Foreclosing on a home in the past can be a painful memory. You may even be wary about applying for another mortgage again. But if you feel ready to get back into the housing market, know that buying a home after a foreclosure is possible.
Here’s what you need to know:
Finish The Waiting Period
Having a foreclosure sticks to your record, so you will have to finish the waiting period before applying again. Depending on your previous loan, you can expect to wait from 3-7 years before you can purchase again.
This waiting period is in place because lenders don’t like to see a foreclosure on your credit report. There are times when a loan will allow for a shorter waiting period due to extenuating circumstances, such as foreclosure due to a medical emergency, divorce, or loss of a job.
Improve Your Credit Score
If you had a great credit score before the foreclosure, you should expect to raise it back up before applying. If you have done so already and have had good credit since then, great! Lenders love to see that.
Still working on improving your credit score? Remember to always pay your bills on time, check your report for errors, and avoid opening unnecessary lines of credit.
As with all loans, get pre-approved before applying after a foreclosure. Pre-approval makes you more attractive as a buyer and it shows sellers that you have the backing of a lender.
Of course, you also want to keep an eye on the market and if it is the right time to purchase. Research what the market is like, make sure you have enough in savings, and if you have a variable income keep thorough financial records to show proof of income.