Main: mortgage loan, mortgage after foreclosure, Long-tail: Ventura County mortgage loan

Foreclosure can be considered a nightmare for every American. Though foreclosure rates in the US have been steadily decreasing since the Great Recession, there are still more than 600,000 Americans who lost homes to foreclosure or short sale in 2018. However, foreclosure doesn’t mean the end of your dreams. With time and a lot of hard work, it is possible to get another chance at owning a home.

Decreasing the Waiting Period

The waiting period for a mortgage after foreclosure may vary depending on your lender. You would need to wait seven years to get a conventional loan, three years to get a loan backed by the Federal Housing Administration (FHA) or the Department of Agriculture (DA) and two years to get a loan from the Department of Veterans Affairs (VA). However, it is also possible to lessen the waiting period with “documented extenuating circumstances.”

These “extenuating circumstances” refers to situations “beyond your control,” such as medical emergencies or death in the family. A drop in equity or divorce would not be considered. But if your property has been transferred to your spouse who wasn’t able to pay the loan after divorce, you would be approved for a lesser waiting period.

Simply put, it should be evaluated by the lender that your previous foreclosure had nothing to do with your lifestyle choices, and you weren’t able to prevent it despite exerting your best efforts. This would reduce the waiting time for conventional mortgage loans to three years, and FHA, DA, and VA loans to a minimum of one year.

Getting Your Loan Approved

Lenders wouldn’t want to lend to someone who would likely default again so you would need to take out something to prove that you are creditworthy. There may be differences depending on how your lender interprets the rules. However, below are some guidelines on how to get your mortgage loan approved within the required waiting period:

  • Rebuild your credit score. One of the most important considerations is your credit score. Rebuilding your credit score after foreclosure may take time depending on a number of factors such as the number of missed payments you had on your previous mortgage, your credit and payment history, your credit card balances, your credit utilization, and more. Your credit score must be at least 620 for conventional loans and 580 for government-backed loans. However, getting barely above the line might not do. The credit score presented by services that provide credit reports to consumers might be different from your credit score with your lenders by at least 40 to 60 points.
  • Prove your job stability. To make sure that you would be able to pay your loans, you will need to demonstrate that you have a stable job. Regular employees with Wage and Tax Statement or W-2 form will get an easier time getting a mortgage after foreclosure as their lenders can verify their income with their employers. However, those with several part-time jobs or self-employed would face harsher requirements.
  • Provide documentation. Loan requirements had been stricter since the financial crisis. You need to provide a lot of documents to get approval. Tax returns, payment receipts, bank and brokerage statements, and basically all the things you put on your mortgage application have to be backed by a relevant document.
  • Clear previous records. For government-backed loans, you will not get approved if you have previous records on defaulting on any federal financial obligations such as loans from the Federal Housing Administration, Department of Agriculture, Department of Veterans Affairs, Department of Education, Department of Justice and Small Business Administration. Your lender can access the Credit Alert Verification Reporting System (CAIVRS), which lists those who have defaulted on a government-backed mortgage or student loans. Student loans need to be paid fully before getting removed; on the other hand, mortgage loans have a 3-year waiting period.

Looking for solutions on Ventura County mortgage loans? Contact Lefton Realty Group at 805-407-6453. We have a team of local experts to guide you with all your needs.