If You Had a Foreclosure, When Can You Buy Another Home?
This week I had a call from a woman that asked a good question. She has been in a little bit of trouble with mortgages in the past. She had a foreclosure about two years ago and since then she has been moving from rental to rental and she wanted to know how long she has to wait before she could buy again. Many people that have gone by a foreclosure don’t ask this question because they are so upset and disappointed with the past foreclosure situation that they don’t want to think about buying a new home for a while.
Here’s the thing. You must begin to take steps toward buying a new home as soon as possible in order to cut down your waiting time. Have you ever heard the saying, “time heals all wounds”? This is especially true with credit but the catch is that if you are pro-active with your credit then you can speed up time. at the minimum where your credit is involved.
Traditionally edges wont give you a loan with a foreclosure on your record until it has been at the minimum 7 years. It is around this time that the foreclosure will fall off of your credit report. With the market so cluttered with foreclosures you can speed up the time of action and in some situations you can get a mortgage on a house in as little as two years. The thing is, you can do some things that can make sure that you are in the best possible position at the two year mark. First thing you can do is to continue or establish new credit lines. If you have a foreclosure, more than likely your credit has other problems. Usually your mortgage is the last bill that you let go so you may have credit card debts and judgements and other things. If you can pay these things off then call the creditors and setup payment arrangements no matter how small. If your debts are overwhelming than you may consider a bankruptcy. Bankruptcy is more complicated now thanks to the new laws but if your debt is really out of your reach then it may nevertheless be a good option.
After handling your current debts than you need to start establishing new credit. Start small with a small secured credit card or a small passbook loan from your bank. Show at the minimum 6 months of on time payment and this will begin to re-establish your credit. You should begin this course of action about a year after your foreclosure.
Finally, educate yourself. Don’t let every mortgage guy in town run your credit. When it is time, pull your own credit report and score, and show it to several possible lenders without them having to truly pull it. This is the best way to get started back on the road to home ownership.