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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?
thank you for the information....i need to clarify some information regarding being late for the mortgage payments.... i was never late with the trustee payments to the trustee (if i was the plan for chapter 13 would have been dismissed with the courts) i was late with some of the mortgage payments paid outside the plan. my credit report state i have been late 180 days to the mortgage company but that can't be true because i did some research through bankruptcy courts and it states..... once you file bankruptcy, the creditor/lender can no longer report your debt as delinquent. so, except bankruptcy, no other debt affects your score after filing. but you can rebuild credit in 2 years. the bankruptcy on the other hand, stays on your report for 10 years but it doesn't affect your credit rating after the initial hit. the best thing is, when you file bankruptcy, the court sends a note to your creditors/lender preventing any activity against you. so, you can expect no further credit damage.

i beleive the courts never sent notice to the mortgage company to let them know we were in chapter 13 bankruptcy.... because since we filed in november of 2004 if kept on showing that we were late...... 180 days thats impossible because thats when we were starting our new payment plans.
thank you
jen
Posted on: 25th May, 2009 11:04 am
Hi jsmith,

Generally the courts inform the banks if the borrower files for bankruptcy. It is quite surprising to me that the court has not informed your creditor about your bankruptcy. I think you should contact your bankruptcy attorney and discuss the whole issue with him. May be your bankruptcy attorney can send a certified letter to the lender stating that your debts are discharged in bankruptcy.

Thanks
Posted on: 26th May, 2009 12:39 am
Everything is Discharged and Paid in Full but the mortgage company we applied with is concerned about the mortgage payments in the Chapter 13 plan being late. My bankruptcy attorney nor my trustee can change anything now because we have been Discharged. Thank you
Posted on: 26th May, 2009 07:35 am
Is there any time limit for new loan application after forecloser earlier loan?
Posted on: 26th May, 2009 10:30 am
Also can we do new loan from same lender after forecloser of previous loan?
Posted on: 26th May, 2009 10:31 am
I just wondered I have never paid a bill late since my foreclosure/bankruptcy(05) I have a good amount of money saved for a downpayment and a steady job.. I've been house shopping what are the chances of being able to get a home mortgage?
Posted on: 30th May, 2009 12:28 pm
Hi,

To Jen,

If you are not late on your chapter 13 mortgage payments, then you should dispute it with the credit bureau. Once it is removed from the credit reports, I don't think lenders would reject your loan.

To sunil,

Lenders won't give you a loan immediately after a foreclosure. You will have to wait for 3-4 years in order to get a loan after loan modification. You can use this time period to improve your credit score and then look out for loans. If you can show that you have a good credit score and stable income, you can get a loan from the same lender who foreclosed your property.

To julie,

Your query has been answered in the given link:
http://www.mortgagefit.com/inprocess/about22564.html#98808

Please take a look. I hope it'll help you.

Thanks
Posted on: 01st Jun, 2009 12:02 am
Posted on: 06th Jun, 2009 07:11 pm
Hi Guest!

Welcome to forums!

You'll have to wait for at least a year or two in order to qualify for a loan. Since the foreclosure took place just a year back, the lenders may not give you a loan right now.

Feel free to ask if you have further queries.

Sussane
Posted on: 07th Jun, 2009 09:24 pm
Hi jameshogg,

Can we go for different lender as we have to wait upto 3-4 years?
Is it like that?
Posted on: 13th Jun, 2009 10:03 am
Guest

Welcoemto the forum

You will qualify for a FHa loan after 2 years and since yoru credit score is decent you shodul be ok

Good luck and feel free to ask
Posted on: 15th Jun, 2009 10:08 pm
Where were you when we had questions before we even went through bankrupcy and a foreclosure?

We were foreclosed on Sept of 2008, Chapter 7 discharged in April 2008 and evicted from our home Nov 2008. We have been renting a home ever since Dec 2008. We want to try and buy our home back, the bank did sell the house to a possible investment group for much less than what it was sold at, and they have since gutted the house and landscaped. What type of mortgage company / broker should we try to work with or would it be better to work with a 3rd party investor to see if they can buy the home back, that we built and wait a couple more years and try for a mortgage on our own? We have also been working on paying on bills that were turned over on our credit history when the chapter 7 was discharged, but we have not been able to save anything extra.
Posted on: 15th Jul, 2009 08:32 am
hi wiggs!

welcome to forums!

as you had filed chapter 7 bankruptcy, it will be difficult for you to get a mortgage immediately. if you want to get a fha loan, you'll have to wait for 2 years after the discharge of your bankruptcy. before that, fha lenders will not be ready to give you a loan. as far as conventional loans are concerned, you'll have to wait for 4 years before you qualify for a loan. moreover, you should have a good credit score and stable income to qualify for a loan.

feel free to ask if you've further queries.

sussane
Posted on: 15th Jul, 2009 10:29 pm
Hi, my husband and I both had divorces before we met each other. He filed for CH. 7 in 2005 and it was discharged in 5/2005. I filed for CH. 7 in 2005 and it was discharged in 3/2006. Both our houses went into foreclosures. His house never sold at the sheriff sale and went back to the bank. His house finally sold in 10/2007. Mine was sold to HUD in 4/2007. I heard that if the house doesn't sale after the sheriff sale it goes to the bank and the waiting period goes back to the discharge date before you can get an FHA loan again. Is that correct?? Or do we both have to wait until 3 years out from our foreclosures to buy again??
Posted on: 26th Jul, 2009 10:50 am
Hi, my husband and I both had divorces before we met each other. He filed for CH. 7 in 2005 and it was discharged in 5/2005. I filed for CH. 7 in 2005 and it was discharged in 3/2006. Both our houses went into foreclosures. His house never sold at the sheriff sale and went back to the bank. His house finally sold in 10/2007. Mine was sold to HUD in 4/2007. I heard that if the house doesn't sale after the sheriff sale it goes to the bank and the waiting period goes back to the discharge date before you can get an FHA loan again. Is that correct?? Or do we both have to wait until 3 years out from our foreclosures to buy again??
Posted on: 26th Jul, 2009 10:51 am
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