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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?
As the foreclosure sale has not taken place, the foreclosure will not be reported in your credit report. In such a case, the waiting period goes back to the discharge date of your bankruptcy. After 2 years of your Chapter 7 discharge, you can apply for a FHA loan. As far as conventional loans are concerned, you'll have to wait for 4 years.
Posted on: 27th Jul, 2009 03:35 am
so, if the bank sells the house to someone then do we have to go from the date the bank sells the house instead of the discharge date??
Posted on: 27th Jul, 2009 07:50 am
Going back to the bank taking the house back after it did not sell at the sheriff sale. If someone buys the from the bank then does the foreclosure show up on the credit report??
Posted on: 27th Jul, 2009 07:56 am
Hi regina!

Welcome to forums!

If the bank sells off the property now, then the date of foreclosure sale will be considered by the lenders before giving you a loan. If the foreclosure sale takes place, then it would be reported to your credit report.

Feel free to ask if you've further queries.

Sussane
Posted on: 27th Jul, 2009 10:28 pm
Hello,

We foreclosed on our home in Nov 2007. The house sold in Jan 2008. We at that point moved into our other home which had been rented. My current credit score is 680 and all our payments have been on time. My Husband and I both have steady jobs and income. Is there anyway we can qualify for a loan at this time. We would like to purchase a new home since our current home is too small for our family and place our current home back as a rental.


thanks
Posted on: 30th Jul, 2009 10:43 am
Hi Gracie!

Welcome to forums!

You won't qualify for a loan so soon after the foreclosure sale of the property. You'll have to wait for 3-4 years in order to get a mortgage. Moreover, a credit score of 680 will only help you in getting a FHA loan. You won't be able to apply for conventional loans as it requires a credit score of 720-740.

Feel free to ask if you've further queries.

Sussane
Posted on: 31st Jul, 2009 12:18 am
just went thru a money hungry devorice.house up for foreclosure and just went thru a auction and yes ,a buyer came forward.i have a second moregage and theres enough to satisfie the first moregage.what happens to second lender even thru ive been stripped of money or no money at all. i dont want to go bankrupt.i still have my job,what are my rights and what can they do to me?
Posted on: 02nd Aug, 2009 07:58 pm
is it the same amount of time if you go this route to try to get a house. and how much of a hit will i take on my credit
Posted on: 03rd Aug, 2009 08:32 pm
hi guest,

you will be liable for the second mortgage though you sell off your property for a lower amount. the second mortgage lender will ask you for the payments immediately after you sell off the property. if you are unable to clear the debts, then the lender will charge off the loan to a collection agency.

thanks
Posted on: 03rd Aug, 2009 11:10 pm
how dificult is to get a loan using the credit score from one and the income from another. :oops:
Posted on: 17th Aug, 2009 12:03 am
Hi martha,

Both the persons should be on the property deed as well as on the mortgage in order to get a loan. Moreover, it will depend upon the lender as to whether or not he would give a loan.

Thanks
Posted on: 17th Aug, 2009 09:39 pm
I have a rental property that I owe $138,000 mortgage with a monthly payment of almost $1200. I cannot rent it for more than $850 and I can't continue making the mortgage payment w/out completely draining my savings and then I'll have to let foreclosure occur anyway. The house is currently worth about $105,000. If I let the bank foreclose what are my tax liabilities?
Posted on: 27th Aug, 2009 06:48 am
Hi bikerLarry!

Welcome to forums!

If the lender forecloses the property, he will sue you for the deficient amount resulting from the sale of the property. If you pay off the amount, then there would not be any tax liability. However, if the lender forgives the deficient amount, then you would be liable for paying taxes as the forgiven amount may be considered as your income.

Feel free to ask if you've further queries.

Sussane
Posted on: 27th Aug, 2009 09:55 pm
what if I put half down on a mortgage? is it sure thing? I have had some judgements several years ago, but no foreclosure or bankruptcy.
Posted on: 09th Sep, 2009 12:19 pm
what if I put half down on a mortgage? is it sure thing? I have had some judgements several years ago, but no foreclosure or bankruptcy.
Posted on: 09th Sep, 2009 12:20 pm
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