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How Does a Past Foreclosure Impact My Chances of Getting a Mortgage?

How Does a Past Foreclosure Impact My Chances of Getting a Mortgage?


How Does a Past Foreclosure Impact My Chances of Getting a Mortgage?

If you’ve ended up in foreclosure, you’re not alone. Many former homeowners have traveled the same rocky path. A foreclosure affects many facets of your finances, including getting approved for a mortgage loan for a different home. Here’s what you need to know about how your past foreclosure impacts your chances of landing a mortgage. In a nutshell, there’s bad news and good news.

Foreclosures Affect Your Credit Score

The bad news. Ending up in foreclosure doesn’t happen overnight, so chances are good that your credit score was already decreasing as soon as your first late payment hit your credit report. Once the foreclosure shows up on your credit report, your score will drop dramatically. We’ve seen scores drop 200 points because of a foreclosure.

The single biggest factor used in calculating your credit score is your payment history. Foreclosures happen because homeowners are no longer meeting their mortgage payments. A recent foreclosure is going to have a bigger effect on your credit score, which is a key component of securing a mortgage loan.

The good news. Credit scores change over time, and you aren’t stuck with a bad score forever. A person with a foreclosure can rebuild their credit by making other payments on time, keeping credit card debt low, and applying for credit sparingly.

The Time After Your Foreclosure Is Important

The bad news. As we mentioned already, a foreclosure will tank your credit score, making you look risky to lenders. Hopeful borrowers with a recent foreclosure won’t be able to qualify for a house for at least a few years.

The good news. Putting work into your finances will slowly prepare you to leave your foreclosure behind you and move forward with a new home and mortgage. After your foreclosure, you need to be diligent about paying your creditors on time. These payments will add positive history every month to your credit report. Manage your revolving debt wisely, too. Avoid overspending on your credit cards and, if you do charge on them, pay them off every month on time. Stay on top of your credit report by looking at it every three months.

These positive moves will start rebuilding your credit score, so you can get a mortgage after foreclosure.

Extenuating Circumstances

The bad news. If your foreclosure was the result of getting into too much debt or not managing your money well, the foreclosure may impact your ability to qualify for a mortgage for several years. Even if you get on the right track, budget well, and pay your bills on time, you’re probably looking at a minimum of four years before you can tackle homeownership again. In some cases, you may need to wait seven years.

The good news. When it comes to foreclosures and how they impact your chances of getting a mortgage, part of it depends on the circumstances that caused your foreclosure. In some instances, you can use “extenuating circumstances” as the reason for your foreclosure. Some examples of extenuating circumstances are divorce, serious illness, or suddenly losing your job. If you have extenuating circumstances for your foreclosure, you might be able to move past it faster than if you have an average foreclosure.

Your Post-Foreclosure Mortgage May Depend on the Type of Mortgage Loan

The bad news. There are many loan types lenders can offer to borrowers. Some of them fit perfectly for some people and not at all for others. If you have a foreclosure in your credit history, you’ll have a much shorter list of options than borrowers with a spotless credit history.

The good news. Over time, your foreclosure will be viewed as less risky by lenders. In addition, some loan programs forgive foreclosures faster than others. For example, if you are eligible for a VA loan, you might only need to wait two years after your foreclosure to land a mortgage. An FHA loan only requires a person to be three years out from their foreclosure. These options can help you get approved for a new mortgage loan much quicker than other, more traditional loan programs.

Talk to Your Lender

Everyone has their own specific story. A savvy mortgage originator can look at your unique situation and your finances and advise you of your options. While your foreclosure may be too recent to be able to get a mortgage loan, you can at least get an idea of how long you need to wait, and what you should be doing to get mortgage-ready.

Millions of people have a foreclosure in their history. Yes, it’s a difficult and frustrating situation, but it doesn’t define you or your future forever. By managing your finances, budgeting, and planning, you’ll hopefully be able to qualify for a new mortgage loan sooner than you think.

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Mortgage Investors Group, based in Tennessee, offers residential financing in a number of states in the southeast, See MIG Service Areas. Terms and conditions to apply to home financing. We want to share with you the loan terms vary based on several characteristics and your financial profile. These include but are not limited to loan program, loan purpose, occupancy, credit history, credit score, assets, and other criteria per loan type. The repayment terms and interest rate may vary from time to time. The terms represented here are based on certain assumptions outlined below and/or noted on the loan outline page. Additional details concerning privacy, program disclosures, licensing specifics may be found at migonline.com Legal Information.

MIG Loan Officers will help gather the information needed for an individual assessment to provide home financing which matches the loan characteristics with your home financing needs based on your financial profile, when you are ready to begin a full loan application. For estimates and general information before that step, the basis for which the mortgage financing information are as follows:

  • Rates are subject to change at any time.
  • Rate locks are available at current terms for 30 to 180 days based on program type, credit profile, property location, etc. which will affect the available rate and term.
  • Rate locks are available at current terms for 30 to 180 days based on program type, credit profile, property location, etc. which will affect the available rate and term.
  • Payments will vary based on program selection, current rates, property location, etc.
  • Not all programs are available in all states.
  • Some loan programs may not be available to first time home buyers.
  • Terms and conditions apply, which may include restrictions or limits per loan program.
  • Information is generally based on primary residence occupancy with no cash out when refinancing.
  • Unless otherwise stated, terms shown are estimates based in part on credit score of 700 or higher; owner occupancy, escrow account is established for taxes and insurance(s); debt-to-income ratio no higher than 43.0%; PMI applies to conventional loan programs over 80.0% LTV; VA,FHA & RD require insuring fees included in loan and/or payment; fixed rate, 30 year term.

An MIG Loan Officer is available to help with your financial details to determine which characteristics apply to your situation for a personalized look into which loan program best fits your home financing needs. Please use the Find a Loan Officer link or reach out to Mortgage Investors Group at 800-489-8910. Equal Housing Lender 1.2020