Three Tips to Buying a House After a Foreclosure

As of late I have been getting a significant amount of calls asking me if it is possible to buy a house after a foreclosure. The answer is absolutely yes. In the current housing crisis the wave of defaults began to happen sometime in 2007. As per the current FHA guidelines a consumer has to wait 3 years before entering into a contract unless there were some some compelling circumstances surrounding the hardship. The most acceptable one is related to medical issues. Before you grab the car keys or pick up the phone to call your Realtor there are a few things that you need to be prepared for:

You must have shown the financial responsibility of re establishing your credit and have a credit score that conforms with the current lending guidelines.
Simply put, if you foreclosed on your home three years ago you should have had enough time to get relief from that high mortgage payment and prove to the lenders that you had plenty of cash to take care of your other responsibilities. Bottom line, your credit score, mid FICO, should be at the very least in the high 600′s.
Enough money in a savings account to put down for the current 3.5% down payment. Some additional moneys for closing costs would definitely help your case.
Be able to proof through tax returns and W-2′s that your mortgage payment, taxes, homeowners insurance and private mortgage insurance are below the 33% required by FHA and that your overall debt load is not greater than 45% of your monthly gross income. Please consult with your mortgage professional for more information about these ratios. In some cases investors do make exceptions.

Since the values of homes have not shown a significant improvement yet, and interest rates remain at historical lows, we expect consumers with previous credit challenges to re emerge and become a driving force to re embark in the American dream. If you would like to read further, feel free to read “The forgotten Home buyer”, for more information.