Suffering a foreclosure may feel like the end of your life as a homeowner. It can take time to recover from the financial blow of a foreclosure, but it is possible to receive a home loan again. “Boomerang buyers” are homeowners who have previously lost a home to foreclosure, but were able to buy a home after. Here are 7 tips to help get you back in a home of your own.
1. Be Ready To Wait
After a foreclosure, you will have a set period of time you’ll have to wait before you can apply for a new home loan. Typically, this is 7 years, but other factors can influence that time. Foreclosure alternatives, like short sales and deeds-in-lieu of foreclosure, can reduce the wait to 4 years, though you may be able to pursue an FHA loan after 3 years.
Veterans and armed forces members can receive financing through VA lenders as soon as 2 years after a foreclosure. With a foreclosure alternative, service members and veterans may not have a waiting period at all.
2. Make a Plan
You may feel ready to own a home again, but there can be many obstacles between you and that goal. Contact a real estate professional to learn what you need to do to be ready to start your hunt for the perfect home. Keep in mind that it may take time to resolve the issues you have, but fixing these problems will allow you to buy a new home.
3. Repair Your Credit
Establish a history of paying bills on time to ease the impact of a foreclosure on your credit. According to FICO, a foreclosure will stay on your credit score for seven years, but the impact decreases as time passes. Your foreclosure is a single negative instance on your credit, and paying your other expenses on time can reduce the damage.
4. Save Up for a Down Payment
Be prepared to pay money upfront when buying a house. The FHA requires a down payment of at least 3.5% of the purchase price of the home, though a conforming loans without mortgage insurance require a down payment of 20%.
5. Consult CAIVRS
The credit alert interactive voice response system, or CAIVRS, is a government database that maintains records on people that have neglected federal debt, have had claims paid on direct of guaranteed federal loans, are subject to a federal lien, judgment, or federal loan that is in default or foreclosure, or has had a claim paid by a reporting agency. This system can only be accessed by an authorized lender, so you should request that one checks whether your foreclosure is listed. If it is, you will have to repay the claim amount owed to the government before you are eligible for other government-insured debt.
6. Get a Preapproved Loan
Many real estate agents won’t want to show a “boomerang buyer” any listings until they have proof that the buyer is ready and able to buy a new home. Work with a lender to obtain preapproval for you loan, before contacting an agent and starting your search.
7. Be Able to Provide Documentation
A new mortgage requires significant documentation, so having the paperwork to verify what you put on your application is a must. This can include pay stubs, bank or brokerage statements, tax returns, and more.
Recovering from a foreclosure can be a long process involving much diligence. You can work to undo some of the damage with research and dedication, and be on your way to buying a new home within a few years.
Wadhwani & Shanfeld can help you if you’re facing the loss of your home. With over 65 years of collective experience, our Los Angeles foreclosure attorneys have protected thousands of clients with personalized attention for each case. Contact us today for a free consultation.