If you have lost a home to foreclosure you might think mortgage lenders will not be willing to give you another chance. While having a foreclosure or bankruptcy makes qualifying for a good mortgage challenging, it is not impossible. Here are tips to help you back on the road to homeownership after a foreclosure or bankruptcy.
Financial hardships can happen to anyone. Illness, unemployment, divorce, or the death of a family member can wreak havoc on a person's finances. The only way out for many homeowners in this situation is bankruptcy; many homeowners are unable to protect their homes during a financial crisis and lose the property to foreclosure.
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Traditional mortgage lenders may not be willing to work with you after a recent foreclosure; however, there is an entire industry of specialty mortgage lenders that cater to homeowners with credit challenges such as foreclosure. These specialty mortgage lenders are known as "subprime" mortgage lenders. You will pay a slightly higher interest rate because of your credit; however, if you invest the necessary time researching lenders and shopping for the best mortgage you can still find competitive interest rates.
The most important thing you need to do after foreclosure is invest the time necessary to rebuild your credit. Most lenders recommend that you take at least two years after foreclosure to rebuild your credit. During this two year period you will need to focus on making all of your monthly payments on time and using credit responsibly. You should also request copies of your credit records from the three credit agencies and review them for errors; any errors you find in these records will need to be disputed.
If you cannot wait two years to purchase another home you should still check your credit reports before applying. You can learn more about your mortgage options including common homebuyer mistakes to avoid by registering for a free mortgage guidebook.
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