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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?
Hi helen!

Welcome to forums!

Getting a mortgage will depend upon your credit score and income. You didn't mention your credit score. In order to get a conventional loan, you would require a credit score of 720-740. If you want to get a FHA loan, you would require a credit score of 620. You've mentioned that you had some judgments several years ago. I don't think they would affect your credit report now.

You should get hold of your credit report and check out what your score is like. Then you can start applying for loans with your local lenders. You will find a number of lenders in this community. You can seek a no obligation free mortgage quote from them to know the type of rates and terms you would receive.

Feel free to ask if you've further queries.

Posted on: 10th Sep, 2009 12:19 am
Our house in Florida lost 2/3 of it's value and we were transferred to new job out of state. Therefore, our house could not sell for what was owed. We could not maintain the payments and received a notice of foreclosure from Bank but they never did foreclose. We have an attorney that has tried to work with them but can't get anyone who can give a difinite answer. It has been a year since the foreclosure letter. Is there a time limit on foreclosure? What should we do now?
Posted on: 10th Sep, 2009 08:58 am
Hi delmar,

Check it out with your lender whether or not your property has been foreclosed. If not, then your attorney should contact your lender and apply for a deed in lieu of foreclosure on your behalf. You can also write a hardship letter in order to apply for a deed in lieu. If the lender accepts it, then you'll have to surrender the property. The lender would sell it off and recover the mortgage dues. As far as the deficient amount is concerned, it would be forgiven by the lender.

Take care.
Posted on: 11th Sep, 2009 01:39 am
My husband filed chap 7 in 4/07, we gave up the house. Foreclosure had actually started in June 2006. Aug 2007 he was discharged. House has been up for auction 3 times and has not sold. We have been gone 2 years Dec 09. Our credit is back up +670. What can we do? We want to buy the house we are renting and are worried the owners won't want to wait. Never been late on rent. They say we are great tenants. Help!
Thank you!
Posted on: 16th Sep, 2009 04:31 pm
Welcome CJ,

As 2 years have passed since your husband's bankruptcy filing, you can apply for a FHA loan. With a credit score of 670, I don't think you would face problems in getting a FHA loan provided you haven't incurred any other negative item on your credit report.
Posted on: 16th Sep, 2009 11:15 pm
Wow that is great news. Even if the house we gave up hasn't sold? I appreciate your help.

Posted on: 17th Sep, 2009 02:14 am
my husband is now in foreclosure can i buy a home iwth my income and mycredit score. will anyone finance me?
Posted on: 18th Sep, 2009 11:16 am
Hi mary!

Welcome to forums!

If you are not a co-borrower or co-owner of your husband's property, then you can definitely buy a home with your income and credit score. You can contact lenders and go for a mortgage shopping. This will give you an idea about the rates and terms of mortgage. Thus, it would be easier for you to decide whether or not you would be able to afford a loan. Also, you can speak to the lenders of this community for a no obligation free mortgage quote. This will help you know about the present mortgage rates and terms.

Feel free to ask if you've further queries.

Posted on: 20th Sep, 2009 11:55 pm
We filed chapter 13 and are still in the middle of making payments on this. We are not discharged yet. We surrendered home in bankruptcy and property is now custody of trustee. The property still after 3 years of vacany has not auctioned off yet. We are self employed and doing well in buisness. Can we get a mortgage? And if so what kind?
Posted on: 01st Oct, 2009 10:22 pm
Hi Guest,

As you've not been discharged of bankruptcy, it would be difficult for you to get a mortgage. Normally, you would get a FHA mortgage after 1 year of Chapter 13 bankruptcy discharge and a conventional loan after 2 years of discharge.

Posted on: 02nd Oct, 2009 11:19 pm
I have an opportunity to get into a smaller less expensive home, if I let go of the mortgage I currently have, will the lender be able to put a lein on my new home property? would it benefit me by calling the lender and letting them know I would like to do this?
Posted on: 12th Oct, 2009 11:02 am
the lender can place a lien on your property if he forecloses it and if you cannot pay off the deficient amount. i don't think it would benefit you in any way by informing the lender about your plans. you can apply for a deed in lieu of foreclosure with your lender and sell off the property. you won't be responsible for the deficient amount. but it would reduce your credit score by 250 points and you may not get a mortgage for the next 3-4 years.
Posted on: 13th Oct, 2009 01:20 am
I'm working with a financial person and they said in 3-4months I should beable to buy a house. Is this possable after a foreclosure 3 years ago? They said credit score is holding us back and can fix it in 4 months. :?:
Posted on: 15th Oct, 2009 06:57 pm
It is true that you can apply for a loan after 3-4 years of going through a foreclosure. You should have a good credit score in order to qualify for a loan. Credit score of 740 is required in order to get a conventional loan. You can check out the given page in order to know some steps to improve your credit score:
Posted on: 16th Oct, 2009 02:14 am
If you had a forecloser on a FHA loan, can you get another FHA loan?
Posted on: 20th Oct, 2009 02:29 pm
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