If you’ve been through a foreclosure then you know how hard it is on your credit. It will be many years before your credit rating is back on track. That’s just the way it is and one of the reasons you want to avoid foreclosure at all costs.
But going through foreclosure is not the end of the world. You can recover. And if it was negotiated correctly, you may be back on your feet sooner than you might think.
Let’s look on the bright side…
If you were wrongfully foreclosed you might be getting a piece of the $3.6 billion settlement. That will ease a bit of the pain. But it may not help your credit rating in the short run.
And the lessons learned will prepare you for you next purchase and help you understand the right and wrong things to do next time.
But Oh… that Credit Hit
How long will you have to wait to see your credit begin to get better?
The time you have to wait will vary depending on your particular circumstances. If you’ve gone through foreclosure you might have to wait three years for a Federal Housing Administration loan or seven years for a conventional loan. If you’ve done a short sale on your home the wait time may be closer to two or three years. In some cases, a homeowner who sold in a short sale may be able to get a new loan right away, particularly if they haven’t fallen behind on mortgage payments.
New “Second Chance” Mortgages
In certain hard-hit locations where the markets are still struggling, some special programs are starting to be available for borrowers to re-enter the market with what are being called “second-chance mortgages.” In Las Vegas, where they were hit hard by the housing crash, there are lenders who are trying to get foreclosed homeowners back into the market. These programs are available to people who have been out of the market for several years but still have strong income and can meet the payment requirements. In a sense, these buyers are being treated like first-time buyers.
I think we’ll see more of these being offered here in Florida where the real estate market is still getting back on its feet. I guess we can only cross our fingers at this point.
What You Can Do
If you’ve been through a foreclosure or short sale there are definitely things you can do to increase your chances of getting back in the market.
- Keep up with all your payments on credit cards, rent, and any other bills you have.
- Pay off those credit cards if possible.
- Avoid applying for credit for a few years. Those applications show up at the credit reporting agencies can actually affect your rating.
- Save your money for a future down payment.
Yes going through a foreclosure, or even a short sale, is tough on the ego. You feel like a failure and there’s a part of you that doesn’t want to ever have to face that possibility again. But you must stay positive and do what you can to improve your financial situation in a lender’s eyes.
And yes, patience is also required. It will take time to put all these negative memories behind you. Those emotions will linger and it will take time to feel good again.
But time is on your side. As those past problems get further and further in the past, they will begin to not impact your credit score any longer — not to mention your mental state. You can begin to breathe easier and then can get back into the market and finally have the fresh start, we all need sometimes.
If Brown & Associates can help please give us a call at 813-289-8485. We are always available for a free consultation to discuss. your situation.