How Much Time After a Foreclosure Until You Can Purchase Another Home?
Having a foreclosure on your credit report is definitely a black mark, but fortunately one that does not last forever. Don't despair, there are ways to move quickly and legally to get back into home ownership.
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Effects of a Foreclosure
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If you have had a foreclosure, it does not mean you cannot own a home immediately thereafter; it simply means that commercial lenders, such as banks and mortgage companies, are not likely to finance a new home purchase for you for up to three years following the date of your foreclosure.
Lender Financing
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Underwriters' guidelines change frequently, and the sheer number of foreclosures in recent years may lead to new programs and practices, so stay abreast of market trends. With a 20 percent-or-more down payment, you may be able to qualify for financing sooner than three years out, though the interest rate will be one to one-and-a-half points higher than average.
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Seller Financing
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A seller who owns a home outright or has a large amount of equity in the property can finance all or part of the purchase price for negotiated terms. This would allow you to purchase a home as quickly as you can put the deal together and close, although finding additional financing could be a problem if the owner is only willing to finance a portion of the purchase price.
Other Private Money
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Hard-money lenders are reluctant to finance owner-occupied homes, and their loans have become more restrictive, though some may lend on a property that is an exceptional value for up to three years. Private individuals, such as friends, relatives or those making a business of private lending, might consider financing a home for you, especially if it is understood that the loan is for three years or less.
Lease to Own
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One of the most viable ways of quickly securing a new home immediately with the opportunity to purchase it at a predetermined price later is through a lease-to-own contract. You lease the property for as long as you can negotiate and earn rent credit to help pay for closing costs or a down payment, while allowing you time to qualify later for a mortgage.
Land Trust
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Another way to quickly arrange to buy a home following a foreclosure is to reach an agreement to purchase a property with a willing owner who then transfers the home's title to a land trust. The owner becomes the trustee, and the purchaser becomes the beneficiary of the trust for a period of time until the beneficiary can refinance the property.
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- Photo Credit Image by: Keith Olsen
