Purchasing A Home After Foreclosure

Yes, buying a home after a recent foreclosure is possible, but homebuyers shouldn’t apply for mortgages without thinking over it carefully. There are many lenders who would take advantage of your current credit standing. Your options are limited. Nonetheless, this does not mean you have to accept a terrible mortgage loan.

So Why Do Foreclosures Happen?

Homes can be foreclosed when the homeowner cannot repay the mortgage. Mostly, a lender would begin the pre-foreclosure process when the mortgage payments are 3 months late. Of course if the homeowner can procure funds, then the lender will stop foreclosure.

Many factors contribute to a homeowner’s inability to repay a mortgage loan. For starters, living beyond one’s means will make it harder to maintain regular monthly payments. There are so many people who want homes that they cannot afford.

Furthermore, some homeowners do not take into consideration utilities and other expenses that come with owning a larger home. Acquiring excessive credit card debt may also result in less disposable income.

The Bad Side To Buying Homes After Foreclosure

Usually, lenders would not be willing to approve mortgage loans immediately after bankruptcy. In their eyes, you are a risky applicant. If you can’t make regular payments 3 months prior, then it’s very likely that a future loan would default.

Naturally, circumstances do change for the better. For example, if foreclosure was the result of a lost job or ill health, then you’re in a better position to afford a mortgage 6 months after the foreclosure. But it’s still not that good of an idea to buy a home even after 6 months from the foreclosure.

Mortgage interest rates following a foreclosure are outrageously high. You’ll be subjected to interest rates that are 3 to 4% higher than the usual. This means there will be an increase of a few hundred dollars in your monthly payments.

The Best Thing To Do

You just have to be patient. You have to rebuild your credit. Use the next 2 years to open new credit accounts and maintain regular payments. You should be prompt in payments.

You should then look around for a new mortgage. Prior to accepting a mortgage offer, contact several lenders for quotes. If using the internet, you may obtain instant quotes from several lenders in minutes.

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