How to Buy a House After a Foreclosure

How to Buy a House After a Foreclosure

A foreclosure can have a negative impact on your credit score, and thus make it difficult to purchase a new home. A foreclosure does not mean you can never be a homeowner again, but the path to credit-worthiness takes dedication and hard work. Unfortunately, there’s no quick fix to instantly improve your credit score (after a foreclosure), but the following Q&A is designed to answer your credit-repair questions, and get you on the path to good credit once again.

Do mortgage lenders consider applicants who have faced foreclosure? Yes, lenders will consider your application, but you’ll need to improve your credit score. Your report should reflect a history of credit-worthiness. Keep in mind, you may have to pay a higher interest rate because this is your second mortgage after a foreclosure.

How does a foreclosure affect your credit score? The affect a foreclosure has on your credit score varies – as in, there is no set-in-stone number. Your credit score will begin to decline before the actual foreclosure. Your late payments are going to be reported (typically once you’re 90 days late or more). Street Directory estimates that the impact of a foreclosure will be somewhere between 125 and 175 points lost.

Should I use a professional service to improve my credit? In terms of fast credit repair, nothing is faster than a trained professional, such as a credit repair specialist, a bankruptcy lawyer or a trained Certified Public Accountant (CPA). These professionals have a history of working with people to help them achieve credit-worthiness. Credit professionals are used to working with sensitive information, and in general they can be trusted. Plus, they can help you learn to make sound financial choices, so you stay on the right path moving forward.

When can I apply for another mortgage? There is no set time limit restricting you from applying for a mortgage. In general, you’ll want to apply when your credit has significantly improved, and your credit report shows a history of paying your bills on time. Government entities, such as Fannie Mae and FHA (Federal Housing Administration), have their own criteria. There is typically a 2 to 7 year wait before these entities will deem your application credit-worthy. It all depends on the circumstances regarding your foreclosure, and whether or not you also filed for bankruptcy.

What foreclosure resources are available? If you’re looking for support or assistance, you’re in luck. There are many programs designed to assist foreclosure victims. Check your local government offices to see what’s available in your area, or check out one of these services:

·  Housing and Urban Development (HUD)

·  Making Home Affordable Program

·  The Housing Counseling Agency

Unfortunately, not all programs claiming to help after a foreclosure are actually designed to help. Some programs are scams. Avoid any program that claims it can “eliminate your debt” because no matter what anyone says: you have to pay back your mortgage. Other scams will take your money and not pay back the lender, or the program will falsify information and charge you more than what you’re currently paying.

How can I look even better to a mortgage lender? Banks are more likely to overlook a prior foreclosure if your credit is good and you have a sizeable down payment. If you can put down 10 to 20 percent of the purchase price, the bank is going to feel more secure lending to you. Plus, a sizeable down payment should lower your interest rate.

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