February 19, 2015 / By Trusst Builder Group
The mortgage industry is facing a new type of buyer these days – people who have lost their homes to foreclosure. Having a home foreclosed was once the kiss of death for someone looking to buy another home, but these days, foreclosures are much more common on applicant credit reports. As a result, lenders are starting to become a little more lenient where foreclosures are concerned. With that said, there are some things you will have to do if you want to improve your odds of being approved.
Here are five tips for buying a home after foreclosure from Trusst’s Wilmington NC home builders.
#1 – Wait Three Years
A foreclosure is still a foreclosure and as such, it is still considered a negative event. But, if you wait three years (the length of time recommended by the Federal Housing Administration) before applying for a new mortgage, then most lenders will be more forgiving of your past. Keep in mind that the countdown clock begins when the foreclosure is completed.
#2 – Repair Your Credit
If the only red flag on your credit history is the foreclosure, then you’re in pretty good shape. But, if you had other lines of credit suffer during your economic struggles, then you’re going to have some work ahead of you. Start by paying off your credit cards and settling your old overdue accounts as quickly as possible. Get your debt-to-credit ratio as low as possible before applying and you’ll improve your odds of approval.
#3 – Save For a Down Payment
Many of the homes bought before the housing bubble burst were bought with no money down. That’s a luxury that doesn’t really exist in today’s real estate market. Therefore, you have to save some money to put down on your new home. The FHA requires at least 3.5% of the purchase price, but if you don’t want mortgage insurance, then you’ll have to shell out 20% of the purchase price in most cases.
#4 – Get Pre-Approved
If you have a foreclosure on your record, then you will definitely want to get pre-approved for a mortgage before you start shopping. This will put the seller at ease and improve your negotiating power.
#5 – Consult an Expert
Rebound buyers often think they have what it takes to successfully own a home the second time around, but it’s not wise to think you have it all sorted out. Consult with a real estate professional and ask them to help guide you through the process. Is there anything else you can be doing to help improve your odds of obtaining a mortgage? The real estate pro will know.
Stick to the Plan and You’ll Be in a New Home Before You Know It
Believe it or not, lenders like working with people who have suffered a foreclosure. These buyers are usually highly motivated and will do what it takes to ensure they don’t lose another home. They understand the process and they learn from their mistakes. By sticking to the above five tips, you’ll find yourself in a new home sooner than not.
If you’re in the market for a new home, just visit Trusst Builder Group today or schedule a consultation with one of our Wilmington NC home builders and we can help you in your search for the home of your dreams. Just give us a call today at 910-371-0304 to see what we have to offer.