Qualifying for a mortgage loan is an arduous process even with a decent
credit score. If you have a foreclosure in your credit history, this process
can be much more difficult. However, difficult is not impossible, and
many homebuyers who faced foreclosure can still qualify for financing
with some extra work.
Conventional mortgage loans require potential homebuyers to wait a certain
number of years after a foreclosure before they can be approved for a
new loan. For loans backed by Fannie Mae or Freddie Mac, this period is
usually seven years. Other mortgage lenders have shorter time periods.
For instance, loans backed by the Department of Veterans Affairs only
require a two-year waiting period, while FHA loans require three years.
In some instances, potential homebuyers facing a long wait can reduce the
time it takes to qualify for a mortgage loan if they can prove that their
foreclosure resulted from financial circumstances which were beyond their
control. To prove this, the U.S. Department of Housing and Urban Development
requires that homebuyers have documented proof of a catastrophic event
such as a job loss or medical emergency that reduced his or her income
by at least 20% over six months.
In addition to waiting out these time periods, potential homebuyers may
also have to wait until their credit score improves. A foreclosure can
often decrease a credit score by 100 points or more, and will remain on
a credit report for seven years. As a result, even if a homebuyer is past
the waiting period, he or she may not have a high enough credit score
to qualify for a loan.
While the prospects for purchasing a new home after a foreclosure may seem
bleak, homebuyers should be aware that many people faced foreclosure during
the housing crises which increases the odds of being approved for a loan.
To improve their odds, homeowners should expect to pay at least 10% of
the purchase price as a down payment.
Additionally, homebuyers can improve their chances of approval by repairing
their credit and increasing their credit score prior to their application.
By paying bills on time and removing inaccurate information, a homebuyer
may be able to boost his or her score substantially.
If you need help with a foreclosure or with increasing your credit score,
the attorneys at Loan Lawyers are here for you. We can review your financial
situation and help you defend a foreclosure or fight inaccurate credit
information which may be decreasing your credit score. For a free and
confidential consultation about your rights and options, schedule a consultation
at Loan Lawyers today by calling (888) FIGHT-13 (344-4813).