If you are a victim of foreclosure, you do not need to consider it as an endless suffering. Foreclosure does bring upon you financial disaster but it does not end your life. You can regain your financial condition, even after you have encountered a foreclosure. You can usually get a mortgage after 2 years of your foreclosure. A foreclosure does not impede you from getting a mortgage; you can buy a house even after you have faced a foreclosure. This article provides you with some tips you must follow in order to recoup your financial security after foreclosure.
Here are some tips you must follow in order to get a mortgage after you have encountered a foreclosure:
- Improve your credit score. Get a copy of your credit report and review it thoroughly. Find out if there are any dues on credit cards or loans. Pay off your dues as soon as possible. Negotiate with your creditors and try to get a reduction on your outstanding debt. You have to improve your credit score to minimum 580 if you want to secure FHA loan. If you need a conventional loan, you require a score of at least 680-700. Thus, improving your credit score is essential when you decide to get a mortgage after foreclosure. Mortgage lenders will review the last three years of your credit report, so it’s better to prepare a document in writing to explain the reason for your foreclosure.
- Save for a down payment. If you need to purchase a new home, you have to save enough for your down payment. Down payment after foreclosure may cost you outrageously. It may cost you almost 3 to 4 percentage points above the current rate.
- Save for PMI. If you can put 20% for your down payment, you can improve the terms of your mortgage and avoid Private Mortgage Insurance (PMI). If you are unable to do that, you need to save enough for PMI in order to buy your new home after foreclosure.
- Plan a budget. Create a budgeting plan as you need to save enough in order to buy your own home. The means to lower your monthly interest rate is to increase your savings. Draft a budget and find out your income and your expenses. If your find your expenditures are more than your income, immediately take steps to reduce your over spending habit. Stick to your budget as this will help you manage your finances in a better way and help you save more.
Apart from following the tips to secure your mortgage after foreclosure, you must also be a smart shopper. You must be careful to shop for the best mortgage loan, compare prices online and take out the loan that offers you with the best deal. Keep your spending in check and you will be able to overcome the stigma of your foreclosure as soon as possible.