Recommmended Mortgage Lenders:
Lending Tree
- Bad Credit OK
- Purchase, Home Equity & Refi
- This company provides up to 4 loan offers from one application. They provide quick approvals and are one of the largest loan companies on the web. We recommend applying here first.
Why Foreclosures Occur?
When a homeowner has a mortgage they are unable to repay it will eventually get foreclosed. Mortgage payments generally have to be at least three months behind before a lender begins the foreclosure process. If the homeowner is able to acquire funds and begins to pay the monthly payments, the lender will stop foreclosure.
Factors That Contribute to Foreclosure
Of course, there are many factors that can contribute to a homeowner’s inability to repay a mortgage loan. For starters, if the homeowner is living beyond one’s means this will make it harder to maintain the regular monthly payments. Secondly, many people fall in love with a home they simply cannot afford. In this case,they have a monthly income that is really below what they should have for their particular home. Many homeowners do not take into consideration all of the other expenses associated with owning a home, i.e., utilities, yard upkeep, and maintenance. Often times these other expenses will lead to excessive credit card debt and consequently less income left over to pay that mortgage payment.
Some Negatives of Buying a Home after Foreclosure.
In general, most lenders will not approve a mortgage loan immediately following a bankruptcy. In their mind, you are a high risk applicant. This stands to reason–if you were not able to make regular payments on your last mortgage, they figure that the odds of your defaulting in the future are probably high. Lenders do, however, understand that circumstances change for the better. For example, if the foreclosure was due to a loss of employment or illness, you may be in a better position to qualify for the mortgage after six months. Still, there are negatives of buying a home soon after foreclosure.
High Mortgage Rates
The interest rate following a foreclosure can be outrageous. As a homebuyer with a recent foreclosure, you are considered high risk. Therefore, most traditional mortgage companies will not approve your loan. The companies that do will often charge you interest rates of 3 or 4 percentage points above traditional rates. This will often increase mortgage payments by a few hundred dollars.
Our Top Recommmended Bad Credit Mortgage Lenders:
Lending Tree
- Bad Credit OK
- Purchase, Home Equity & Refi
- This company provides up to 4 loan offers from one application. They provide quick approvals and are one of the largest loan companies on the web. We recommend applying here first.
Things to Remember when Purchasing a Home after Foreclosure
Remember to be patient when looking to buy a home relatively shortly after a foreclosure, rebuilding your credit is key. During the first 24 months, attempt to open new credit accounts and maintain regular payments. Be sure to pay all creditors on time and avoid missing any payments. Take your time and shop around for a new mortgage. Prior to accepting the mortgage offer, be sure and contact many lenders for quotes. If you shop online, you will be able to obtain many quotes from several lenders in minutes.