Thinking about buying a home after foreclosure? Here’s how you can do it
If you have previously lost your home to foreclosure, or if you have filed for bankruptcy, or if both situations are true for you, you may be wondering whether or not home ownership in the future is ever possible. Indeed, there is no doubt that a foreclosure or bankruptcy can seriously harm your credit score, making it very difficult for you to get approved for a home loan moving forward. However, buying a home after foreclosure is possible, although doing so will take time and a conscious effort to improve your credit score.
The first thing that you should be aware of if you want to buy a home after a major credit event, such as a foreclosure or bankruptcy, is that there will be a mandatory waiting period in place that you must satisfy before you can be considered for a mortgage loan.
How long you will have to wait depends on the severity of your credit event, but you should expect to wait between two and seven years, as explained by an article published in U.S. News & World Report. Guidelines for a conventional loan ask for a seven-year waiting period, but that period may be reduced to three years for a foreclosure in the event that there was an extenuating circumstance that led to the foreclosure. Further, in some cases, the time period may be shortened even more if you are applying for a VA loan or FHA loan.
How to Buy a Home after Foreclosure
It’s not just about satisfying the waiting requirement; you will also need to be sure to take steps to rebuild your credit during the two to seven year period to show a lender that foreclosure won’t happen again and that you’re a good candidate for the mortgage. Here are some tips to help you purchase a home after a major credit event:
- Savings matter. If you have had your home foreclosed on and want to purchase a new home, you’ll likely be expected to put at least 10 percent down, which means you should start saving for your new home as soon as you can. This can be the hardest part of buying a new home, so start saving now, even if you’re only putting away a little bit each month.
- Rebuild your credit. In addition to savings, rebuilding your credit is one of the most important things that you need to focus on after a foreclosure or bankruptcy filing. Like savings, rebuilding your credit can be difficult, and will take having a developed financial plan in place. The best way to do this is to make sure that you are paying all of your bills on time and maintaining a low balance on any credit cards you hold.
Meet with a Real Estate Professional to Learn More
If you’re thinking about buying a home after foreclosure, you should meet with a financial professional and mortgage lender to discuss options and loan types available to you, as well as how you may qualify for the loan. Meeting with a real estate agent is also advised; a real estate agent can help you to find a home that is within your budget and that meets your needs. To learn more, contact our team today.
Source: “Buying a Home after Foreclosure,” The Benenati Law Firm