If you have experienced a foreclosure in the past, you may wonder if you will ever be able to own a home again. When the real estate market crashed, many people found themselves experiencing something they never thought they would – foreclosure. Foreclosure became more common than anyone could have ever expected and even some incredibly responsible borrowers faced foreclosure. If you experienced a foreclosure, it does not mean you can never buy a house again. If some time has passed since your foreclosure and you find yourself financially able to, you may be eligible for a mortgage now. Mortgage brokers are in the business of finding the right loan for the right candidate but they also have to protect themselves with proper due diligence. They want to be sure you can actually afford your mortgage and that it won’t put you in the position of needing to foreclose again. Know what restrictions are in place and how to best position yourself to get approved for a new mortgage loan after a foreclosure.
One of the first hurdles to owning another home after foreclosure is a mandatory waiting period. Depending on the type of loan you previously had, it may have had a waiting period penalty for going into foreclosure. The waiting period varies significantly and can be anywhere from 2 years to 7 years after the foreclosure was completed before you are eligible to purchase a new home. While that waiting period ties your hands from qualifying for a new mortgage, there is much you can do to increase your chances of getting a mortgage once that waiting period is complete. A foreclosure will impact your credit score so during the waiting period one of the most important things you can do is work to raise your credit score as much as possible. Pay your bills on time, pay off your credit cards, pay off whatever debt you can, etc. Additionally, by paying off your debt to raise your credit score, you will also improve your debt-to-income ratio when it comes time to get pre-qualified for your loan.
Once you have done everything to improve your credit score that you can, and you have waited the mandatory length of time, it is time to start shopping for a loan. Speak to your mortgage lender about exactly what they will need from you for the loan process. Because you have a foreclosure in your past, you may be required to have a larger down payment. Start preparing as soon as possible and follow any instructions your mortgage lender provides to make the home buying process after foreclosure as smooth as possible.