Home Ownership After Foreclosure
It won’t be easy to obtain a mortgage after foreclosure. But with enough time, discipline, and desire, you can own your own home again. Here’s what you need to do:1. Stick with a job after foreclosure
Did you fall into foreclosure because of the lack of a steady job? If you did, the first step toward homeownership after foreclosure is finding and holding one. And if you already have one—stick with it, unless you can move to a better one. Note that potential lenders will require stable employment before they’ll give you a new mortgage loan after a foreclosure. Even if it means taking a lower-paying job, it’s worth it.
2. Rebuild your nest egg after foreclosure
Establish a safety net. Financial planners generally recommend three to six months of living expenses in a liquid account, but since you’re coming out of foreclosure, six is a minimum to show stability and that you’re able to pay your bills—including your mortgage—for an extended period if you lose your job.
3. Raise your credit score after foreclosure
This is the hardest and most time-consuming part. After foreclosure, your credit score, according to myfico probably dropped by about 150 points. You’ll need to raise it back up with perseverance.
Pay bills on time and keep your credit card balances below maximum levels. The foreclosure will stay on your credit report for seven years, but if you prove your money management skills have matured, it will become less of a red mark as years go by.
Tip: Consult a housing counselor. TheU.S. Department of Housing and Urban Development offers free housing counseling for distressed homeowners with a foreclosure in their past. A counselor can help you with money management and budgeting. Counseling works—an evaluation of a program in Indianapolis discovered that credit scores greatly improved because of education and counseling, and increased average borrowing power by $4,500 per family.
4. Reduce your waiting time for a mortgage after foreclosure
Normally, you would have to wait seven years after foreclosure before you can apply for a new mortgage under Fannie Mae rules. (Fannie Mae changes rules frequently. You can check the latest rules at Fannie Mae’s site.)
If you have a foreclosure I can help you get started again, call me of email me.