How to Get a Mortgage After a Foreclosure

Owning a home is a huge accomplishment. At the same time, it's also a weighty responsibility. And unfortunately, some homeowners stumble into financial hardships that lead to a mortgage foreclosure. While a foreclosure damages your credit history and makes it difficult for you to qualify for future financing, there are ways to fix your rating and get a mortgage with a foreclosure on your credit record.

Difficulty: Moderately Challenging

Instructions

1. Wait at least two years. Applying for a home loan immediately following a foreclosure or within the first year results in a high interest rate. Instead, wait at least 24 months, and use this time to rebuild your credit.

2. Order a copy of your credit report and score. Lenders base loan approval on your credit rating. Before applying for a home loan with a foreclosure on your record, order a copy of your credit report and score from Annual Credit Report

3. Rebuild your credit. To qualify for a new home loan and receive the best rate, take steps to improve your score. Pay your existing creditors on time each month. If possible, make early payments. Also, reduce your current debts and maintain a low debt-to-income ratio.

4. Open a new line of credit. If you don't have an existing credit account, contact your bank and apply for a secured credit card. These credit accounts require a security deposit, but they're ideal for individuals who want to rebuild their credit and buy a home after a foreclosure.

5. Save money for a down payment. You may not qualify for 100 percent financing with a foreclosure on your credit report. Thus, be prepared to pay a down payment, between five and 20 percent of the purchase price.

6. Shop around for a lender. Use a mortgage broker and obtain mortgage quotes from at least three different lenders. Compare mortgage rates, fees and closing costs; and choose the best mortgage deal.