Going through a foreclosure can make it seem impossible to ever buy a house again. The impact is felt much further than just your wallet. While you may believe you are destined to just be a renter for the rest of your foreseeable life, foreclosure doesn’t actually mean you will not be able to purchase a home in the future. Time and patience are your two greatest allies in order to become eligible to purchase a home again. Learning about the ways in which to increase your credit and get on the right path again can greatly help you along the right path. Read on to discover how to buy a house after going through a foreclosure in Lancaster, PA and how you can become a homeowner once again.
Monitor Your Credit Report
The biggest factor in helping you attain a new mortgage is your credit score. Your credit report must be improved during the period you are forced to wait to qualify for a mortgage, so that you may buy a house after going through a foreclosure in Lancaster, PA. One of the first steps you should take is to ensure that the information being reported is correct and accurate. If you find any discrepancies you can report them directly to each credit bureau. Making timely payments repeatedly will help you build back up your credit. Additionally, you will want to make a concerted effort to pay down the balances on your remaining debts. Doing so will improve your debt to income ratio, which is the percentage of your income used to pay your monthly debts. You should aim to have a DTI (debt to income ratio) of under 20%, this will show the banks that you can afford a mortgage when the time comes to apply. One specific suggestion that we have is to get a secured credit card, since it may prove difficult to get a traditional credit card. This allows you to continue building credit without paying extraordinary high fees.
Save Up Your Cash
Because your credit has been so adversely affected, the more you save towards buying a house after going through a foreclosure in Lancaster PA the better. You may be required to put down more than the standard minimum because of your credit history. You’ll also want to have additional cash on hand to make any repairs or complete work, which often comes along with more affordable housing. Sticking to a plan over a period of time will help you tremendously. Remember to save up an emergency fund of 3 to 6 months before putting money towards a down payment. Saving cash up will also help you better budget and be prepared for the issues of life that pop up unexpectantly.
Improving Your Credit Score Goes a Long Way
Once you have gone through the process of foreclosure, it will remain on your credit history for seven years. We have put together a super helpful chart below to show you the waiting period for each loan. Notice that some types of loans, usually the government backed ones such as Fannie Mae/Freddie Mac or FHA, have potentially longer waiting periods than private options. Repairing your credit should a very high priority in your life, not only will it allow you to potentially buy a house again but you will get much better interest rates on major purchases or loans. This can save you thousands of dollars in the future. When you do buy a house after going through a foreclosure in Lancaster, you can expect to pay higher interest on the mortgage as well. Buying a property off-market or under value and putting some sweat equity into the house can help offset the additional interest you will need to pay.
|Loan Type||Waiting Period After Foreclosure|
|Fannie Mae/Freddie Mac||Generally: 7 years Extenuating circumstances: 3 years|
|Conventional, Private||2-8 years|
Circumstances Out of Your Control
Regrettably, circumstances in life can bring on changes that are unpredictable and are beyond our control and we are usually forced to live with the consequences. This is often referred to as “extenuating circumstances” by most lenders. Extenuating circumstances is defined as “that is, situations which are one-time only, beyond your control, and resulted in a sudden, significant, and prolonged reduction in income.” Most often this means divorce, illness, sudden loss of household income or job loss. Should the cause of your foreclosure fall under this category, this fact can shorten the waiting period needed for you to qualify for a mortgage. Check with your lender what they consider a valid circumstance, as it will vary from lender to lender. Local banks are much more likely as well to hear your case especially if you hold a bank account with them which can prove the above. Likewise, you must be able to show that you have fully recovered financially from the event and that the event is unlikely to occur again should you buy a house in the future.
Who Can Help You Find a House?
It’s never a bad idea to have an experienced guide, especially when you’ve done all of the work or repairing your credit and making sacrifices to save, in order to achieve homeownership again. Professional buyers can help you find a property off market and under the value of what you would normally pay. Since you will be paying a higher interest rate, the more equity you can get when buying the property the more money you will save in the long run. These professionals work to fulfill your goals and suit your needs, from the initial inspection through closing often going beyond and above what a real estate agent does. Professional buyers also have access to inventory that you can’t publically see online.
At 717 Home Buyers we would be happy to assist you in finding the right property for you. While we hope no one has to ever go through foreclosure, and have written several articles about how to stop a foreclosure in Lancster, PA we do recognize that foreclosure’s will happen. Often really good people get pushed into a situation and are forced to sell their homes. If you are ready to learn more about how to buy a house after foreclosure in Lancaster feel free to reach out and we will give you a call today.