If you have a bad track record when it comes to servicing debt, this will make up a large part of your credit report and will be a major factor in the decision by a creditor as to the approval of any future loans.
Having a foreclosure on your credit history is by far the worst event that can happen to your score.
Many people believe that once they have a foreclosure on their credit rating they will never be able to own a home again. This is not the case; all it takes is re-building your credit rating and employing good financial habits.
It may not be right away that you will be able to purchase a new home, since foreclosure stays on your credit history for 7 to 10 years – but in time it will be possible.
Build Your Credit History
Your FICO score will be affected by your foreclosure and this will be the case for up to ten years. Over this period it is likely that any application will be met with rejection.
You can build your credit rating by establishing new credit, in the form of pre-paid credit cards and paying them off every month; paying your bills on time and even obtaining store credit cards. Once you rebuild your credit and some time has passed, mortgage lenders will be more willing to take a chance on you.
Take Your Time
Don’t rush into trying to buy a new home immediately after a foreclosure. It can be possible to purchase a home this early if you have the funds available, or are able to secure a sub-par lender – but it also means you probably won’t receive a great deal on your mortgage.
These lenders can charge up to 6% more than the current average interest rate and they may also charge you additional fees.
Compare Mortgage Lenders
If you decide to try to purchase a home right after foreclosure, make sure you compare the lenders that are willing to work with you. Most sub-par and high interest lenders will offer very high interest rates and fees.
Get several quotes before making your final decision. Be careful of dodgy operators – checking their credentials with the Better Business Bureau is recommended.
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