Recently on our bankruptcy forum a user asked, “We were one of the millions of homeowners that lost our house during the 2008 housing market crash. I lost my job and my husband suffered a major heart attack and could not work for several months. We tried to sell our home but with so many homes on the market it was impossible. Finally, the bank forced us into foreclosure. It’s been eight years and we are doing well financially. We have thought about buying another home. I was wondering how difficult that will be after our home foreclosure?”
Unbelievably, it’s estimated that more than 9.2 million Americans lost their homes due to foreclosure from 2006 to 2014. Luckily, many of these homeowners have reestablished themselves financially and are ready to purchase another home.
Homeownership after home foreclosure
The good news is that many individuals will qualify to purchase a home after a home foreclosure. Your success, however, will depend in large part on whether you have overcome your financial hardship, you have waited long enough to meet the loan requirements, and you have improved your credit score.
For example, a conventional loan will require you to wait seven years after a home foreclosure to apply for a loan, but some programs, such as loan programs offered through the Federal Housing Administration or the U.S. Department of Agriculture, may be approved after three years. If, however, you can prove that your home default was due to a significant hardship and that hardship has passed, you might be able to get a VA or FHA loan in as little as one year.
What do I need to do to get a home mortgage after a home foreclosure?
So, what steps should you take to get a home mortgage after a foreclosure? First, you will need to recognize what went wrong the first time and take steps to ensure it does not happen again. For example, did you purchase a home that was too expensive? Did you not save enough money for emergencies? Or did you buy a home in an area that was overvalued?
Next, you will need to take the necessary steps to rebuild your credit. If you have not improved your credit score and you have not been paying your bills on time, it won’t matter how long you wait. A home lender will want to see that they will be paid back before they decide to loan you money.
Lenders want to see job stability
Finally, make sure you have a stable job. You mentioned that your spouse was unable to work due to a disability. Has he returned to work? Have you been employed for several years with consistent work? Keep in mind, it’s much more difficult for individuals who are self-employed or those who are working part-time or contract labor to prove that they have stable employment.
It can be difficult to get another home after a home foreclosure, but not impossible. You will have to wait the required time, you will need to reestablish good credit, and you will have to show that you have stable income.
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