Can I Own a Home Again After Facing Foreclosure?

Can I Own a Home Again After Facing Foreclosure?

Written by Mary Beth Tice

Rebuilding your financial life after a foreclosure can seem overwhelming but with some work and persistence, you can once again own a home.

 

Find Steady Employment

Unemployment can put you on the fast track to foreclosure. The best thing you can do is find and maintain a steady and permanent job after facing foreclosure. Because lenders look at your employment record, switch employers only if you are trading up or moving. (Whenever possible, attempt to be promoted within the company. This shows longevity with the same employer.) Can’t find a job at your desired pay scale? Opt for a lower paying job over unemployment until you can land a more desirable job to build employment history.

 

Build Your Savings

Chances are you used most if not all of your savings trying to prevent foreclosure. In order to make a potential lender comfortable, you will need to build up a minimal savings of 6 months living expenses (this includes 6 months of mortgage payments as well). Not sure how to start? Track your expenses using a spreadsheet, your online banking access or through a third-party like Mint.com. (Tip- nix dining out to once a month and opt for eating at home and brown bagging lunches.)

 

Improve Your Credit Score

Foreclosures will impact your credit score for 7 years however, if you pay down credit cards (and keep them down) and pay on time each month, you can raise your score over time. You can consult a housing counselor free of charge through the US Department of Housing and Urban Development if you have a foreclosure in your past.

 

Tired of Waiting? Reduce Your Wait Time!

Currently Fannie Mae requires a wait time of 7 years before you can apply for a new mortgage, but you have a couple options available. If you can show extenuating circumstances (such as job loss, divorce, unexpected medical expenses), you may be able to reduce your wait to 3 years. If that is not an option, you can bypass the traditional mortgage with a lease with option to buy or seller financing. Both options require agreement by both parties and as a buyer, you may have to present payment and job histories to the seller.

 

Be Honest & Upfront

When you attempt to purchase a home again (either with a traditional mortgage or seller financing), the smartest thing you can do is be honest. If you try to hide it and your past is uncovered, you will hurt your approval chances. Instead, show your mortgage broker or the seller what you have done to improve the situation.

Coming back from a foreclosure is a daunting task but if you are persistent, one day you can own a home again. View more information on buying your next home.

Information in this post was gathered from HouseLogic.com.

 

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Foreclosure Avoidance Options

Foreclosure Avoidance Options

Foreclosure is one of the most devastating financial challenges that a family can face and one that many times can be avoided. The options available to residents for foreclosure are many, including but not limited to short sales.

Reinstatement

A reinstatement is the simplest solution for a foreclosure, however it is often the most difficult. The homeowner simply requests the total amount owed to the mortgage company to date and pays it. This solution does not require the lender’s approval and will ‘reinstate’ a mortgage up to the day before the final foreclosure sale.

Forbearance or Repayment Plan

A forbearance or repayment plan involves the homeowner negotiating with the mortgage company to allow them to repay back payments over a period of time. The homeowner typically makes their current mortgage payment in addition to a portion of the back payments they owe.

Mortgage Modification

A mortgage modification involves the reduction of one of the following: the interest rate on the loan, the principal balance of the loan, the term of the loan, or any combination of these. These typically result in a lower payment to the homeowner and a more affordable mortgage.

Rent the Property

A homeowner who has a mortgage payment low enough that market rent will allow it to be paid, can convert their property to a rental and use the rental income to pay the mortgage.

Deed-in-Lieu of Foreclosure

Also known as a “friendly foreclosure,” a deed-in-lieu allows the homeowner to return the property to the lender rather than go through the foreclosure process. Lender approval is required for this option, and the homeowner must also vacate the property.

Bankruptcy

Many have considered and marketed bankruptcy as a “foreclosure solution,” but this is only true in some states and situations. If the homeowner has non-mortgage debts that cause a shortfall of paying their mortgage payments and a personal bankruptcy will eliminate these debts, this may be a viable solution.

Refinance

If a homeowner has sufficient equity in their property and their credit is still in good standing, they may be able to refinance their mortgage.

Servicemembers Civil Relief Act (military personnel only)

If a member of the military is experiencing financial distress due to deployment, and that person can show that their debt was entered into prior to deployment, they may qualify for relief under the Servicemembers Civil Relief Act. The American Bar Association has a network of attorneys that will work with servicemembers in relation to qualifying for this relief.

Sell the Property

Homeowners with sufficient equity can list their property with a qualified agent that understands the foreclosure process in their area.

Short Sale

If a homeowner owes more on their property than it is currently worth, then they can hire a qualified real estate agent to market and sell their property through the negotiation of a short sale with their lender. This typically requires the property to be on the market and the homeowner must have a financial hardship to qualify. Hardship can be simply defined as a material change in the financial stability of the homeowner between the date of the home purchase and the date of the short sale negotiation. Acceptable hardships include but are not limited to: mortgage payment increase, job loss, divorce, excessive debt, forced or unplanned relocation, and more.

