Having a home foreclosed on an individual or couple can be devastating to them personally as well as financially. This blotch on their credit rating stays for quite a few years. They probably think their chances of ever owning a home again are nil because they don’t think they can get another mortgage after a foreclosure. Fortunately for these unfortunate individuals, it is possible to obtain a mortgage after foreclosure proceedings that resulted in the loss of your home.
Although it’s possible to get a mortgage after foreclosure, it takes a lot of careful preparation. You’ll be rebuilding from ground zero or starting from scratch. There’s a lot that will need to be done, with the first thing being rebuilding your credit rating. This needs to be your first priority. Although you’ll probably want to start looking for another home soon, it’s better to wait a while.
Banks determine what interest rate they charge on what your credit rating is, which in your case, won’t be good. If you do manage to get a mortgage so soon after foreclosure, your interest rate is going to be very high. This will also result in higher monthly payment amounts, which may leave you in a tight cash flow situation. You’ll find yourself having difficulty meeting your monthly obligations once again. This, in turn, will make it difficult to rebuild your credit scores.
It’s best to wait anywhere from one to two years before trying to get a mortgage after foreclosure of another home. Two years is usually ample time for you to get some other debts paid off as well as show a steady flow of monthly bills paid on time. This time when you apply for a loan, your credit scores will be much higher, thus lowering the interest rate you’ll be charged on your new mortgage.
There are different steps you need to take to rebuild your credit scores and prepare that mortgage after foreclosure. Take a realistic look at your budget, checking your income against your expenses. Determine where you can cut back the spending. Use this extra money towards paying off debts and saving for a down payment. The amount you can put as a down payment will also help to lower your monthly payments.
It’s very important during this time to pay all your debts on time, especially ones that get reported on the credit report. You may want to sign up for automatic payments, so you know they’re getting paid on time. You may consider getting a gas credit card or a secured credit card.
Make small purchases so you can make the small monthly payments on time each month. This will show up on your credit report when you try to get your mortgage after foreclosure. After some good shopping around, you’ll find the home of your dreams as well as a reputable lender that will put their faith in you.