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Where Can I Get a House Loan if I Have a Foreclosure on My Credit Report?
by Cari Oleskewicz
Obtaining a home loan after foreclosure takes time, patience and attention to credit repair.
The best way to qualify for a home loan with a foreclosure on your credit report is to immediately begin rebuilding your credit. In the past, sub-prime lenders would approve mortgages for credit scores as low as 580. According to Realtor.com, this is no longer the case, and most potential homebuyers need a credit score of at least 640, which will require responsible credit use in the years after foreclosure. You also need to save some cash for a down payment. Lenders won’t finance 100 percent of your home loan.
The best home loan option might be an FHA loan, or a mortgage insured by the Federal Housing Administration. When you qualify for an FHA loan, lenders are more willing to give you an affordable mortgage because they are protected by the FHA if you default. To get approved for an FHA loan, your foreclosure must have been discharged at least three years ago. The down payment must be at least 3.5 percent of the purchase price. You also need a credit score of 640 and a record of timely bill payments and debt management since your foreclosure. A reasonable debt-to-income ratio is necessary, meaning your income exceeds the debts you owe and can reliably cover your mortgage payments. Finally, you’ll need to pay for ongoing mortgage insurance.
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