A foreclosure is one of the most disadvantageous financial situations anyone can be in, and for good reason: recovering from such a negative credit event can take up to seven years to recover from. During that period, it’s extremely tough to get a new loan; even more so a typical mortgage. Although getting a mortgage after a foreclosure is tough, it doesn’t mean it’s impossible. Here are a few tips for “boomerang buyers” out there.
Wait It Out A Bit – The Federal Housing Administration (FHA) mandates a 3-year wait before obtaining a new FHA loan, with several lenders following suit. Waiting periods can be shorter, though, provided that the loans are portfolio or conventional-type loans. Also, always remember that waiting periods don’t start until the foreclosure is completed.
Make Yourself Presentable – Lenders wouldn’t want to do business with a high-risk borrower, and that’s a given. Make yourself presentable in the eyes of the lender and gradually build a history of timely repayment; never miss a payment. Steer yourself from taking on new debts after settling prior payments—otherwise you’ll risk the balance of your debt-to-income (DTI) ratio.
Put Other Financing Applications On Hold – Car loans, furniture/appliance financing, and other related loans can significantly hurt your chances of rebounding. Lenders are careful not to let these details go unnoticed.