Experiencing a foreclosure can be very devastating. It is an emotional process that takes a great toll on your life, your finances, and even how you view the future. Thankfully, it does not take very long to start rebuilding your life. In fact, you can even start planning to buy a new home in a very short period of time.
If you have been through a foreclosure and are now ready to buy a home and start over, there are several things that you should know and do to make the process very easy.
• Timing Makes A Difference. Even if you have become financially stable in a very short period of time, you should wait at least two years before attempting to get a mortgage again. A foreclosure can impact your credit score by two hundred or more points. However, after two years have passed, this impact is a lot less severe, giving you the ability to seek a good loan at good rates.
• Manage Your Credit Report. You want to clean up your credit report as best as you can. Dispute errors, negotiate with creditors if necessary, and have any and all new lines of credit reported to all three of your reports. Managing your report will help you create a credit profile that is sure to impress.
• Look At The Type Of Loan. Mortgages are all different and have different guidelines. For instance, you may not be able to be approved for a government backed loan for five years after you have been through a foreclosure. Other lenders, however, may start the mortgage process as soon as 18 months after the finalization of the foreclosure.
• Down Payments. While some federally funded programs may allow you to make a smaller down payment through the use of mortgage insurance, most lenders will require a down payment of at least 20 percent on a home now. Some lenders will require 30 percent if your foreclosure is still too recent on your credit report.
You should also take into account that most lenders now have a minimum requirement for employment attached to their loan qualifications. As a rule, you must be at the same job for a minimum of two years at the same pay rate or higher. Lenders believe that this is a sign of stability for your employment. With so many businesses recently downsizing and cutting pay rates, banks want to know that your job is secure and you will be able to repay the loan.
There are also other options that may be available to you after you have been through a foreclosure. Many real estate companies are now offering rent-to-own homes. This is a program in which a portion of your monthly rent is applied as a down payment on the home. After a specified time period, the renter has the option to purchase the home outright, using the money that was set back as their down payment. Many lenders are agreeing to this type of mortgage because it shows that the borrower is willing to commit to the home.