Team Gale is ready to assist you and help figure out your best option. With 2 Certified Distressed Property Expert (CDPE) REALTORS® and over half our team handling foreclosures regularly, we are ready to talk your options over with you. Contact us today.

IMPORTANT GOVERNMENT DISCLOSURE: You may stop doing business with us at any time. You may accept or reject the offer of mortgage assistance we obtain from your lender (or servicer). If you reject the offer, you will not have to pay us for our services. The above brokerage is not associated with the government, and our service is not approved by the government or your lender. Even if you accept this offer and use our service, your lender may not agree to change your loan.

Buying Foreclosed Homes Tips & Myths

Buying Foreclosed Homes Tips & Myths

Buying Foreclosed Homes Tips

*Budget for the unseen.

-Repairs, new appliances, inspections, etc. all cost money. Be prepared to pay for them out of pocket.

*Never buy sight unseen.

-Even if you don’t live in the same state, hire someone you can trust to look at the property and pass information on to you.

*Check out the neighborhood.

-Is it where you want to live?

-Are there a lot of other foreclosures or is there high crime?

*How long has it been vacant?

-Is anyone keeping up the foreclosure? Even homes in the best condition will deteriorate when left vacant.

-Some agents go through programs like HomeSteps which requires foreclosures to be maintained (see information on HomeStep’s Good Neighbor Practices below)

*Was the home winterized?

-Are the pipes winterized and in working order? If not, part of your budget needs to be replacing cracked and damaged plumbing.

*Has the landscaping and exterior been kept up?

-Over-run landscaping can bring vermin, snakes and insects not commonly found on the property.

-Un-kept exteriors can lead to roof and siding damage that can affect the interior and cost more than expected to repair.

*Pay for an up-to-date inspection.

-Expect to pay between $300-$500 for one but if you are spending the time, effort and money on purchasing a home (foreclosed or not), spend the money on an inspection paid for by you.

*Buy a HUD home or one backed by a similar program (like Freddie Mac’s HomeSteps) because the properties are better protected and looked after.

*Do not expect a quick profit.

-Unless you put in the time, money and energy to fix up a foreclosure, do not expect to make a profit on a quick resale.

Buying Foreclosed Homes Myths

*Foreclosed homes sell for pennies on the dollar.

-Expect to see an average of 5% below market value with no more than 10% below in most cases. Banks have investors they answer to, so lowballing offers generally won’t get you the home.

*Most are heavily damaged or stripped bare.

-In reality, most foreclosed homes are in the same condition as other homes in that area provided someone regularly maintains the property.

*It’s too risky.

-While buying through an auction can be tricky, bank-owned homes have usually been cleared of debts, liens and other hidden costs. Closing costs associated with bank-owned homes are also in line with non-foreclosure home purchases.

*Accelerated Depreciation

-There is no reason to assume a foreclosed home will depreciate faster than if you bought a non-foreclosed home.

*Cash-Only Purchases

-When bought through a bank, foreclosed homes close similar to their non-foreclosure counterparts. You can still get a conventional loan on the property provided you meet your lender’s criteria for credit, income and the like.

Freddie Mac’s HomeSteps Difference

Team Gale maintains a level of quality in our work that Freddie Mac’s HomeSteps program also strives for. Their strict guidelines for agents and vendors are called “HomeSteps Good Neighbor Practices”

These practices help keep neighborhood values protected by:

*Keeping the foreclosed home secured

*Removing all trash from the interior and exterior

*Properly maintaining the landscape weekly

*Cleaning the exterior and interior

*Random inspections to make sure homes are cared for according to HomeSteps guidelines

*Regular training is provided for agents and property maintenance vendors to insure quality on all homes

*Agents can immediately address safety issues on their own

*HomeSteps Toll-Free Customer Hotline (1-800-972-7555) is available to answer all questions regarding their homes.

Buying Foreclosed Homes Tips & Myths Resources:

9 tips for buying a foreclosed home- CNN.com

http://articles.cnn.com/2009-02-24/living/toh.buying.foreclosure_1_foreclosed-housing-market-home-inspectors?_s=PM:LIVING

 Top 5 Myths about Buying Foreclosed Homes- Mythbusters.com

http://www.mythbusters.com/top-5-myths-about-buying-foreclosed-homes.html

 The safest ways to buy foreclosures- MSN.com

http://articles.moneycentral.msn.com/Investing/RealEstate/TheSafestWaysToBuyForeclosures.aspx

 The HomeSteps® Difference- HomeSteps.com

http://www.homesteps.com/difference/index.html

Written by Mary beth Tice, Marketing Assistant for Team Gale