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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?
ok.What if I did a loan mod with the lender?Would that enable me to refinance if I modified the loans instead?Since I am in default anyway on those 2 loans would I have to wait 2 yrs anyway?
Posted on: 16th Apr, 2009 05:09 am
We had a foreclosure in 07/2007. We are currently renting have done so for almost 2 years now. We were told previously that we could get a mortgage if we show proof of rent checks. I have all the information they require and they still say no mortgage. My current home has Chinese Drywall and it is affecting our health. I need to know what we can do to get a mortgage asap.
Posted on: 16th Apr, 2009 10:01 am
hi!

welcome to forums!

to karen,

you can refinance the loan immediately after loan modification. you will have to wait for at least a year and then refinance the loan.

to lynn,

as you have a foreclosure in your credit report, you'll have to wait for at least 3-4 years in order to get a mortgage. i don't think lenders would offer you mortgage before that.

sussane
Posted on: 16th Apr, 2009 09:37 pm
CAN THEY STILL BE ABLE TO BUY AHOUSE.
Posted on: 21st Apr, 2009 11:30 am
We recently pulled our home out of foreclosure by working with our mortgage company and have a loan modification set. We would really like to sell this house as soon as possible but wonder if we could even get another loan for a different home. Any suggestions? What steps should be taken? Who would be the best company to contact?
Posted on: 27th Apr, 2009 09:02 pm
Hi,

To THERESA,

Yes, though you file bankruptcy, you'll be able to purchase a property. Though a bankruptcy will remain on your credit report for 7-10 years, you will be able to get a mortgage within 2-4 years.

To anonymous,

If your credit is good and if you have a stable income, then I don't think you'll face problems in getting a loan though your current lender has modified the loan.

I would suggest you to speak to a few lenders and check out what type of terms and conditions you are receiving. This will give you a fair idea about the present market rates and it will also help you to judge whether you'll be able to afford the loan or not. You can also speak to the lenders of this community and seek a no obligation free mortgage consultation. This will let you know whether you will be getting a loan or not.

Thanks
Posted on: 29th Apr, 2009 11:30 pm
I had a Foreclosure of my home back in 2006. I had moved out of the home and got an apartment before the foreclosure had taken place. My ex was in the home occupying it and didn't pay the mortgage. Currently i got married and my husband and i want to look at buying a home. Will my foreclosure mess up the chances of us being home owners? Is there anything that we should do when trying to buy a home together?
Posted on: 30th Apr, 2009 03:16 pm
Hi Ducati!

Welcome to forums!

A foreclosure will remain on your credit report for 7 years like any other negative item. The lender will come to know about your foreclosure. There are chances that if you jointly purchase the property, you may have to pay higher rates of interest. However, if your husband does not have a negative item on his credit report, then he can take a mortgage in his name alone.

Feel free to ask if you have further queries.

Sussane
Posted on: 30th Apr, 2009 11:54 pm
So we just recently had a foreclosure but we still have decent credit. Would a lender be more lenient if they see that our credit score is still good & that we have no other problems w/ our credit. With the housing so low right now I'd hate to pass up this opportunity to buy a home.
Posted on: 04th May, 2009 02:33 pm
We are about to go into foreclosure on our $800,000 mortgage. However we will be able to make a down payment of $125,000 on a $185,000 home. Will we be able to get a bank to lend us this $60,000 within a couple of months after our foreclosure?
Posted on: 04th May, 2009 05:26 pm
Hi,

To Amy,

I don't think lenders would be lenient enough to grant you a loan if he finds that you had a recent foreclosure. Though your credit is good, you'll have to wait for 3-4 years in order to get another loan.

To Beverly,

No, the banks won't be ready to lend you money after couple of months after your foreclosure.
Posted on: 05th May, 2009 12:10 am
How long I have to wait to get a mortgage after chapter 7 I was told you can get it 1 day after discharge? :oops:
Posted on: 19th May, 2009 10:54 pm
hi stacey,

after the discharge of chapter 7 bankruptcy, you will have to wait for 2 years to get a fha loan and 4 years to get a conventional loan.

thanks
Posted on: 20th May, 2009 08:56 pm
hi, my name is jen and i need help …. i was told by my mortgage broker (suburban mortgage) that we would be qualified for a mortgage even though we have been only discharged a little more than a year ago… we sold our house due to being told by the courts in chapter 13 bankruptcy courts to sell in january of 2007. since then all of our debt was removed and satisfied. so since the last 2 years we made sure we paid all our bills, rent and even improved our credit history but now the underwriter for fha is giving us a hard time because in chapter 13 we made our payments to the mortgage late and the reason why was being my husband lost his job and no money was coming in. (ps….. the credit report state we have been late since we started chapter 13 in november of 2004 for over 180 days late even though that’s when we started chapter 13 they the mortgage company never changed the credit reports it kept on saying we were late over 180 days since the beginning……)

our trustee and our attorney told us the only thing we needed to pay was his trustee payment of $50.00 until we sold our house.

prior to us using this mortgage company we were told we should not have any problems due to filing chapter 13 now we are…. i really thought the underwriter was going to consider the pros and cons and make a decision regarding our present situation…..(i was told if the underwriter does not approve then they will have a committee hearing to decide if we are qualified is that true???) we even got a lsr before even looking at houses and they the mortgage company was well a ware that we were had been in bankruptcy and had been discharged, they had our paper work since last year…. we are in a contract now and i so nervous that we will not be approved and get the house because we where late with our mortgage payments prior to the sale of our house. can you please help to let me know if we still qualify for a fha mortgage???? please help!!!



and ever since then when we sold our house in january 2007 paid all our debt from the proceeds of the house, we improved our credit score and paid everything on time for over 2 years we still have no chance to get a mortgage? my last question…. when it is officially “2 years from discharge” will the underwriter disregard being late during chapter 13. i really do appreciate you taking the time to help…



one more question…sorry if we had let the house go into foreclosure we still would have to wait 2 years to qualify for a loan too, right?
Posted on: 23rd May, 2009 09:52 am
Hi jamielynn,

You have mentioned that you sold of the property after filing Chapter 13 bankruptcy. I guess you've satisfied the loan amount after selling the property. In that case, the underwriter cannot claim that you're late on your Chapter 13 payments. I would suggest you to contact your bankruptcy attorney and get the issue resolved. If you've really been late on your Chapter 13 payments, then it would still be considered when 2 years have passed since your bankruptcy discharge.

As far as foreclosure is concerned, you've mentioned that you've sold off the property. In that case, the lender will not be able to foreclose the property anymore.

Feel free to ask if you have further queries.

Sussane
Posted on: 24th May, 2009 09:37 pm
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