Will I be Able to Buy Again after Losing a Home to Foreclosure?

Have you lost a home to foreclosure or filed bankruptcy? Does your FICO score resemble a scarlet letter among lenders?

Foreclosure is not the end of the world. Home ownership is still possible even with bad credit but there are consequences. You may have a waiting period, a higher interest rate as well as a larger down payment. Buying another home is still possible. In the interim, it is wise to rebuild your credit.

Rebuild credit

Apply for a major credit card or take out a secured loan with a lender. Pay your bills on time every time.

It is best to pay off your credit card balance each month.

Stay with an employer for at least two years.

Earn a steady wage for this one to two year period.

If self-employed, you could get a part-time job and stay there for this period.

Save your money for a down payment.

Future lenders will look at hardship cases among foreclosures. Document your credit history with bureaus in case of divorce, health issues or job losses.

Waiting Time

FHA mortgages can be obtained in 2-3 years after foreclosure. Bankruptcy filings for FHA loans require a 4 year wait. FHA loans only require a 3.5% down payment.

There are lenders who will make loans six months after foreclosure, but require a 20 to 30 percent down payment. These lenders also have tough terms with this loan and a high interest

It is recommended to wait at least 2-5 years after foreclosure. Future lenders will study records to find the reason for the foreclosure. Job losses, divorce, and health issues are viewed more favorably than someone who walks away from their loan.

Reapply for a mortgage

Compare home lenders after the wait time and credit rebuilding period. Check your score for improvements and remember the foreclosure will stay on your report for seven years.

When ready to apply for a home loan, remember to compare lenders and types of loans that best suit your needs. Obtain a quote called a good faith estimate to determine the interest rate, monthly payments and required mortgage fees for your loan. Compare at least three mortgage companies before making a final decision on your new loan.

Do your homework on the company for reputation. Consider the loan terms with a magnifying glass for risks. Remember there are shady lenders who are only after a quick buck and others who are reputable. A risky mortgage is the last thing a homeowner would need after a previous foreclosure.

Remember to wait a respectable amount of time before searching for a new home loan. Rebuild you credit in every way possible. Save money for a new down payment and stay with your employer at least two years. These recommended steps will help a homeowner after foreclosure to obtain a new mortgage loan.

Make sure your financial house in order before taking out a loan that could result in default again. Use caution and common sense to determine when homeownership is the best option.