Getting a mortgage after foreclosure is going to be no easy task. In fact it is going to be darn right impossible for a minimum of at least 3 years to a more realistic time frame of 5 years.
For example, Fannie Mae now requires a minimum of 5 years from the date of foreclosure for you to be able to qualify for their mortgage programs. The Federal Housing Administration (FHA) is a bit little more lenient with their loan programs. They allow just three years from the date of foreclosure. FHA also allows what they call “documented extenuating circumstances beyond the control of the borrower” and this may allow some borrowers to obtain financing prior to the three year period.
These special excetions are for unfortunate life events such as death, cancer or other serious illness. You would have to have to fully document your situation and prove this to the FHA underwriter’s review.
You need to understand that over 300 lenders have gone out of business and the options that you once had are very far and few in between. Fannie Mae, Freddie Mac, FHA, a few banks and your local credit unions are your only hope to obtain financing in the future and most likely for sometime to come.
As is the case with all loans and especially in today’s lending environment, good credit will need to be re-established in order to obtain a new mortgage in 3-5 years plus. So pay your bills and please pay them on time because your going to need good credit. If you skip or miss payments on bills, including utility bills, credit card payments, rent, etc., then you’ll have a tough time getting a mortgage until you have a good track record.
Making payments your payments on time, establishing new (limited) credit will help boost your credit score. Common sense.
Create and follow a budget because you’ll need to save evrey extra penny you have in order to have enough money for a down payment. You’ll most likely need to put a hefty down payment of 15-20% and maybe 5-10% with FHA on your mortgage. The days of no money down loans are gone and left to only a select few first time home buyers with good credit.
If you create a budget and following your budget, you will be able to reach your goals.
Putting more money down might also lower the interest rate and help with your monthly payments. However, no matter what, you’ll be charged a higher interest rate since you have a foreclosure on your report. Either way, be prepared to save your cash and have money in hand when your ready to buy in 3-5 years.
Last but not least, buy a home you can afford for the long term. A mortgage with monthly payments that let your sleep at night and a loan that you can pay off as soon as possible.
Owning a home isn’t about flip this house or making millions. It’s all about the American Dream and raising your family in place that you can call your own.
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