It is indeed one of life’s major setback to have one’s home foreclosed. However, all’s not lost with that and there are certain ways, if followed wisely, that can get a person to buy a new home and that too after losing his/her home as a result of a foreclosure.
Time required to buy a new home after foreclosure
According to the federally chartered mortgage corporation, Fannie Mae, you’ll have to wait for at least seven years to buy a new home for yourself. This mortgage corporation is one of the leading mortgage guarantor in the country that functions under the supervision of the federal government.
No matter how detrimental a foreclosure is, you’ve got ample chances to bounce back, resurrect your credit score and become financially fit all over again to own a new home. Even though it’ll continue to show on your credit report, yet your lender will, in reality, want to confirm regarding your mortgage affordability before obliging you with one.
In other words, you have to project yourself as not a high-risk borrower who may default on the loan any moment.
Foreclosure and your credit score
There are many ways to improve your credit score. In case, you’ve relocated to a rental property, then keep in mind to choose a place that is well within your means. This is because it’ll help you to build up a savings fund to be used as a down payment at the time of taking out a mortgage loan.
Moreover, you can get a secured credit card, where you’re required to deposit a certain amount to the credit card issuer, who in turn will set the credit limit on it. By paying off your purchases that you’ve made through the card, such an act will show you in good stead, financially. This will get reflected on you in a beneficial way when you apply for the mortgage loans.
Apart from that, your lender may also ask for your employment history. In that case, it is very important for you to have a stable job and a steady employment history that’ll convince the lenders regarding your creditworthiness. The rule is, the longer you’ve been employed, the greater will be your chances of having your loan application approved by the lenders.
Foreclosure and the three years of waiting period
It may happen that your house was foreclosed as a result of extenuation. Then, in that case, Fannie Mae has set the waiting period to only three years, instead of seven, before you can file in a fresh mortgage loan application.
Extenuating situations are events that are non-recurring. These events can be beyond your control that may result in an unforeseen, drastic and extended reduction in what you earn every month. While it may also happen that you may go deeper into your debt obligations.
So, if your home was foreclosed under any such circumstances, then you’ll have to get some documents ready to support your claim so that you can qualify for a mortgage after completing the minimum waiting period of three years.
Speaking about documents, you should provide papers that establish the occurrence of the foreclosure proceedings, a copy of your divorce papers, job severance letters and medical bills. In addition to that, you may have to provide proofs that’ll establish your financial hardship which prevented you from paying the insurance premiums or filing your annual tax returns on time.