Steps to Owning A Home Again After Foreclosure

By Steve Blankenship
Dec 13, 2010

We all have been affected by the economy in the past few years and many were forced to sell their homes or lost their property because they were unable to make their mortgage payments.

If you lost your home due to foreclosure you should know that there are ways for you to own a home again and you might only have to wait 3 years instead of 7.

First of all if you fell into foreclosure because you were lacking a steady job, you will have to find one and hold your job. Only change it if you find a better one. Potential lenders will require stable employment before they will give you a new mortgage loan after a foreclosure. Even if it means taking a lower-paying job, it’s worth it.

Lenders will also want to see a financial safety net of 3 to 6 months of living expenses in a liquid account. Since you got foreclosed on, a 6 months savings will be the very minimum of what you need to show to prove that you are able to pay your mortgage even if you do lose your job again.

The hardest step is to improve your credit score after foreclosure. For most people foreclosure means that their credit score drops by about 150 points. So, make sure you pay your bills on time, and keep your credit card levels low. Banks usually recommend spending less than half of your monthly credit card allowance. The foreclosure will stay on your credit report for seven years, but if you prove better money management skills, it will become less of a red mark as years go by. The U.S. Department of Housing and Urban Development offers free counseling and money management.

In some cases you can reduce your waiting time for a mortgage after foreclosure. This can be the case if you can prove that the circumstances for your foreclosure were events that were beyond your control and resulted in a sudden, significant, and prolonged reduction in income or catastrophic increase in financial obligations.  Examples are losing a job, getting a divorce or having unexpected medical expenses.

Last but not least be honest when you do apply for a new mortgage. Be proactive and reveal the steps you have taken. Also make sure you work with a mortgage broker that works with many lenders as bank have a limited number of loans to offer.

If you work hard and follow these guidelines, the American dream of obtaining a mortgage and owning a home can be yours again. Even after a foreclosure.

There are steps you can take before being foreclosed on, such as doing a short sale.  Contact me for options.

Google by Steve Blankenship