When you are notified that your mortgage lender is foreclosing on your home, one of the first things you think about is the future. Things like your credit rating, personal reputation and creditworthiness to get a new loan must be considered if you plan to go through with foreclosure. Before the changes to bankruptcy laws, it was less intensive for buying a home after foreclosure or bankruptcy. The laws have been updated and banks and lenders have quickly changed their policies regarding lending. The outcome of foreclosure will always impact your ability to purchase a new home. There are new criteria used for borrowers with certain negatives on their credit report.
There are generally two types of foreclosures. The first type is the most common. A lender issues a notice of foreclosure and the homeowner does not dispute the foreclosure process. The lender will sell the property within 3 to 6 months and the homeowner will be released from the mortgage. The second type is also common and is the most severe. A homeowner is notified of a foreclosure, but chooses to walk away from the mortgage. This forces the lender to lose the entire value of the mortgage and accumulate more debt. With home values plummeting, this second option is becoming more common compared with homeowners going through the entire foreclosure process.
The Chance of Buying a Home After Foreclosure
The rules of borrowing money have changed. Interest rates are the lowest they have been in decades. The problem is that lenders are not lending money to people that have foreclosures on their credit report. The average period of time is 5 years after a foreclosure before a loan can be considered. There are no guarantees that you will ever qualify for a mortgage if you have gone through a foreclosure. People that walk out on a mortgage face double the amount of time. It can take 10 or more years before a lender has confidence to give someone a new mortgage. Things like job history, savings account balances, revolving credit account history and other criteria are used to make modern lending decisions.
The down payments are often higher for someone with a mortgage foreclosure. Long gone are the days of needing only 10%. For someone with negative credit caused by foreclosure, the down payments are commonly set at 30%. This makes it even harder for someone that is in the credit restoration process to find adequate living space. The thought of buying a home after foreclosure can be a frightening one. Stopping foreclosure before it is completed is the best way to avoid foreclosure on your property.
Call Avoid Foreclosure today at 1-800-589-4106 to find out how to get out of foreclosure before it’s too late.