Many people believe that after they have had a home foreclosed on, they will never be able to buy a house again. This is untrue.
As you may have guessed, it is much more difficult to get a mortgage after a foreclosure hits your credit report, but it is not impossible. With time and good financial decisions, you can put yourself back in position to get an FHA loan.
FHA Loans After a Foreclosure
FHA loans are some of the easiest to receive. The Federal Housing Administration (FHA) backs them, and the goal is to help people who wouldn’t otherwise be able to get a mortgage from a bank or other financial institution. While FHA loans are offered by big banks, those institutions usually require applicants to have high credit scores. A better option can be to apply for an FHA loan at a smaller bank or institution.
Keep in mind that a foreclosure needs to be at least three years old. There may be rare exceptions, but the typical waiting period is three years, so you can prove you are able to manage your finances responsibly.
Credit scores are an important consideration with FHA loans and also affect down payments. If your credit score is 580 or higher, you can expect to pay around 3.5 percent of the home’s purchase price as a down payment. If your credit score is lower than 580, you can expect to pay closer to 10 percent.
Debt-to-income ratio matters as well. Debt-to-income ratio means how much debt you have in relation to the amount of income you receive. For a lower down payment, you must have at least 43 percent of a debt-to-income ratio with your 580+ credit score.
What Else You Need for an FHA Loan Approval After Foreclosure
Besides waiting three years after a foreclosure and being financially responsible, there are a few other qualifications you should meet to increase your chances of FHA loan approval.
Once you have these two, you can start working with a lender for FHA loan approval.
Work towards buying a new home now. The past is the past and the future is yours to do whatever you want. Make it a success.