Foreclosure is a mentally and financially catastrophic event, but it’s not the endresult. When you have been through a foreclosure, or are about to undergo foreclosure, know it is possible to acquire a mortgage . With a little effort, diligence and discipline, you can rebuild your credit rating, qualify for loans with market interest rates and also own your own house again–in under the seven to ten years it takes for your own foreclosure to fall off your credit report.
Find a copy of your credit report and check it for accuracy. Guarantee that the month of your finished foreclosure is noted on the report for future record. Make a list of the outstanding debts you find on the report.
Talk to a credit-counseling bureau, financial adviser or accountant to get your finances in order and to establish a monthly budget. Lenders are searching for one to learn from the mistake and act more financially responsible following your foreclosure.
Settle any outstanding debts, especially ones with late payments, collections, judgments or liens, and pay down credit cards. Call your creditors and negotiate repayment conditions, then stick to them–save money order stubs as evidence of your adherence. Provided that you follow the agreed conditions, your creditors can no longer report negatively from you and you may start fresh.
Research filing for bankruptcy if you cannot come to terms with creditors or are unable to settle your debts. Consult with an experienced bankruptcy attorney to find out if bankruptcy is the ideal solution for you.
Pay all bills on time, especially any remaining open credit card accounts or loans you might have. Lenders will want to see blank credit with no late payments following the time of the foreclosure in order to give you a new mortgage or loan.
Use credit cards for small purchases on a regular basis and pay off the accounts in full each month. Do not let your cards turn into”maxed out,” since this shows lenders that you’ve not learned monetary responsibility. Paying off the full balance each month will even help you avoid paying the high interest rate your cards will be prone to charge following the foreclosure.
Save money for a deposit, whether for a car, home or other big purchase. Having money to put down provides you with a danger in a lender’s eyes.
Apply for installment loans such as car loans with the anticipation of being supplied higher-than-normal interest rates. As you construct a history of paying them promptly, you’ll be able to receive better terms. You might also go to a”buy here-pay here” establishment that offers credit to high-risk borrowers with bankruptcies and foreclosures on their records.
Apply for a Federal Housing Authority (FHA) or the Department of Veterans’ Affairs (VA) home loan following three years or a traditional loan following four or five years. FHA or VA loans are a better option than traditional loans for individuals who have a troubled credit history as they’re flexible in their own credit guidelines and will not penalize you with a higher interest rate for a poor credit history. They typically carry an interest rate about 0.5 percent higher than the market rate on a traditional loan.