Going through a foreclosure, or a bankruptcy, can be traumatic – in part because of the threat of not being able to purchase another home for a long time. However, the conventional wisdom that you have to wait several years after a foreclosure to qualify for another mortgage is not necessarily true, experts report.
According to Reuters, there are more people buying homes not long after going through foreclosure. After interviewing more than 30 realtors, consumers, lenders and builders, Reuters found that having a foreclosure, short sale or bankruptcy in recent years has not stopped many Americans from buying another home.
Home Buying Options for Consumers After a Foreclosure
In order to take advantage of the lower prices for homes, and to avoid paying exorbitant amounts for rent, many consumers who have been through foreclosure are looking at avenues that will help them purchase a home. In many cases, prospective homeowners are getting help from the Federal Housing Agency. In fact, FHA home loans have increased substantially in the last few years: In 2005, only 4.5 percent of homeowners received their loans through the FHA. In 2011, that amount had increased to 30 percent.
The increase in FHA loans can be attributed to the fact that the agency’s criteria are not as stringent as the standards set by other lenders. Whereas, most conventional mortgage companies require that borrowers have a minimum credit score of 720, as well as a significant down payment and proof of income, the FHA will grant loans to those who have a credit score of at least 620. In addition, borrowers can pay a 3.5 percent down payment when getting their loan.
In addition to help from the FHA, many consumers have been able to qualify for home loans through the Department of Veterans Affairs and the U.S. Department of Agriculture.
Increasing Your Chances of Getting a Mortgage After a Foreclosure
Although it can be difficult to get a loan from a traditional lender after going through a foreclosure, short sale or bankruptcy, it is not impossible.
Chances of getting a home loan improve when consumers hold down a steady job, clean up their credit by paying bills on time and keep credit to a minimum. Also, the chances of getting a mortgage increase if consumers can prove that their foreclosure was caused by extenuating circumstances that were out of their control rather than reckless spending.
If you are concerned about the future effects a foreclosure or short sale may have on your ability to purchase a home in the future, a debt relief attorney may be able to offer advice. In addition, there could be available remedies that would allow you to stay in your current home, such as Chapter 13 bankruptcy.