A few things are more stressful than going through foreclosure. Fear of not being able to get approved for a mortgage after foreclosure might be close to it.
Everyone can experience financial hardships. Sometimes, even foreclosure might happen. For many people, this is a terrible process that is hard to go through. Not only you may end in debt, but you will lose the roof over your head.
While we understand how emotionally draining and difficult this process is, it’s important to heal and to start your life again. One of the ways to do so is to buy a new house when your finances allow it. However, with a damaged credit report, is it even possible to apply for a mortgage after foreclosure? We have good news. With just a few tricks – and a little bit of patience, you will be able to get approved for a new loan. Here’s what you need to do.
Repair Your Credit Score
As you probably already know, foreclosure damages your credit report. Typically, it will stay on your credit report for seven years since the date of the first payment you’ve missed. Sadly, the damage you’ll likely sustain is very high, so there is a chance you will have to wait until this time frame passes before your credit repairs enough for you to get a new mortgage after foreclosure. Still, if you can make this period shorter, why not give it a try?
Pay all your loans, bills and taxes on time. If possible, pay some of them in advance. There is a possibility this will raise your credit score enough to repair some damage that foreclosure did. Take note of your credit score and report any mistake you may notice. Agencies such as Experian, Equifax, and TransUnion, will give you a credit report for free once a year. There are several other credit monitoring websites you can use for a minor fee, as well.
You can also take small credits once at a time, then repay them quickly. The faster you get to pay off your loan, the better your credit score is. If you can pay them early, even better. This is a good trick to repair your credit score and get a mortgage after foreclosure fast. Just make sure you’re never late on your payments, and that you don’t ever bounce a check. Having some cash stashed aside is also a good idea, as you never know when will you urgently need some extra money.
Keep Your Job
The best thing you can do for your credit score is to stay at one job for as long as possible. In other words, even if you aren’t too happy about the job you have, try to delay changing it for at least a little while. If you have a one employer for a prolonged period of time, you are letting your lender know you are trustworthy. This will also ensure you have a constant source of income, which is necessary if you’re trying to get a new mortgage after foreclosure.
If you’ve lost your home due to a foreclosure, it typically takes you at least three years before you are stable enough to not feel its consequences. This is normal, and you should use this time in a smart way. Make sure you have prepared everything before you take on a new loan. What went wrong the last time? How can you prevent it – if you can? Do you have a good plan? All of these questions are important, especially when you need to think about getting a new mortgage after foreclosure.
Look on the Bright Side
As cliché as it sounds, there are good sides to everything, even to a foreclosure. First off, real estate agents will look at you favorably, as you will be considered a motivated buyer. In the end, you have already bought a home once. This means you already know the process, even though you have lost your house a first time. If you are looking to get a mortgage after a foreclosure, this is a good sign. The same goes with your mortgage brokers. In the end, the only problem you might be facing is a bad credit report. Compared to other things that can hold you down when applying for a loan, this issue is solvable.
Are there Consequences?
Sadly, there are some downsides to trying to get a mortgage after foreclosure, as well. First off, you’ll have to have cash ready for a down payment of 10% to 20%. Also, you’ll likely be required to pay a higher interest rate, as a punishment for your foreclosure. It’s a good idea to look for a smaller, more affordable home this time.
Also, there is a high chance your lender will require a co-signer, so make sure to check with your friends or relatives who will be available and willing to help you with applying for mortgage. This has to be someone who knows you well. Also, you should remember that now your late payments will affect their credit, as well.
Try to Avoid Foreclosure at all Cost
Of course, the best thing you should do is try to avoid foreclosure at any cost. Make all your payments in time to ensure your home is safe. If this isn’t possible, try communicating with your lender. If you have a valid reason behind your debt, such as a divorce, illness, death of a family member, or losing your job, they will likely be willing to help you make a good repayment plan that will work for you.
If all else fails, you can always sell your house for cash to help you repay your debts while keeping your credit score intact. Finding a reliable direct buyer, such as Sparks Property Investors LLC, has many benefits, and one of them is the ability to sell your house before losing it to the bank. This way you don’t even have to worry about getting a mortgage after foreclosure.
A direct buyer will buy your house, even if you’re late on your mortgage payments. They will pay you in cash, which will help you close the sale in up to seven days. This leaves you with enough time to sort everything out and start a new life quickly. With a direct buyer, you can say ‘Goodbye’ to the foreclosure and your loan.