Mortgage Monday: Mortgage After Foreclosure or Bankruptcy?

Mortgage After Foreclosure or Bankruptcy?

I have been asked if it is possible to get a mortgage after you have gone through a foreclosure or a bankruptcy. The answer to that question is yes. It may take several years before you can, but by being patient and rebuilding your credit history you can get a mortgage on that dream house.

For bankruptcy it takes from 7 to 10 years for it to get off your credit report and not be a factor when applying for a mortgage. For foreclosure the time is a lot less. It takes from 3 to 4 years for the foreclosure to work its way off your credit report.

Most credit scores are generated by current information rather then the past history on the credit report. But lenders have a longer memory then Experian, Equifax and Transunion, the credit reporting companies. The lenders look at your history in the long term. You can have a great credit score after only three years after bankruptcy and still be turned down for a mortgage. That is because the underwriter of the loan is looking at the bankruptcy that occurred three years ago and does not want to take a chance on you going into bankruptcy again. If there are extenuating circumstances for the bankruptcy, such as an accident, loss of job, a death in the family, or a combination of these, you need to write a “cry letter” explaining this and have it put in your credit report.

A rising credit score and a significant down payment can go a long way to convince an underwriter that you will not default on your loan.

Whatever your situation, I hope you work closely with your real estate agent and loan officer so that they can assist you in getting the loan that is right for you for that home you want to buy.

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