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.
Love reading Team Gale’s blog? Subscribe to the Team Gale feed!