Going through a foreclosure can make it seem impossible to ever buy another home. Especially after the events of 2020, many homeowners are behind on their mortgages. The impact of foreclosure can impact your credit for many years. While you may believe you are destined to be a renter for the rest of your life, foreclosure doesn’t have to mean that buying your own home is no longer possible. Homeowners can educate themselves about credit and borrowing so as to set themselves up for success later on. Read on to learn how to buy a house after foreclosure in Raleigh and start living the dream of homeownership again.
Get Your Credit Report
You are entitled to a free copy of your credit report once per year. You can go to the three credit bureaus via their websites and obtain a free copy of your report. The free report will not contain your score, but that is ok. It’s best to take an inventory of what needs to be fixed before you start fixing things. An easy way to improve your score is to make sure all your personal data is accurate and consistent across all three reports. This will include first, middle, and last name. Your current address as well as your previous places of address over the last several years. Make sure all the details match. Also, make note of any derogatory items that are on the report.
Save Your Cash..by spending it!
Yes, I recommend that people spend their cash as a way to save money! This sounds crazy, right? I learned this technique in the 2000s. It’s called pay yourself first. Whenever you get money, via paycheck, gift, refund, whatever, transfer a percentage to a savings account. The key is to do so consistently so it becomes a habit. Most people react with “I can’t afford that!” I would recommend starting very small with a nominal amount, say $50 or something. Then work your way up to about 10% of your total income. You may just be in for a shock to learn how much is being spent on small expenditures, such as special coffees or eating lunch out of the office every day.
This will create a cushion for any emergency expenses that come up. You would be surprised how much better you can sleep when you know you have 3 to 6 months of salary tucked away in an account that you can access in an emergency.
Improve Your Credit Score
Once you have gone through the process of foreclosure, it will remain on your credit history for seven years. Additionally, there is at least a two year period for VA loans, and at minimum, three years before you would be able to qualify for mortgages from other lenders. You will want to work swiftly, taking any actions within your power during this time to repair your credit score in any way possible. There are good companies that can assist you with repairing your credit. It’s true that you have to be careful with whom you hire. But a good company can help you navigate the complexities of credit repair.
Extenuating Circumstances..Especially 2020
There are circumstances in life that can bring on changes that are unpredictable and are beyond our control and we are usually forced to live with the consequences. For most residents of Raleigh, this came in the form of Covid-19.
Should the cause of your foreclosure fall under this category, this fact can shorten the waiting period needed for you to qualify for a mortgage. To do so without any waiting period, your situation must meet the guidelines your lender considers as qualifying for the extenuating circumstances exclusion. Likewise, you must be able to show that you have fully recovered financially from the event and that the event is unlikely to occur again should you buy a house in the future.
Hire a Mortgage Broker
It’s never a bad idea to have an experienced guide, especially when you’ve done all of the work or repairing your credit and making sacrifices to save, in order to achieve homeownership again. A mortgage broker will have an idea of what loan products you will be eligible for given your current situation and credit status. They can work to fulfill your goals and suit your needs, from the initial inspection through closing.