Buying A Home Post Foreclosure

home ownership

If you recently lost your home to foreclosure, how long do you think it’ll take before you can become a homeowner again? 5 years? 7 years? Maybe even 10 years?

Many consumers believe that once they have lost a home to foreclosure, they won’t have the opportunity to purchase another home for many years. Thinking that their credit is trashed and that a foreclosure will be on their credit report for 7 or 10 years, perhaps longer, some people are under the impression that homeownership is off limits.

True, a foreclosure will be on your credit record for beyond the seven year period that most bankruptcies are listed. Yet, having a history of a foreclosure doesn’t have to stop you from buying another home. Moreover, you could find yourself in another home a few months post foreclosure.

Most conventional lenders will not consider lending you money for a home quickly, for the simple reason that if you lost a home recently, then you could lose your home again. But there are factors which might be taken into consideration by the lender:

You lost the home due to divorce, an illness, loss of job, or some other valid reason.

You have the cash on hand to put at least 20% down on the home you want to purchase.

You are willing to pay a higher interest rate, perhaps as much as 2% over the current rate offered to their best borrowers. Along with the bigger down payment and possibly including some points, a lender may decide that you are a risk worth taking.

Loans and loan rates are always determined based on risk factors. If a lender believes that you are worth the risk and you can put down a large amount of cash, then you could be considered for a loan.

Granted, you’ll pay tens of thousands of dollars more interest payments with a higher risk loan, but you can always refinance later especially as your credit improves and a lower rate is offered to you.

Home ownership post foreclosure isn’t a given, but it isn’t impossible either. You must demonstrate to a lender that you are worth the risk and hope that they can see past the problems which caused you to lose your home in the first place.