The foreclosure fiasco has left many Americans who always paid their debts in a position where the house payment has become unmanageable by no fault of their own. Of course you know that because you have experienced or heard about mortgage payments sharply increasing with many ARMS–adjustable rate mortgages.
There is life after foreclosure, but the quality of life depends largely on how the family conducts their financial affairs after the foreclosure. Foreclosures remain on the credit records for seven years and they lower the credit scores by up to 400 points, but that doesn’t mean you’ll have to wait seven years before you qualify to buy another home. Under current FHA guidelines, you can qualify for a mortgage as soon as three years after a foreclosure.
The lenders will expect steady employment at the same job, and no missed payments or late utility bills. It is a good idea to prepare a historical perspective on why the foreclosure occurred. Was it a lost job, family illness, or the mortgage payment doubled? There is a better chance of getting a mortgage if the credit record was superb prior to the problem that led to the foreclosure.
The fact that you’ve had a foreclosure does not preclude private financing as an option. This means that an investor may finance the home purchase. The interest on a seller-carried mortgage note is often higher than normal mortgage rates at the time. The advantage, however, is a chance to rebuild the borrower’s credit. Borrowers should consult with an attorney and make sure all the documents are properly prepared and that the mortgage and deed is recorded.
Under current underwriting guidelines, borrowers may qualify for a mortgage in 3-4 years after a foreclosure. So the key is patience and realizing that if you experience foreclosure, recovering from it doesn’t take forever.