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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?
my home foreclosed 6 months ago and my credit score is still 700. my only credit debt a truck payment. prior to foreclosure my credit score was at 805.all other credit card debt is paid off.. how soon would i be able to qualify for a new home loan?
Posted on: 13th May, 2013 11:16 am
Hi briman!

Welcome to the forums!

After a foreclosure, one needs to wait for a 3-4 years in order to get a new mortgage for buying a property. You can utilise this time to improve your scores so that it becomes easier for you to get a mortgage.

Feel free to ask if you've further queries.

Sussane
Posted on: 13th May, 2013 09:47 pm
I claimed BK, chapter 7, July 2011, which included my house which is still in prefreclosure I guess. The house was turned over in lieu of deed. I did this only after trying repeatedly for HAMP. I became ill having to g onto SSDI. I could not afford the taxes alone, 8K per year, much less the house payment. Since then I have credit cards and have been rebbuilding my credit. I purchased a home, Dec 2011, outright using my 401K savings. Now I want to improve my home. How can I get a mortgage to do this. My credit was perfect prior to claiming BK
Posted on: 11th Jun, 2013 02:36 am
Hi Antioch,

A similar query has been replied to in the given page: http://www.mortgagefit.com/Mortgage-Basics/Home-imrovement-loan.html .

Please take a look at it. I hope it will help you.
Posted on: 11th Jun, 2013 10:51 pm
July 2011 my home was foreclosed. I did not go bankrupt now have a 660 credit score. In addition I have had a spotless payment history since and just was approved for an Auto Loan. If I pay 1/3 plus down what are my chances of getting a new mortgage?
Posted on: 23rd Jun, 2013 10:41 am
Hi Jim Hines,

After a foreclosure, you may have to wait for 3-4 years in order to qualify for any new mortgage. Prior to that, I don't think lenders will consider giving you a loan.

Thanks
Posted on: 23rd Jun, 2013 09:55 pm
I had conventional home loan, foreclosed in Jan 2009. My credit score is 672,730,669 with the different credit agencies. Could I buy a house with no money down?
Posted on: 14th Sep, 2013 11:48 am
Hi Mrsmajorhavok,

It will be difficult for you to qualify for a loan with no money down. The lender may ask you to go for a private mortgage insurance (PMI).
Posted on: 15th Sep, 2013 10:11 pm
I purchased a home in 1999 with a boyfriend. we separated and he wanted to keep the house. He could not refinance it without me. and wasn't staying current on the mortgage. So in 2005 I filed bankruptcy to remove myself from liability. This month I was turned down for purchasing a home because fha said I went threw a forclosure in 2011. Though we were no longer together and I was off the mortgage. What can I do to fix this? The mortgage company doesn't even show on my credit report it has been that long. And my credit score is 723. Please help.
Posted on: 04th Oct, 2013 04:32 pm
Hi jackie!

Welcome to the forums!

If the foreclosure is mentioned in your credit report, then you have nothing to do but to wait for 2-3 years and then apply for a loan. If the foreclosure is not reported on your credit report, then you should contact other lenders and check out if they can help you.

Feel free to ask if you've further queries.

Sussane
Posted on: 07th Oct, 2013 11:01 pm
Hi, there, After trying for 2 years to sell our house, we ended up walking away from it. When we received our first past due notice, we wrote back to Provident Funding advising we had vacated the house, would not be making any more payments, and they were free to proceed as needed. That was May 2011. The house was auctioned off in November of 2011. When I pull creditkarma to look at my credit, we are at 703 credit score but that mortgage still shows. Is this normal?
Posted on: 04th Nov, 2013 11:18 am
Hi Josie!

Welcome to the forums!

The account will show in your credit report for 7 years but the correct information should get reported on it. You should contact your lender and rectify the information.

Feel free to ask if you've further queries.

Sussane
Posted on: 05th Nov, 2013 10:34 pm
im trying to get pre approved for a morgage it has been over 3 years since the forclosure and it never showed up on credit report and was included in a chapt 7 my scores are good and have paper showing forclosure will they contact and check on forclosure i dont want to stir anything up and have it added to my report after all these years
Posted on: 04th Dec, 2013 05:44 pm
Hi jim and patti!

Welcome to the forums!

If the foreclosure is not mentioned on the credit report, then the new lender will not be able to come to know about it. But again. it will be better to let the lender know the truth.

Sussane
Posted on: 04th Dec, 2013 10:29 pm
Posted on: 17th Sep, 2014 09:52 am
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