Tips on Applying for a Mortgage After a Foreclosure
Recovering from a negative credit event like a foreclosure can take years—seven years in many cases.
A growing number of Americans are reaching that juncture after going into foreclosure early in the housing crisis.
During that seven-year period, gaining access to loans is challenging, particularly in the first two to three years. Getting approved for a car loan or credit card is possible, though the interest rates you’ll be charged will be high. But finding a lender that will give you a mortgage will be a lot harder in most cases.
Foreclosures stay on consumers’ credit reports with the three main credit-reporting firms—Equifax, Experian and TransUnion—for up to seven years and are factored into their FICO credit scores for all of that period. The seven-year period also applies to short sales, settlements with credit-card companies or other lenders, and other negative events. Bankruptcies can stay on for 10 years.
Millions of consumers are feeling the impact of the seven-year timeframe in the wake of foreclosures after job losses, pay cuts or other setbacks from the last downturn. To figure out when a negative mark is due to be dropped, borrowers can check their credit reports from each of the three firms, which they can do free once every 12 months at annualcreditreport.com. The reports will list the year the negative event was recorded.
Here are some pointers on how to increase your chances with mortgage lenders if you have a black mark on your credit record.