©renjith krishnan - freedigitalphotos

©renjith krishnan – freedigitalphotos

If you have a foreclosure on your credit report, getting another mortgage is going take some work and time.  It will take at least 3 years from the time the foreclosure was finalized to be eligible for another (conforming) mortgage.  This 3-year period is a critical time, to build your credit back up and get back on track with your finances if you plan on buying another home in the future.

Taking the 3 years to build your credit scores is one of the most important things your can do.  If you have had a foreclosure you just have to wait out those 3 years before getting another mortgage, so you might as well make the best of the time. If you don’t work on repairing things and recovering financially, you may never qualify for a new mortgage.

After the three years passes you can try to qualify for an FHA or a VA mortgage.  Make sure that you don’t miss any credit payments while waiting for the three years to be up; it will drastically hurt your credit score and chances of getting a loan.  Missing payments will also indicate to a possible lender, that you may be a credit risk and not approve your mortgage.

Repair Your Credit After Foreclosure

–    The last 12 months prior to the 3 year point, is the most important for keeping your credit clean.  Don’t charge too much on your credit at this time, make all you payments on time and try to get your payments and payoffs down.  Too much credit may indicate that you do not know how to manage your credit and a lender may take notice of this when getting trying to get approved.

–    If you are three years from your foreclosure and have had problems with your credit history in the past 12 months, then you will possibly have to wait another 12 months before getting approved.  You’ve got to try and keep that credit as clean as possible those last 12 months.

–    Fannie Mae and Feddie Mac require 5 years to pass from a foreclosure, before you will be able to get a regular conventional mortgage.  You will also need a credit score of 620 to have any chance at qualifying.

–    Keep in mind that Fannie Mae and Freddie Mac can charge some high fees to borrowers with credit scores less than 740.  That is something to check into and then consider that a FHA mortgage just might be a more affordable solution.  Double check with an FHA approved lender to see what makes the most sense as well.

– Save as much money as possible for your down payment. Getting approved in the future will likely have a lot to do with how much money you can afford to put down. But keep in mind, if you are saving money for a down payment, yet paying 31% of a credit card, then you are not getting ahead. It’s best to pay of any high interest credit cards first. This will help you’re long term financial situation, even if you have to wait a little longer to get your new home.

Tips For Cleaning up Your Credit
–    Don’t ignore your credit-This is what a lot of people do hoping the problem will go away; it won’t.

–    Check your credit report-This is very important, to see what exactly could be affecting it.  It could be something as simple as an old electricity bill you didn’t pay a couple years ago.

–    Get credit in your own name-Don’t let someone else’s bad credit history affect yours.  If you are married and your spouse has had financial problems, be sure to establish good credit in your name.  Also avoid co-signing a loan for someone else that can highly affect your future credit.

–    Check your rates and fees that come with credit cards-It is important to know the APR on all your credit cards if it is higher than 18% try and call your credit card company a negotiate a lower APR.

–    Try to always pay more than your minimum-double or triple your payments if that is possible.

–    Don’t let people run your credit-In that final 12 months before trying to get approved for a mortgage don’t let anyone run your credit, this lowers the score every time.

Although lending laws seem to be changing on a daily basis, and no one can predict what you will or will not be approved for in the future, these simple steps should help give you the best possible chances of getting approved.

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