If possible, negotiate to lower the interest rate on your credit cards as that will help you save more. Also check your credit report for any inaccurate information being reported to the bureaus.

    You may open new credit accounts but maintain regular payments - this is what lenders will be concerned about when you look out for a new mortgage. Know more...


  2. Save for down payment:
    To get the best loan program, you'll have to put down 15-20% of the home purchase price as the down payment. The more you put down, the less you need to borrow and the less you need to pay.


  3. Prepare a budget:
    Make sure that you plan a budget and spend according to it. A budget will help you maximize your savings. Use the Simple budgeting tool to plan your budget on a monthly basis. When you start budgeting, try saving some cash in an emergency fund as cash reserves help in qualifying for a mortgage loan.


  4. Check your affordability:
    Go for a house that is affordable. Also, calculate the monthly payments (including property taxes and insurance premiums) on your new loan and see if it's well within your reach. Use the Home Affordability Calculator to find out how much you can afford.


  5. Check the housing market:
    Even though you may save enough and rebuild you credit, it's important to check the housing market in your area. If you're in a declining market, be careful when you buy. Chances are, if you default, you may be unable to retrieve the loan balance by selling off your home as a result of declining home prices.

    At times, certain lenders inflate appraisals and offer more money than the buyer is supposed to get. Make sure that you don't get an inflated appraisal or else you'll be paying more than you should. And later on you may not be able to repay thereby ending up in foreclosure.


Once you've been in foreclosure, what the new lender will check is how your credit has been used since the financial hardship that led to foreclosure, and how much you'll be able to put down on the new house. In fact, banks may not lend more than 75-80% of the home purchase price to anyone having gone through foreclosure in the past 2 years or so. So, it's important that you have a savings plan and adequate cash reserves.
Posted on: 04th Oct, 2007 06:16 pm
How difficult is it to get another home mortgage after a foreclosure? Also van anybody tell me how to qualify for mortgage after foreclosure?
BK7 discharged almost 2 years ago and house was included, house foreclosed 3 months ago when can I purchase again. I moved out of home in 2006 with my children and ex and his former wife lived in it. Bank put a padlock on in Jan 2009 and ex was evicted out of home. I filed BK7 due to ex who was on court paperwork responsible on RV did not pay in 2009 and also included the home since on court paperwork he was suppose to shortsale it but refused to. I could not help since I was renting on a lease property and also lost 15% cut in pay working with the state of CA, house was broken into and I had to insurance, I was hospitalized in 2010 and also had to take my children to court mandated counseling. I want to know if and when I can purcahse again.. I do hold a credit score of 720 now. I paid off my car and motorcycle and hold the title and recently purchased my daughter a car for college.
Posted on: 17th Dec, 2011 10:28 am
Welcome Brandi,

What type of bankruptcy had you filed for? If you filed for Chapter 7, then you will have to wait for 4 years to get a conventional loan and 2 years to get a FHA loan. If you filed Chapter 13, then you will have to to wait for 1 year to get a FHA loan and 2 years to get a conventional loan after discharge.
Posted on: 19th Dec, 2011 12:32 am
I filed bk and chase mortgage still forclosed on my home, and it is sitting on my credit report that way. I was told that they could do that. Is that correct
Posted on: 30th Dec, 2011 09:56 am
Welcome Guest,

Once you file bankruptcy, the lender won't be able to foreclose the property as the bankruptcy court will issue a notice as per which no actions can be taken against you by the lender/creditor. I will suggest you to speak to your bankruptcy attorney in this matter.
Posted on: 30th Dec, 2011 10:24 pm
hallo

my house got forclosed in auguest 2011. at the time of forclosuer, my credit was 670. but two months after the forclosure, my credit jumped up by 41 points to 711. now, it has been six months since my house is forclosed. is that mean i can be eligible for a new mortgage since my credit is very good? is it a good sign that my credit jumped that much?
also, i have a good income but my wife has a job with not much income. but her credit square is 735. does this help? please help me with your answer.
for my forclosed house i put down 20% for a total of $85,000.
but its value lost by over 65% and the bank refused to refinance since my income is higher than the 33% required for eligibility.

thank you for your help
Posted on: 04th Feb, 2012 04:12 pm
Hi Selamawit,

Your query has been replied to in the given page: http://www.mortgagefit.com/Mortgage-problems/Eligibility-post-forclosure.html . Take a look at it. I hope it will help you.

Thanks
Posted on: 05th Feb, 2012 11:38 pm
bankruptcy 2010..discharged 2010/foreclosure 2010..any chances on getting a mortg for new home to be built right now with anyone..5% down..price of home 150-190,000..credit scores 694 and up on all 3 credit bureaus..have gotten things off report and have re-established credit to good
Posted on: 13th Feb, 2012 04:16 pm
Hi goodgirl!

Welcome to forums!

A query similar to yours has been answered in the given page: http://www.mortgagefit.com/Mortgage-Basics/new-mortgage.html . Take a look at it. I hope it will help you.

Feel free to ask if you've further queries.

Sussane
Posted on: 13th Feb, 2012 11:21 pm
I had my house foreclosed on 11/10. Back in 04' I couldn't afford the mortgage so we sold it to a broker. (So I thought) it turns out that I only signed over the deed to the house. He was renting out the house and collecting the money, but not paying the mortgage. Can this qualify for extenuating circumstance since it was out of my hands?
Posted on: 01st Mar, 2012 11:00 pm
Hi Monica!

Welcome to forums!

Well, I won't be the right person to say whether or not it was an extenuating circumstance. You should contact a real estate attorney and he/she will help you in this matter.

Feel free to ask if you've further queries.

Sussane
Posted on: 02nd Mar, 2012 12:03 am
I had a foreclosure after losing my job in 2003. Equifax shows my credit score at 747, no credit problems since. The home actually sold at auction for what we owed, so the bank did not take a loss and my credit report from Experion indicates that my lender was paid in full. I make 160k+ and have about 80k saved to use as a downpayment. How much impact will all this have on my ability to get a loan? I'd like something in the 400k range.
Posted on: 13th Mar, 2012 12:37 pm
Welcome Sweetswing,

After so many years of property foreclosure, it won't have much impact on your borrowing ability. After a foreclosure, you need to wait for 3-4 years in order to qualify for a loan. As you have the required credit score, income, down payment, you will be ale to qualify for a loan. You can contact the local lenders and apply for a loan.
Posted on: 14th Mar, 2012 01:30 am
Is there is mortgage co that will loan me money when I had a foreclosure 2.5 years ago, My credit score is 650.
I can put 20% down
Posted on: 01st May, 2012 09:07 am
Hi Bill,

Normally, lender will approve a loan to you after 3-4 years of a foreclosure. However, as 2.5 years have passed, you can apply for a loan and try to check out if the lender will be ready to give you the same. I personally feel that if you wait for 6 months and then apply for a loan, your chances will be better.

Thanks
Posted on: 02nd May, 2012 12:35 am
I had a chapter 7 discharged 2 yrs. ago that included my home.
My credit score is now 640 and I have a car loan thru a major bank that I got just last year. I am paying ahead on the car loan also.
At this time, I have $12,000 save up in the bank.
When can I qualify for a home mortgage again?
Posted on: 02nd Jul, 2012 04:58 pm
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