Because of the wide variety of mortgage lenders offering home loans to people with low FICO scores, it is very possible to secure mortgage financing with bad credit. After a foreclosure, few people are in a hurry to buy a new home. While waiting has its advantages, this is not a requirement. Here are a few tips to help buyers find a mortgage following a foreclosure.
What is a Foreclosure?
If you own a home, you are likely familiar with how foreclosures work. When a buyer purchases a home, they are required to make monthly payments to a lender. Unfortunately, situations arise which makes it difficult for some homeowners to maintain regular payments.
For the most part, lenders will not foreclosure if payments are a few days late. Moreover, foreclosures rarely occur for one missed payment. Some mortgage lenders are willing to assist borrowers who experience financial hardships. Yet, if payments stop altogether, or the mortgage is at least 90 days past due, lender can proceed with a foreclosure.
Bouncing Back after Foreclosure
Having a home foreclosed will have a negative effect on your credit. Nonetheless, there are ways to recover. If your goal is to purchase a home in the near future, there are specific steps that should be followed.
For starters, be patient and allow time to rebuild your credit. Even though several people are able to secure financing shortly after having a home foreclosed, these home loans carry high interest rates. In some instances, this may increase mortgage payments by as much as $200.
If possible, wait at least 12 to 24 months before applying for a new home loan. During this recovery period, obtain new lines of credit or maintain a good standing with current creditors.
Search for Sub Prime Lenders
If you are able to achieve a credit score of 680 or higher, it may be possible to receive a prime loan. If not, apply with a sub prime lender. These lenders service a multitude of loans for all credit types. Thus, if you have a bankruptcy, foreclosure, collection accounts, or too much debt, sub prime lenders can help.
By: Carrie Reeder About the Author:
